SQE – Equity and Trust – Causation in Breach of Trust Claims
Introduction
Once a breach of trust has been established, the court must determine whether that breach actually caused a loss to the trust fund or enabled the trustee to obtain an unauthorised profit. This requirement is known as causation. A trustee will not automatically be liable simply because a breach of trust has occurred. There must be a sufficient causal connection between the breach and the loss suffered by the beneficiaries. Without such a connection, liability will generally not arise.
The law of trusts therefore requires beneficiaries to demonstrate not only that a trustee acted improperly, but also that the breach caused the loss complained of. This principle ensures that trustees are held responsible only for the consequences of their own wrongdoing and not for losses that would have occurred regardless of the breach.


The “But For” Test
The principal test used to establish causation in breach of trust claims is the “but for” test.
The court asks the following question:
Would the loss have occurred but for the trustee’s breach of trust?
If the answer is no, the trustee’s breach caused the loss and liability will generally follow.
If the answer is yes, the loss would have occurred even if the trustee had performed their duties properly, and therefore the trustee will not be liable for that loss.
This approach is familiar from other areas of private law, particularly tort law, but it has been firmly incorporated into equitable compensation claims involving breaches of trust.


Target Holdings Ltd v Redferns [1996] AC 421
The leading authority on causation in breach of trust cases is Target Holdings Ltd v Redferns.
The claimant company agreed to lend approximately £1.5 million to finance the purchase of two properties. The properties were represented as having a value of approximately £2 million. In reality, however, they were worth only around £775,000, meaning that the lender’s security was substantially inadequate.
The defendants were solicitors who acted for both the lender and the purchasers. The lender transferred the mortgage funds to the solicitors before completion of the transaction. Under the terms of the arrangement, the money was not to be released until completion occurred.
The solicitors nevertheless released the money prematurely, thereby committing a breach of trust.
The property transaction later completed as planned. Subsequently, the purchasers defaulted on the mortgage repayments. When the lender enforced its security and sold the properties, it discovered the true value of the properties and suffered a substantial shortfall.
The lender therefore sued the solicitors for breach of trust and sought compensation equal to the loss suffered.


Decision in Target Holdings
The House of Lords accepted that the solicitors had committed a breach of trust by releasing the funds prematurely. However, the court held that the solicitors were not liable for the lender’s loss.
The crucial issue was causation.
The evidence demonstrated that even if the solicitors had complied with their instructions and released the funds only upon completion, the transaction would still have proceeded exactly as it did. The lender would still have received inadequate security and would still have suffered the same loss when the borrowers defaulted.
Consequently, the breach of trust did not cause the loss.
Applying the “but for” test, the court concluded that the loss would have occurred regardless of the breach. Therefore, although a breach had occurred, there was no causal connection between the breach and the claimant’s loss.


Significance of Target Holdings
Target Holdings established that equitable compensation is not automatically available whenever a trustee commits a breach of trust.
Instead, beneficiaries must demonstrate that the breach actually caused the loss suffered by the trust.
The case rejected the notion that trustees should be liable for every loss associated with trust property simply because a breach occurred at some stage during the transaction.
Rather, equitable compensation should restore losses that flow from the breach itself and not losses that would have arisen in any event.
This approach aligns equitable compensation with principles of causation while preserving the distinctive objectives of trust law.


Example Applying the “But For” Test
Suppose a trustee is instructed not to release £500,000 from a trust account until certain legal documents have been signed.
The trustee ignores the instructions and releases the money immediately. The recipient absconds with the funds and disappears.
Had the trustee waited until the documents were signed, the money would have remained protected and the loss would not have occurred.
Applying the “but for” test, the trustee’s breach clearly caused the loss. The beneficiaries would therefore be entitled to equitable compensation.


Example Where Causation Is Absent
Suppose a trustee releases funds one day earlier than authorised, thereby committing a technical breach of trust.
The transaction subsequently completes successfully exactly as intended. Several years later, an economic downturn causes the investment to fail.
The beneficiaries argue that the trustee should compensate them because a breach of trust occurred.
Although the trustee acted improperly, the loss was caused by market conditions rather than the premature release of funds. The same loss would have occurred even if the trustee had complied fully with their obligations.
Applying the “but for” test, causation is not established and compensation would not be awarded.


AIB Group (UK) Plc v Mark Redler & Co Solicitors [2015] AC 1503
The Supreme Court reaffirmed the principles established in Target Holdings in AIB Group (UK) Plc v Mark Redler & Co Solicitors.
The case involved solicitors acting as trustees who improperly distributed mortgage funds during a refinancing transaction. The claimant argued that the solicitors should be responsible for all losses associated with the transaction.
The Supreme Court rejected this argument and confirmed that equitable compensation must be linked to losses actually caused by the breach.
Lord Toulson stated that, absent fraud, it would be wrong to impose liability for losses that would have been suffered even if the trustee had performed their duties correctly.
He emphasised that it would be a backward step to depart from Lord Browne-Wilkinson’s analysis in Target Holdings.
The decision therefore confirmed that the “but for” test remains the governing principle in modern breach of trust claims.


The Position in Cases Involving Fraud
The courts have indicated that different considerations may arise where fraud is involved.
Fraudulent trustees are treated particularly harshly by equity because of the fundamental fiduciary obligations owed to beneficiaries.
However, even in cases involving dishonesty, the courts still require a connection between the wrongful conduct and the loss claimed. The primary difference is that equitable remedies are often interpreted more strictly against fraudulent trustees.


Relationship with Equitable Compensation
Causation is central to the assessment of equitable compensation.
The purpose of equitable compensation is to restore the trust fund to the position it would have occupied had the breach not occurred.
The court therefore compares:

1. The actual position of the trust after the breach; and
2. The position the trust would have occupied if the trustee had acted properly.

Only losses attributable to the breach are recoverable.
Accordingly, even where a trustee has clearly acted improperly, compensation will not be awarded if the claimant cannot demonstrate that the breach caused the loss.


Comprehensive Case Study
Facts
Daniel acts as trustee of a family trust.
The trust deed requires him to hold £1 million until all conditions of a property transaction have been satisfied. Instead, Daniel releases the funds one week early.
The transaction later completes exactly as anticipated. Two years afterwards, the property market collapses and the investment loses £600,000.
The beneficiaries bring proceedings against Daniel for breach of trust.
Analysis
Daniel clearly committed a breach of trust by releasing the money prematurely.
However, the court must determine whether the breach caused the £600,000 loss.
The evidence shows that the transaction would have completed regardless of the timing of the payment and that the subsequent loss resulted from a downturn in the property market.
Applying the “but for” test established in Target Holdings and reaffirmed in AIB Group, the beneficiaries cannot show that the loss would have been avoided had Daniel complied with his duties.
Outcome
Although Daniel committed a breach of trust, he will not be liable for the £600,000 loss because the breach did not cause the loss suffered by the trust.


Conclusion
Causation is an essential element of trustee liability. Beneficiaries must establish not only that a breach of trust occurred but also that the breach caused the loss for which compensation is sought. The leading decisions in Target Holdings Ltd v Redferns and AIB Group (UK) Plc v Mark Redler & Co Solicitors confirm that the appropriate approach is the “but for” test. A trustee will generally be liable only where the loss would not have occurred but for the breach. Consequently, equitable compensation seeks to restore losses actually caused by the trustee’s misconduct rather than providing recovery for losses that would have arisen regardless of the breach.


References
Target Holdings Ltd v Redferns [1996] AC 421.
AIB Group (UK) Plc v Mark Redler & Co Solicitors [2015] AC 1503.
Nestle v National Westminster Bank Plc [1993] 1 WLR 1260.
Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515.
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, Oxford University Press 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, Oxford University Press 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

​

SQE – Equity and Trust – Rules Governing Equitable Tracing: Unmixed Funds
Introduction
Equitable tracing is the process by which beneficiaries identify and follow trust property into its substitutes or proceeds after a breach of trust has occurred. The rules governing tracing are particularly important because they allow beneficiaries to preserve proprietary rights even where trust property has been transferred, sold, exchanged, or converted into another form.
The simplest tracing situations arise where the trust property remains:
unmixed.
This means that the trust property has not been combined with other funds or assets. In such circumstances, tracing is relatively straightforward because the property or its substitute remains identifiable.
Equity therefore allows beneficiaries to follow the property through various transactions and recover either the original asset, substitute property, or proprietary interests arising from it.


Return of the Original Property
The most straightforward situation occurs where the trustee wrongfully removes trust property but the property remains identifiable and unchanged.


Case Scenario
Assume Daniel is trustee of the Carter Family Trust.
Daniel improperly removes a valuable painting from the trust and hangs it in his own home.
The painting remains:

• identifiable;
• unchanged;
• and still in Daniel’s possession.

Remedy
The beneficiaries may seek:
✅ return of the painting itself.
The court may order restoration of the original trust property back into the trust.
Because the property remains identifiable and unmixed, tracing is simple and direct.


Transfer to a Third Party
Tracing also remains possible where the trustee transfers the trust property to another person.


Example
Suppose Daniel gives the painting as a gift to his sister Emma.
Emma:

• did not pay for the painting;
• and had no knowledge that it belonged to the trust.

Result
The beneficiaries may still:
✅ trace the painting into Emma’s hands.
Because Emma is merely an innocent volunteer and did not provide value, she does not obtain protection against tracing claims.
The painting may therefore be returned to the trust.


Sale of the Property
Equity also permits tracing into substitute property where the trustee sells trust assets.


Example
Suppose Daniel sells the painting for:
£200,000.
The beneficiaries may trace their equitable interest from:

• the painting;
  into
• the sale proceeds.

The beneficiaries’ proprietary interest therefore attaches to the money substituted for the original trust property.


Tracing Into the Purchaser’s Hands
It may also be possible to trace into the hands of the purchaser.
However, this depends upon whether the purchaser possessed notice of the breach of trust.


Bona Fide Purchaser Rule
If the purchaser:

• paid valuable consideration;
• acted honestly;
• and had no notice of the breach,

they become:
✅ a bona fide purchaser for value without notice.
In such circumstances:
❌ tracing against the purchaser fails.
The beneficiaries instead trace into the money received by the trustee.


Example
Suppose Emma purchases the painting honestly for:
£200,000,
without knowing it belonged to the trust.
Emma is protected in equity.
The beneficiaries therefore cannot recover the painting from Emma but may still trace into:
✅ the £200,000 received by Daniel.


Purchase of Substitute Assets
Equitable tracing also allows beneficiaries to trace trust money into assets purchased with it.


Example
Suppose Daniel improperly removes:
£500
from the trust and uses the money to buy jewellery.
The beneficiaries may trace their interest into:
✅ the jewellery.
The trust money is treated as having been substituted into the new asset.


Proprietary Remedies
In these circumstances the beneficiaries may choose between different proprietary remedies.


Taking the Asset Itself
The beneficiaries may elect to take:
✅ the jewellery itself.
This is particularly advantageous if the asset has increased in value.


Equitable Charge
Alternatively, the beneficiaries may obtain:
✅ an equitable charge
(or equitable lien)
over the jewellery securing repayment of:
£500.
This principle was recognised in Re Hallett’s Estate.


Example of Increased Value
Suppose the jewellery purchased for:
£500
later becomes worth:
£5,000.
The beneficiaries may prefer to claim:
✅ ownership of the jewellery itself,
rather than merely recovering the original £500.


Shortfall and Personal Remedies
Sometimes proprietary recovery may not fully compensate the beneficiaries.


Example
Suppose the jewellery purchased with:
£500
later falls in value and can only be sold for:
£300.


Result
The beneficiaries may still sue Daniel personally for:
✅ the £200 shortfall.


Equitable Compensation
This personal remedy is known as:
equitable compensation.
It aims to restore beneficiaries to the position they would have occupied had the breach not occurred.


Why Proprietary Remedies Matter
Proprietary remedies are often preferable because they:

• attach directly to property;
• survive insolvency;
• provide priority over unsecured creditors;
• and allow beneficiaries to benefit from increases in value.

This is why tracing is one of the most powerful remedies available in equity.


Relationship With Mixed Funds
Tracing involving unmixed property is comparatively straightforward because the trust property remains identifiable.
Once mixing occurs, tracing becomes significantly more complicated and additional rules apply, including:

• Re Hallett;
• Re Oatway;
• Roscoe v Winder;
• and Clayton’s Case.

Practical Importance
The rules governing unmixed funds remain highly important in cases involving:

• breach of trust;
• fiduciary fraud;
• substitute property;
• asset recovery;
• and insolvency.

They provide beneficiaries with powerful mechanisms for preserving proprietary rights after misappropriation of trust property.


Key SQE Principles
Where trust property remains:
✅ identifiable and unmixed,
beneficiaries may trace into:

• the original property;
• substitute assets;
• sale proceeds;
• and gifts to innocent volunteers.

Beneficiaries may choose between:

• recovery of the asset itself;
• or an equitable charge securing repayment.

If proprietary recovery is insufficient, beneficiaries may also claim:
✅ equitable compensation.


Conclusion
The rules governing equitable tracing of unmixed funds provide beneficiaries with strong proprietary protection where trust property remains identifiable. Equity allows beneficiaries to follow the original property into substitute assets, sale proceeds, and even into the hands of innocent volunteers. Beneficiaries may recover the property itself, obtain an equitable charge over substitute assets, or pursue personal remedies where losses remain uncompensated. These principles form the foundation of equitable tracing and demonstrate equity’s commitment to protecting beneficial ownership rights after breaches of trust.
Sources of Reference
Re Hallett’s Estate (1880) 13 Ch D 696 (CA).
Foskett v McKeown [2001] 1 AC 102 (HL).
Pilcher v Rawlins (1872) LR 7 Ch App 259.
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, OUP 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, OUP 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

​

Equity and Trust – What Is an Equitable Lien?
Introduction
An equitable lien  is a proprietary equitable remedy that gives a claimant:
a security interest over property
to secure repayment of money owed.
Unlike ownership, an equitable lien does not give the claimant title to the property itself. Instead, it gives the claimant the right to have the property sold so that the debt or claim can be satisfied from the sale proceeds.
Equitable liens are extremely important in:

• equitable tracing;
• breach of trust;
• fiduciary wrongdoing;
• mortgages;
• and proprietary remedies.

Meaning of an Equitable Lien
An equitable lien arises where equity recognises that it would be unfair for a defendant to retain property without securing repayment to the claimant.
The claimant therefore obtains:
✅ a charge over the property.
This allows the claimant to enforce the debt against the property itself.


Important Point
An equitable lien is:
❌ not ownership of the property.
Instead, it is:
✅ security over the property.


Example
Assume Daniel wrongfully takes:
£200,000
from a trust and mixes it with:
£300,000
of his own money to buy shares worth:
£500,000.
The beneficiaries may seek:
✅ an equitable lien over the shares
for:
£200,000.


What Does This Mean?
The beneficiaries do not own all the shares.
Instead, they possess:
✅ a secured claim over the shares
for the amount of trust money used.


Enforcement
If Daniel refuses to repay the money, the beneficiaries may ask the court to:
✅ order sale of the shares.
The beneficiaries then recover:

• the £200,000;
• plus possibly interest and costs

from the sale proceeds.


Why Equitable Liens Matter
An equitable lien gives the claimant strong protection because they become:
✅ secured creditors.
This is especially important if the trustee becomes bankrupt.


Insolvency Example
Suppose Daniel later becomes insolvent.


Without Equitable Lien
The beneficiaries become:
❌ unsecured creditors.
They may recover little or nothing.


With Equitable Lien
The beneficiaries possess:
✅ security over the property.
They therefore obtain:

• priority over unsecured creditors;
• stronger enforcement rights;
• and proprietary protection.

Difference Between Equitable Lien and Ownership
This distinction is extremely important.


Equitable Lien
Gives:
✅ security rights only.
The claimant receives repayment from the property.


Proprietary Ownership / Constructive Trust
Gives:
✅ ownership rights in the property itself.
This may allow the claimant to benefit from:

• increases in value;
• profits;
• and appreciation.

Example With Figures
Trust Money Used
£200,000.


Shares Purchased
£500,000.


Shares Later Worth
£2 million.


If Beneficiaries Take Equitable Lien
They recover:
✅ £200,000
plus interest.


If Beneficiaries Take Proportionate Ownership
They may recover:
✅ 40% of £2 million
= £800,000.


Which Remedy Is Better?
It depends on the circumstances.


Equitable Lien Preferred When

• the asset decreased in value;
• the claimant wants guaranteed repayment;
• or the asset produces little profit.

Ownership Preferred When

• the asset increased significantly in value;
• the claimant wants proportional profits;
• or the asset is highly valuable.

Equitable Lien in Tracing
Equitable liens commonly arise in tracing claims where:

• trust money contributes to acquisition of property;
• mixed funds are used;
• or substitute assets are purchased.

The claimant may elect either:

• a lien;
  or
• proportional ownership.

Foskett v McKeown
The leading authority is Foskett v McKeown.
Lord Millett explained that where trust money contributes to purchasing an asset, beneficiaries may choose between:

• a proportionate share in the asset;
  or
• an equitable lien securing repayment.

Equitable Lien vs Common Law Lien
A common law lien usually gives:

• possession-based rights.

An equitable lien is broader and arises because equity recognises fairness and proprietary justice.
Possession is not always required.


Practical Example
Suppose:

• Daniel uses £100,000 trust money;
• plus £400,000 personal money;
• to buy a property worth £500,000.

The property later falls to:
£300,000.


Best Remedy?
The beneficiaries may prefer:
✅ an equitable lien
for £100,000,
rather than taking 20% ownership worth only:
❌ £60,000.


Key SQE Principle
An equitable lien:
✅ gives security over property,
not ownership.
It allows the claimant to:

• force sale of the property;
• recover money from sale proceeds;
• and obtain secured creditor status.

Conclusion
An equitable lien is a powerful proprietary equitable remedy that grants the claimant a security interest over property to secure repayment of money owed. Although it does not provide ownership of the asset itself, it allows the claimant to enforce repayment directly against the property and obtain priority over unsecured creditors. In tracing cases, equitable liens are particularly valuable where trust money has contributed to acquisition of substitute assets and provide beneficiaries with strong proprietary protection after breaches of trust.
Sources of Reference
Foskett v McKeown [2001] 1 AC 102 (HL).
Re Hallett’s Estate (1880) 13 Ch D 696 (CA).
Re Oatway [1903] 2 Ch 356.
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, OUP 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, OUP 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

​

 Equity and Trust – Equitable Tracing
Introduction
Equitable tracing is a process used by the courts to identify and follow trust property after it has been wrongfully transferred, exchanged, or converted into another form. The purpose of tracing is to allow beneficiaries to recover property or substitute assets after a breach of trust or fiduciary wrongdoing.
Tracing does not itself create rights; rather, it identifies where the claimant’s existing equitable proprietary interest has moved. Once the property or its substitute is identified, the claimant may then seek proprietary remedies such as:

• recovery of the property;
• a constructive trust;
• an equitable lien;
• or a charge over substitute assets.

Equitable tracing is particularly important because beneficiaries under a trust are not legal owners of trust property and therefore cannot usually rely upon common law tracing. Instead, they must rely upon equitable tracing principles.


Basic Example of Equitable Tracing
Assume Daniel is trustee of the Carter Family Trust.
Daniel improperly removes:
£100,000
from the trust fund and uses the money to purchase a luxury car for himself.
This constitutes:
✅ a breach of trust.
The beneficiaries wish to recover the loss caused to the trust.
Equity allows the beneficiaries to:
✅ trace the trust money into the car.
The beneficiaries may then ask the court to:

• order sale of the car;
• return the proceeds to the trust;
• or impose proprietary remedies over the vehicle.

The beneficiaries’ equitable interest therefore moves from:

• the trust money;
  into
• the substitute asset (the car).

Why Equitable Tracing Is Necessary
The beneficiaries are not legal owners of the trust property. Legal title is held by the trustee.
As a result:
❌ common law tracing is usually unavailable.
The beneficiaries must therefore rely upon:
✅ equitable tracing.
Equity is more flexible than common law tracing and allows tracing through:

• mixed funds;
• substitute assets;
• and complex financial transactions.

Requirements for Equitable Tracing
Before tracing in equity is possible, two requirements must usually be satisfied.


Fiduciary Relationship
First, there must be:
✅ a fiduciary relationship
between the claimant and the person who initially held the legal title to the property.


Meaning of Fiduciary Relationship
A fiduciary is someone entrusted to act in the interests of another.
Examples include:

• trustees;
• executors;
• solicitors;
• company directors;
• agents;
• and partners.

Example
In the trust example above:

• Daniel is trustee;
• therefore Daniel is a fiduciary.

This requirement is easily satisfied.


Equitable Proprietary Interest
Second, the claimant must possess:
✅ an equitable proprietary interest
in the property being traced.
This means the claimant must have beneficial ownership recognised in equity.


Example
The beneficiaries possess an equitable interest in the trust fund because they are beneficial owners under the trust.
The interest may arise under:

• an express trust;
• a resulting trust;
• or a constructive trust.

Re Diplock
The leading authority is Re Diplock.


Facts of Re Diplock
Executors of Caleb Diplock’s estate wrongly distributed approximately:
£250,000
to various charities under a clause later found invalid.
The money should properly have passed to:
✅ the next of kin.
The next of kin therefore sought recovery.


Importance of the Case
The court confirmed the two prerequisites for equitable tracing.


Fiduciary Requirement
The executors were fiduciaries because executors owe fiduciary duties when administering estates.
Importantly, the charities themselves did not need to be fiduciaries.
The relevant fiduciary relationship concerned:
✅ the original holders of the property.


Equitable Interest Requirement
The next of kin possessed equitable proprietary interests as the true beneficiaries of the estate.
They were therefore entitled to trace the misapplied property.


Tracing Into Third Parties
Equitable tracing may continue even where trust property passes into the hands of third parties.
However, tracing may fail if the property reaches:
✅ a bona fide purchaser for value without notice.
Such purchasers are protected in equity.


Criticism of the Fiduciary Requirement
The requirement for an initial fiduciary relationship has been criticised.
In Foskett v McKeown, Lord Millett suggested, obiter, that there was:
no logical justification
for insisting upon a fiduciary relationship as a strict prerequisite for equitable tracing.


Lord Millett’s View
Lord Millett argued that tracing is fundamentally concerned with:

• identifying property rights;
• not fiduciary wrongdoing itself.

According to this reasoning, tracing should depend upon:
✅ proprietary interests,
rather than fiduciary status.


Modern Position
Although criticism remains, courts generally continue formally to require:

• an initial fiduciary relationship;
  and
• an equitable proprietary interest.

In practice, however, courts are usually generous in recognising fiduciary relationships in tracing cases.


Tracing and Substitute Property
One of equity’s most powerful features is that tracing permits claimants to follow value into substitute assets.


Example
Suppose Daniel uses trust money to purchase:

• shares;
• jewellery;
• property;
• or cryptocurrency.

The beneficiaries may trace their equitable interest into:
✅ the substitute asset.
The beneficiaries may then seek:

• ownership of the asset;
• a proportional share;
• or an equitable lien.

Mixed and Unmixed Funds
The rules governing tracing differ depending upon whether funds remain:
✅ unmixed,
or
✅ mixed.


Unmixed Funds
Tracing is relatively straightforward because the property remains identifiable.


Mixed Funds
Tracing becomes more complicated where trust money is mixed with:

• trustee money;
• other trust funds;
• or third-party funds.

Additional tracing rules then apply, including:

• Re Hallett;
• Re Oatway;
• Roscoe v Winder;
• and Clayton’s Case.

Why Equitable Tracing Matters
Equitable tracing provides beneficiaries with powerful proprietary protection because it allows them to:

• recover substitute assets;
• obtain priority in insolvency;
• benefit from increases in value;
• and preserve proprietary rights after wrongdoing.

Tracing is therefore one of the most important doctrines in equity and trusts law.


Key SQE Principles
To trace in equity, the claimant usually must show:
✅ a fiduciary relationship;
and
✅ an equitable proprietary interest.
Equitable tracing allows claimants to follow property into:

• substitute assets;
• mixed funds;
• and third-party hands.

Tracing itself identifies property rights, after which proprietary remedies may be sought.


Conclusion
Equitable tracing is a central doctrine within equity and trust law that enables beneficiaries to identify and recover trust property after breaches of trust and fiduciary wrongdoing. By allowing claimants to follow property into substitute assets and mixed funds, equity preserves proprietary rights even where trust property has changed form. Although tracing traditionally requires both a fiduciary relationship and an equitable proprietary interest, modern judicial commentary has questioned whether the fiduciary requirement remains conceptually necessary. Nevertheless, equitable tracing continues to provide one of the most powerful mechanisms for protecting beneficiaries and recovering misapplied trust property.
Sources of Reference
Re Diplock [1948] Ch 465.
Foskett v McKeown [2001] 1 AC 102 (HL).
Re Hallett’s Estate (1880) 13 Ch D 696 (CA).
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, OUP 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, OUP 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

​

​Equity and Trust – Personal Remedies, Proprietary Remedies and Equitable Remedies


Introduction


In equity and trust law, courts provide different types of remedies depending on:

• the nature of the wrongdoing;

• the type of property involved;

• and the outcome sought by the claimant.

Three of the most important concepts are:

• personal remedies;

• proprietary remedies;

• and equitable remedies.

These concepts are closely related but they are not identical. Understanding the distinction is extremely important in areas such as:

• breach of trust;

• equitable tracing;

• fiduciary duties;

• contracts;

• insolvency;

• and unjust enrichment.

⸻


Equitable Remedies


Definition


Equitable remedies are remedies granted by courts of equity.


They are:


✅ discretionary remedies,


meaning the court is not automatically required to grant them even if the claimant succeeds.


This differs from many common law remedies, such as ordinary damages, which usually follow automatically once liability is established.


⸻


Characteristics of Equitable Remedies


Equitable remedies are generally:

• flexible;

• discretionary;

• fairness-based;

• and guided by equitable principles and maxims.

⸻


Examples of Equitable Remedies


Equitable remedies include:

• injunctions;

• specific performance;

• rescission;

• rectification;

• equitable compensation;

• account of profits;

• constructive trusts;

• equitable liens;

• subrogation;

• and tracing remedies.

⸻


Example


Suppose Daniel breaches a trust by taking trust money.


The court may grant:

• equitable compensation;

• tracing remedies;

• or a constructive trust.

These are all:


✅ equitable remedies.


⸻


Personal Remedies


Definition


A personal remedy operates:


✅ against a person personally.


The defendant becomes personally liable to pay money or perform an obligation.


The remedy does not attach directly to specific property.


⸻


Main Feature


Personal remedies create:


✅ personal liability only.


The claimant merely becomes a creditor of the defendant.


⸻


Example


Suppose Daniel wrongfully removes:


£200,000


from a trust and spends all the money on holidays.


The money is gone and cannot be traced.


The beneficiaries may sue Daniel personally for:


✅ equitable compensation.


⸻


Result


Daniel personally owes:


£200,000


to the beneficiaries.


However:


❌ the beneficiaries do not obtain rights over any specific asset.


⸻


Examples of Personal Remedies


Personal remedies include:

• equitable compensation;

• account of profits;

• damages;

• dishonest assistance;

• and knowing receipt compensation.

⸻


Advantages of Personal Remedies


Personal remedies are useful because they may still operate even where:

• property has disappeared;

• tracing fails;

• or assets are dissipated.

⸻


Disadvantages of Personal Remedies


The major disadvantage is insolvency.


If the defendant becomes bankrupt:


❌ the claimant becomes an unsecured creditor.


The claimant may recover little or nothing.


⸻


Proprietary Remedies


Definition


A proprietary remedy gives the claimant:


✅ rights over specific property.


The claimant asserts ownership rights or security interests directly against the asset itself.


⸻


Main Feature


The remedy attaches:


✅ to property,
not merely to the defendant personally.


⸻


Example


Suppose Daniel wrongfully takes:


£200,000


from the trust and buys shares.


The beneficiaries may trace into:


✅ the shares.


The beneficiaries may claim:

• ownership of the shares;

• a proportional share;

• or an equitable lien.

⸻


Result


The beneficiaries obtain:


✅ proprietary rights over the asset itself.


⸻


Examples of Proprietary Remedies


Proprietary remedies include:

• tracing;

• constructive trusts;

• equitable liens;

• equitable charges;

• subrogation;

• and proprietary injunctions.

⸻


Advantages of Proprietary Remedies


Proprietary remedies are generally considered stronger because they:

• survive insolvency;

• provide priority over unsecured creditors;

• attach directly to property;

• and allow claimants to benefit from increases in value.

⸻


Example of Increase in Value


Suppose trust money of:


£200,000


is used to buy shares later worth:


£2 million.


If the beneficiaries obtain:


✅ a proprietary share,


they may recover far more than the original £200,000.


⸻


Insolvency Advantage


Suppose Daniel becomes bankrupt.


⸻


Personal Remedy


The beneficiaries become:


❌ unsecured creditors.


⸻


Proprietary Remedy


If beneficiaries possess a proprietary interest in the shares:


✅ they recover directly from the asset itself.


They therefore rank ahead of ordinary creditors.


⸻


Difference Between Personal and Proprietary Remedies


Personal Remedy

• against the defendant personally;

• creates debt liability;

• no ownership rights over assets.

⸻


Proprietary Remedy

• against specific property;

• creates proprietary rights;

• survives insolvency;

• may include appreciation in value.

⸻


Relationship Between Equitable and Proprietary Remedies


Not all equitable remedies are proprietary.


Some equitable remedies are:


✅ personal remedies.


⸻


Example


Equitable Compensation


This is:

• equitable;

• but personal.

⸻


Example


Constructive Trust


This is:

• equitable;

• and proprietary.

⸻


Therefore


Equitable remedies form the broader category.


Inside equity there are:

• personal equitable remedies;

    and

• proprietary equitable remedies.

⸻


Example Comparing All Three


Suppose Daniel steals:


£100,000


from a trust.


⸻


Scenario 1 – Money Dissipated


Daniel spends everything on holidays.


The beneficiaries may claim:


✅ equitable compensation.


This is:

• equitable;

• and personal.

⸻


Scenario 2 – Money Used to Buy Shares


Daniel buys shares now worth:


£500,000.


The beneficiaries may claim:


✅ a constructive trust over the shares.


This is:

• equitable;

• and proprietary.

⸻


Scenario 3 – Equitable Lien


The beneficiaries seek:


✅ an equitable lien securing repayment.


This is also:

• equitable;

• and proprietary.

⸻


Why the Distinction Matters


The distinction is extremely important in:

• insolvency;

• asset recovery;

• tracing;

• fiduciary breaches;

• and fraud litigation.

Claimants usually prefer proprietary remedies because they provide:

• stronger protection;

• priority rights;

• and access to appreciating assets.

⸻


Key SQE Principles


Equitable Remedy


A remedy granted by equity and subject to judicial discretion.


⸻


Personal Remedy


Operates against the defendant personally.


⸻


Proprietary Remedy


Attaches directly to identifiable property.


⸻


Conclusion


Equitable remedies are discretionary remedies developed by courts of equity to achieve fairness and justice. Within equity, remedies may operate either personally or proprietarily. Personal remedies impose liability upon the defendant personally, while proprietary remedies grant rights directly over specific property. Proprietary remedies are generally more powerful because they survive insolvency, provide priority over creditors, and allow claimants to benefit from increases in asset value. The distinction between these remedies lies at the heart of modern equity, trust law, tracing, and fiduciary accountability.


Sources of Reference


Foskett v McKeown [2001] 1 AC 102 (HL).


Re Hallett’s Estate (1880) 13 Ch D 696 (CA).


Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (HL).


Target Holdings Ltd v Redferns [1996] AC 421 (HL).


Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).


James Penner, The Law of Trusts (12th edn, OUP 2020).


Graham Virgo, The Principles of Equity and Trusts (5th edn, OUP 2024).


John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

Equity and Trust – Constructive Trust
Introduction
A constructive trust is an equitable remedy and legal mechanism imposed by the court where it would be unconscionable for a person holding property to deny another person’s beneficial interest in that property.
Unlike an express trust, a constructive trust does not arise because parties intentionally created it. Instead, it is:
✅ imposed by operation of law.
The court imposes the trust in order to achieve fairness, prevent unjust enrichment, and respond to wrongdoing or unconscionable conduct.
Constructive trusts are extremely important in:

• equity and trusts;
• equitable tracing;
• breach of fiduciary duty;
• family property disputes;
• unjust enrichment;
• and proprietary remedies.

Definition
A constructive trust arises where:
equity considers it unconscionable for the legal owner of property to retain the beneficial interest exclusively.
The legal owner therefore becomes:
✅ a constructive trustee
holding the property for the benefit of another person.


Main Feature
A constructive trust is:
✅ proprietary.
This means the claimant obtains:

• rights over the property itself;
• not merely personal compensation.

Purpose of Constructive Trusts
Constructive trusts serve several functions:

• preventing unjust enrichment;
• protecting beneficiaries;
• enforcing fiduciary obligations;
• recognising beneficial ownership;
• and preserving proprietary rights.

Common Situations Where Constructive Trusts Arise
Constructive trusts commonly arise in:

• breach of trust;
• fiduciary wrongdoing;
• tracing claims;
• family homes disputes;
• secret profits;
• knowing receipt;
• and fraudulent conduct.

Example 1 – Breach of Trust
Assume Daniel is trustee of the Carter Family Trust.
Daniel wrongfully takes:
£200,000
from the trust and buys shares.
The beneficiaries may trace into the shares.
The court may declare that Daniel holds the shares on:
✅ constructive trust
for the beneficiaries.


Result
The beneficiaries acquire:
✅ proprietary rights over the shares.
They may therefore:

• claim ownership;
• force sale;
• or benefit from increases in value.

Example With Figures
Trust Money Taken
£200,000.


Shares Purchased
£200,000.


Shares Later Worth
£1 million.


Result
If a constructive trust is imposed:
✅ the beneficiaries may claim the shares themselves,
worth:
£1 million.
This is far more valuable than merely recovering:
❌ £200,000 compensation.


Constructive Trust vs Equitable Compensation
This distinction is very important.


Equitable Compensation
Creates:
✅ personal liability only.
The claimant merely becomes a creditor.


Constructive Trust
Creates:
✅ proprietary rights in the property itself.
This is usually stronger.


Example 2 – Secret Profit
Suppose a trustee uses trust information to purchase land personally and later sells it for profit.
Equity may impose a constructive trust over:

• the land;
  or
• the profit.

This prevents fiduciaries from profiting from breaches of duty.


Example 3 – Family Home Cases
Constructive trusts also arise in domestic property disputes.
Suppose:

• Alice and Ben live together;
• the house is legally owned only by Ben;
• but Alice contributed significantly toward the purchase price or mortgage.

The court may recognise that Ben holds part of the property on:
✅ constructive trust
for Alice.
Alice therefore acquires a beneficial interest in the property.


Institutional vs Remedial Constructive Trusts
This is a major academic distinction.


Institutional Constructive Trust
Arises automatically by operation of law once relevant events occur.
English law traditionally prefers this approach.


Example
A trustee misappropriates trust money to buy shares.
The constructive trust arises immediately when the wrongful acquisition occurs.


Remedial Constructive Trust
Arises only when imposed by the court as a discretionary remedy.
This approach is more common in:

• Australia;
• Canada;
• and some other jurisdictions.

English law is generally cautious about adopting broad remedial constructive trusts.


Relationship With Tracing
Constructive trusts are closely connected with equitable tracing.
Tracing identifies:
✅ where the property has gone.
The constructive trust then gives:
✅ proprietary rights over the identified asset.


Insolvency Advantage
Constructive trusts are especially important in insolvency.


Example
Suppose Daniel becomes bankrupt.
If beneficiaries possess only:
❌ personal remedies,
they become unsecured creditors.
However, if a constructive trust exists:
✅ the beneficiaries recover directly from the property itself.
This gives priority over ordinary creditors.


Knowing Receipt
A person who knowingly receives trust property may become:
✅ a constructive trustee.
This allows beneficiaries to claim proprietary remedies against the recipient.


Unconscionability
Modern courts often explain constructive trusts using the concept of:
unconscionability.
If it would be unconscionable for the legal owner to deny another person’s beneficial rights, equity may impose a constructive trust.


Key Case – Foskett v McKeown
In Foskett v McKeown, the House of Lords confirmed that beneficiaries could obtain proprietary rights through tracing where trust money was used to acquire substitute property.
The case strongly supports the proprietary nature of constructive trusts.


Key Case – Westdeutsche Landesbank
In Westdeutsche Landesbank Girozentrale v Islington LBC, Lord Browne-Wilkinson explained that constructive trusts arise where the conscience of the legal owner is affected.
This case emphasised:

• conscience;
• equitable ownership;
• and proprietary obligations.

Advantages of Constructive Trusts
Constructive trusts are powerful because they:

• provide proprietary rights;
• survive insolvency;
• allow tracing into substitute assets;
• permit claims over increases in value;
• and provide priority over unsecured creditors.

Disadvantages and Criticism
Constructive trusts have also been criticised because they may:

• disrupt commercial certainty;
• prejudice unsecured creditors;
• create uncertainty;
• and rely heavily on vague concepts such as unconscionability.

Key SQE Principles
A constructive trust:
✅ is imposed by operation of law.
It arises where:
✅ equity considers it unconscionable for the legal owner to deny another’s beneficial interest.
Constructive trusts provide:
✅ proprietary remedies,
not merely personal compensation.


Conclusion
A constructive trust is one of the most important proprietary remedies in equity and trust law. It arises by operation of law where equity considers it unconscionable for a person holding legal title to deny another person’s beneficial interest in the property. Constructive trusts are central to tracing, breach of trust, fiduciary wrongdoing, and family property disputes because they provide claimants with proprietary rights over assets themselves rather than merely personal compensation. Their powerful proprietary nature makes them especially important in cases involving insolvency, substitute assets, and increases in value.
Sources of Reference
Foskett v McKeown [2001] 1 AC 102 (HL).
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (HL).
Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105.
Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400.
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, OUP 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, OUP 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

​

Equity and Trust – Subrogation
Introduction
Subrogation is an equitable proprietary remedy that allows one person to:
step into the legal position and rights of another person.
In equity and trust law, subrogation commonly arises where trust money has been used to pay off another person’s secured debt, such as a mortgage. Rather than treating the money as completely lost or dissipated, equity allows the beneficiaries to assume the rights previously held by the original secured creditor.
Subrogation therefore prevents unjust enrichment and protects beneficiaries whose money has been used improperly.


Definition
Subrogation occurs where:
✅ one person’s money is used to discharge another person’s debt,
and equity allows that person to:
✅ acquire the legal rights and security previously possessed by the creditor who was paid.


Main Idea
The claimant effectively:
“stands in the shoes”
of the original creditor.


Why Subrogation Exists
Without subrogation, a wrongdoer could unfairly benefit from using another person’s money to improve their financial position.
Equity therefore intervenes to prevent unjust enrichment.


Common Trust Example
Suppose Daniel is trustee of the Carter Family Trust.
Daniel wrongfully removes:
£300,000
from the trust and uses it to pay off part of a mortgage secured over his house.
Normally, paying off a debt would amount to:
❌ dissipation,
because the money has disappeared.
However, equity applies:
✅ subrogation.


Result
The beneficiaries become entitled to:
✅ the mortgage security rights
that previously belonged to the bank.


What Does This Mean?
The beneficiaries may obtain:
✅ a charge over Daniel’s house
for:
£300,000.
They effectively replace the bank to the extent the trust money discharged the mortgage.


Enforcement
If Daniel refuses repayment, the beneficiaries may:

• force sale of the property;
• recover from sale proceeds;
• or enforce the security like a mortgage lender.

Example With Figures
Original Mortgage
£500,000 owed to the bank.


Trust Money Misused
£300,000.


Mortgage Reduced To
£200,000.


Result
The beneficiaries may become subrogated to:
✅ £300,000 worth of the bank’s former security rights.


Why This Is Important
Without subrogation:

• the trust money would appear dissipated;
• and beneficiaries might lose proprietary protection.

Subrogation therefore preserves:
✅ proprietary recovery.


Key Characteristics of Subrogation
Subrogation is:

• equitable;
• proprietary;
• restitutionary;
• and discretionary.

It prevents defendants from benefiting unfairly from another person’s money.


Leading Case – Boscawen v Bajwa
The leading authority is Boscawen v Bajwa.


Facts
A building society advanced money intended to finance a property purchase secured by mortgage.
The solicitors used the money to pay off an existing mortgage before completion.
The transaction later collapsed.


Issue
Could the building society trace into the discharged mortgage security?


Decision
The court held:
✅ yes.
The building society became subrogated to the rights of the original mortgage lender.
The discharged mortgage security was effectively kept alive for the benefit of the building society.


Importance of Boscawen
The case confirms that subrogation can preserve proprietary rights even where trust money was used to discharge secured debts.


Burston Finance v Speirway
In Burston Finance Ltd v Speirway Ltd, Walton J explained the principle clearly.
Where A’s money is used to pay off B’s secured debt, equity may treat A as having acquired:
✅ B’s former security rights.


Relationship With Tracing
Subrogation is closely linked to tracing.
Normally:
❌ money used to pay debts is dissipated.
However, subrogation creates an important exception.
Instead of losing proprietary rights, the claimant traces into:
✅ the discharged security interest.


Subrogation vs Equitable Lien
These remedies are related but different.


Equitable Lien
Creates:
✅ a new security interest.


Subrogation
Transfers:
✅ an existing security interest.
The claimant acquires rights already possessed by the former creditor.


Example Comparing Both
Suppose trust money pays part of a mortgage.


Equitable Lien
The court creates a fresh charge over the property.


Subrogation
The beneficiaries inherit the bank’s existing mortgage rights.


Why Proprietary Status Matters
Subrogation is powerful because it gives claimants:
✅ secured creditor status.
This becomes especially important in insolvency.


Insolvency Example
Suppose Daniel later becomes bankrupt.


Without Subrogation
The beneficiaries become:
❌ unsecured creditors.


With Subrogation
The beneficiaries possess:
✅ secured rights over the house.
They therefore rank ahead of unsecured creditors.


Practical Importance
Subrogation is highly important in cases involving:

• breach of trust;
• mortgages;
• secured lending;
• fiduciary fraud;
• and insolvency.

It enables courts to preserve fairness where one person’s money has discharged another’s secured obligations.


Criticism and Complexity
Subrogation can be technically difficult because it involves:

• tracing;
• proprietary rights;
• unjust enrichment;
• and equitable discretion.

Courts therefore carefully analyse whether granting subrogation would be fair and proportionate.


Key SQE Principles
Subrogation allows a claimant to:
✅ step into the legal position of a former creditor.
It commonly applies where trust money is used to discharge:
✅ secured debts.
Subrogation preserves:
✅ proprietary rights and security interests.


Conclusion
Subrogation is an important equitable proprietary remedy that allows a claimant to acquire the security rights previously held by a creditor whose debt was discharged using the claimant’s money. It operates as an exception to the normal rule that payment of debts amounts to dissipation and ensures that beneficiaries do not lose proprietary protection merely because trust money was used to repay secured liabilities. By allowing claimants to step into the shoes of the original creditor, subrogation prevents unjust enrichment and provides powerful protection in cases involving breach of trust, tracing, mortgages, and insolvency.
Sources of Reference
Boscawen v Bajwa [1995] 4 All ER 769 (CA).
Burston Finance Ltd v Speirway Ltd [1974] 1 WLR 1648.
Foskett v McKeown [2001] 1 AC 102 (HL).
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, OUP 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, OUP 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

​

SQE – Equity and Trust – Is Breach of Trust the Same as Breach of Fiduciary Duty?
Short Answer
❌ No.
A breach of trust is not exactly the same as a breach of fiduciary duty, although the two concepts are closely related and often overlap.


Introduction
Both breach of trust and breach of fiduciary duty involve wrongdoing by a person who owes obligations to another. Both arise within equity and both may lead to equitable remedies such as:

• equitable compensation;
• account of profits;
• constructive trusts;
• tracing;
• and injunctions.

However, they are not identical concepts.


Breach of Trust
Definition
A breach of trust occurs where:
a trustee fails to comply with the duties imposed by the trust.
The trustee violates obligations arising from:

• the trust deed;
• trust law;
• fiduciary obligations;
• or statutory duties.

Examples of Breach of Trust
A trustee commits breach of trust if they:

• misappropriate trust money;
• invest imprudently;
• distribute assets incorrectly;
• fail to safeguard trust property;
• act outside trustee powers;
• or fail to act impartially between beneficiaries.

Example
Suppose Daniel is trustee of the Carter Family Trust.
Daniel improperly removes:
£200,000
from the trust to buy a car.
This is:
✅ breach of trust.


Breach of Fiduciary Duty
Definition
A breach of fiduciary duty occurs where:
a fiduciary acts disloyally or contrary to the interests of the person to whom duties are owed.
Fiduciary duties are duties of:

• loyalty;
• good faith;
• honesty;
• and avoidance of conflicts of interest.

Fiduciaries Are Broader Than Trustees
Trustees are fiduciaries, but many other people are also fiduciaries, including:

• company directors;
• solicitors;
• agents;
• partners;
• executors;
• and financial advisers.

Therefore:
✅ all trustees are fiduciaries,
but
❌ not all fiduciaries are trustees.


Examples of Breach of Fiduciary Duty
A fiduciary breaches duty if they:

• make secret profits;
• place themselves in conflicts of interest;
• misuse confidential information;
• act disloyally;
• or prioritise personal interests over beneficiaries.

Example
Suppose a company director secretly profits from a business opportunity belonging to the company.
This is:
✅ breach of fiduciary duty,
even though no trust exists.


Relationship Between the Two
Important Principle
Every trustee owes fiduciary duties.
Therefore:
✅ some breaches of trust are also breaches of fiduciary duty.
However:
❌ not every breach of trust is fiduciary in nature.


Key Distinction
Fiduciary duties focus mainly upon:
✅ loyalty and conflicts of interest.
Trust duties are broader and also include:

• administrative duties;
• investment duties;
• accounting obligations;
• and management responsibilities.

Example of Breach of Trust But Not Fiduciary Breach
Suppose Daniel, as trustee:

• invests trust funds carelessly;
• but honestly and without self-interest.

This may be:
✅ breach of trust,
because he acted negligently.
But it may not be:
❌ breach of fiduciary duty,
because there was no disloyalty or conflict of interest.


Example of Both
Suppose Daniel uses trust money to buy property for himself.
This is:
✅ breach of trust,
and
✅ breach of fiduciary duty.
Why?
Because Daniel:

• misused trust assets;
• acted disloyally;
• and placed personal interests above beneficiaries.

Fiduciary Duties Are Proscriptive
An important distinction is that fiduciary duties are usually:
proscriptive,
not prescriptive.
This means fiduciary law mainly tells fiduciaries what they:
❌ must not do,
such as:

• making secret profits;
• entering conflicts of interest;
• acting disloyally.

Trust Duties Can Be Positive Duties
Trustees also owe:
✅ positive administrative duties,
including:

• investing properly;
• keeping accounts;
• safeguarding trust property;
• and distributing assets correctly.

Failure to perform these duties may create breach of trust even without disloyal conduct.


Remedies
The remedies often overlap.


Remedies for Breach of Trust

• equitable compensation;
• tracing;
• constructive trusts;
• equitable liens;
• account of profits.

Remedies for Breach of Fiduciary Duty

• account of profits;
• constructive trusts;
• rescission;
• equitable compensation;
• injunctions.

Key Cases
Breach of Fiduciary Duty

• Boardman v Phipps
• Keech v Sandford

Breach of Trust

• Target Holdings Ltd v Redferns
• Foskett v McKeown

Academic View
Modern equity scholars often emphasise that:

• breach of fiduciary duty concerns loyalty;
• while breach of trust concerns broader trustee obligations.

Therefore the concepts overlap but are not identical.


Simple Comparison
Breach of Trust
Concerned with:
✅ violation of trust obligations generally.
Includes:

• negligence;
• mismanagement;
• improper investments;
• wrongful distributions.

Breach of Fiduciary Duty
Concerned with:
✅ disloyalty and conflicts of interest.
Includes:

• secret profits;
• self-dealing;
• conflicts;
• misuse of position.

Key SQE Principle
All trustees are fiduciaries.
Therefore:
✅ a trustee may commit both breaches simultaneously.
However:
❌ breach of trust is broader than breach of fiduciary duty.


Conclusion
Breach of trust and breach of fiduciary duty are closely connected but distinct concepts within equity. A breach of trust occurs whenever a trustee fails to comply with obligations imposed by trust law, while a breach of fiduciary duty specifically concerns disloyalty, conflicts of interest, and misuse of fiduciary position. Although many breaches of trust also involve fiduciary wrongdoing, some breaches of trust arise merely from negligence or poor administration rather than disloyal conduct. The distinction is important because fiduciary duties focus primarily on loyalty, whereas trust obligations extend more broadly to the proper administration and management of trust property.
Sources of Reference
Boardman v Phipps [1967] 2 AC 46 (HL).
Keech v Sandford (1726) Sel Cas Ch 61.
Target Holdings Ltd v Redferns [1996] AC 421 (HL).
Foskett v McKeown [2001] 1 AC 102 (HL).
Bristol and West Building Society v Mothew [1998] Ch 1 (CA).
Alastair Hudson, Equity and Trusts (11th edn, Routledge 2022).
James Penner, The Law of Trusts (12th edn, OUP 2020).
Graham Virgo, The Principles of Equity and Trusts (5th edn, OUP 2024).
John McGhee (ed), Snell’s Equity (35th edn, Sweet & Maxwell 2024).

​