Lloyd's Maritime and Commercial Law Quarterly
BREACH OF TRUST AND CONVERSION IN A FALLING MARKET
Jamie Glister*
Equitable compensation for breach of trust is assessed at judgment, but claimants in a falling market will prefer to seek recovery calculated on the value at breach. This article discusses the availability of breach-date recovery in respect of breach of trust and conversion, the closest common law analogue. The analysis shows that the position is not clear in either case, but it may be that conversion claimants are in a more favourable position in a falling market.
I. INTRODUCTION
Equitable compensation for breach of trust is assessed at judgment, using the full benefit of hindsight.1 This usually works in the claimant’s favour, because the value of lost assets commonly rises between breach and judgment, and the benefit of that rise is automatically given to the claimant. In a falling market, however, the position is reversed. There, a later assessment date will work to the claimant’s disadvantage. The claimant will instead want to pursue compensation calculated on the breach-date value, or, if the market has fluctuated, on an interim value. This article discusses the availability of such recovery.
The article comprises three main parts. The first (Part II) examines damages for the tort of conversion. Conversion is the closest common law analogue to an ultra vires breach of trust, whereby property is lost by being wrongly paid away in breach of trust. Although the position is far from certain, it will be seen that damages for conversion may be calculated on the breach-date value of the goods, notwithstanding a later fall in the market. Part III considers the availability of breach-date claims in equity. It has historically been possible for a beneficiary to falsify entries in the trustee’s account when those dealings were made in breach of trust. A breach-date claim should therefore be available where money or other property has been wrongly paid out from a trust, and that claim will be valuable in a time
* Senior Lecturer, Faculty of Law, University of Sydney. Most of this article was written during research leave spent at the universities of Cambridge and Durham, and earlier versions of the article were presented at seminars in Durham and at Queen’s University Belfast. I am very grateful to those three institutions for their hospitality. I would also like to thank Professor Matthew Conaglen, Professor Charles Mitchell and the anonymous referee for their helpful comments. I remain responsible for errors.
The following abbreviations are used in the footnotes:
Clerk & Lindsell: MA Jones (gen. ed.), Clerk & Lindsell on Torts, 20th edn (Sweet & Maxwell, London, 2010);
Green & Randall: S Green & J Randall, The Tort of Conversion (Hart, Oxford, 2009);
McGregor : H McGregor, McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2009).
1. Target Holdings Ltd v Redferns [1996] 1 AC 421 (HL), 439.
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