Equity and Trust – Can Multiple Personal Remedies Be Claimed Together?
Case Scenario
The trustees of the Morgan Family Trust hold:
£2 million
for the benefit of several beneficiaries.
One trustee, Daniel, improperly transfers:
£500,000
from the trust into an overseas investment account in breach of trust.
Daniel works together with:

• Michael, who knowingly receives part of the trust money;
• and a solicitor, Sarah, who dishonestly helps conceal the transaction.

Michael receives:
£300,000
knowing it came from a breach of trust.
Michael invests the money and later earns:
£120,000 profit.
The remaining:
£200,000
is lost completely in a failed investment and cannot be traced.
The beneficiaries want to know:

• whether they can claim several remedies together;
• whether they must choose only one;
• and how equitable compensation, account of profits, and other personal remedies operate.

Short Answer
Yes — beneficiaries may often claim multiple personal remedies together.
However:

• they cannot recover the same loss twice;
• courts prevent double recovery;
• remedies may overlap but serve different purposes.

Main Principle
A claimant may simultaneously plead:

• equitable compensation;
• account of profits;
• knowing receipt;
• dishonest assistance;
• proprietary claims.

But the court ensures:
✅ full restoration of the trust
❌ no overcompensation


1. Equitable Compensation
Definition
Equitable compensation is a personal remedy designed to restore beneficiaries to the position they would have occupied had the breach not occurred.
It focuses on:
the claimant’s loss.


Application to the Scenario
The trust lost:
£500,000
However:

• £200,000 cannot be traced or recovered because it disappeared in the failed investment.

The beneficiaries may therefore seek equitable compensation against Daniel for:
£200,000
because that portion of the trust fund is permanently lost.


Purpose of Equitable Compensation
The aim is to:

• restore the trust fund;
• compensate beneficiaries for loss caused by breach of trust.

2. Knowing Receipt
Definition
Knowing receipt arises where a third party receives trust property knowing it was transferred in breach of trust.


Application to the Scenario
Michael knowingly received:
£300,000
from the trust.
The beneficiaries may sue Michael personally for knowing receipt.


Possible Recovery
Michael may be personally liable to restore:
£300,000
to the trust.


3. Account of Profits
Definition
An account of profits strips profits made from misuse of trust property.
It focuses on:
the defendant’s gain.


Application to the Scenario
Michael used the trust money to earn:
£120,000 profit.
The beneficiaries may claim:

• the original £300,000;
  PLUS
• the £120,000 profit.

Why?
Because the profit arose entirely from misuse of trust assets.
Equity prevents fiduciaries and knowing recipients from retaining unauthorised gains.


4. Dishonest Assistance
Definition
Dishonest assistance arises where a third party dishonestly assists a breach of trust.


Application to the Scenario
Sarah, the solicitor, helped conceal the breach.
Even though she never received the money personally, she may still be personally liable for dishonest assistance.


Can All These Remedies Be Claimed Together?
Yes — Procedurally
The beneficiaries may plead all claims together:

• equitable compensation;
• knowing receipt;
• account of profits;
• dishonest assistance.

But Recovery Is Controlled
The court prevents duplicate recovery.
The beneficiaries cannot recover:
❌ £300,000 twice from different defendants.


Practical Calculation
Trust Loss
Total improperly transferred:
£500,000


Amount Recoverable From Michael
Knowing Receipt
£300,000


Account of Profits
£120,000


Total From Michael
£420,000
because:

• £300,000 restores trust property;
• £120,000 removes wrongful profit.

These are different recoveries.


Amount Recoverable From Daniel
Equitable Compensation
£200,000
for the irrecoverable portion of the trust fund.


Possible Liability of Sarah
Sarah may also be personally liable for dishonest assistance regarding the losses caused.
However:

• beneficiaries cannot recover the same £200,000 twice.

If Daniel already restores the full amount, Sarah’s liability may become contribution-based between defendants.


Why These Remedies Can Operate Together
The remedies address different wrongs:


Equitable Compensation
Restores loss suffered by the trust.


Account of Profits
Strips wrongful gains from the defendant.


Knowing Receipt
Imposes liability for receiving trust property knowingly.


Dishonest Assistance
Imposes liability for dishonest participation in breach.


Example of Double Recovery Not Allowed
Suppose beneficiaries recover:
£300,000
from Michael.
They cannot then recover another identical:
£300,000
from Daniel for the exact same loss.
That would overcompensate the trust.


Simple Rule
Claimants May:
✅ combine remedies
✅ sue multiple defendants
✅ recover losses and profits


Claimants Cannot:
❌ recover identical sums twice
❌ obtain double compensation
❌ profit from the litigation


Key SQE Principle
Equity distinguishes between:
Compensation for Loss
and
Disgorgement of Profit.
These remedies may coexist where they remedy different consequences of wrongdoing.



Conclusion
Multiple personal remedies may often be claimed together in equity, including equitable compensation, account of profits, knowing receipt, and dishonest assistance. However, although several remedies may coexist, courts carefully prevent double recovery. Equitable compensation restores losses suffered by the trust, while account of profits strips wrongful gains obtained from misuse of trust property. Together, these remedies ensure both restoration of trust assets and fiduciary accountability without overcompensating beneficiaries.

​

SQE – Equity and Trust – Dishonest Assistance
Case Scenario
The trustees of the Hamilton Family Trust manage:
£5 million
for the benefit of several beneficiaries.
One trustee, Daniel, improperly transfers:
£800,000
from the trust into offshore accounts in breach of trust.
Daniel works closely with a solicitor, Sarah, who helps structure the transfers and conceal the movement of funds.
Sarah does not personally receive any trust money. However, she:

• prepares misleading documentation;
• assists in transferring the funds overseas;
• knows the transaction is suspicious;
• deliberately avoids asking further questions.

Eventually, the trust suffers losses because:

• £500,000 disappears permanently;
• the remaining funds become unrecoverable due to insolvency.

The beneficiaries bring a claim against Sarah for dishonest assistance.
The court must determine:

• whether Sarah dishonestly assisted the breach of trust;
• whether dishonesty exists;
• whether her conduct amounts to “assistance”;
• and what remedies are available.

Dishonest Assistance
Definition
Dishonest assistance arises where a third party dishonestly assists or procures a breach of trust or fiduciary duty.
Unlike knowing receipt:

• the dishonest assistant does not need to receive trust property;
• liability arises because of participation in wrongdoing.

Nature of the Remedy
Dishonest assistance gives rise to:
✅ a personal remedy
❌ not a proprietary remedy.
The dishonest assistant is personally liable to compensate the claimant for losses caused by the breach.


Important Principle
The dishonest assistant is:
not a constructive trustee.
Liability is fault-based rather than receipt-based.


Twinsectra Ltd v Yardley
Lord Millett explained:
dishonest assistance is fault-based, not receipt-based.
The claim focuses on:

• wrongful participation;
• not receipt of trust property.

The claimant seeks:

• compensation for wrongdoing;
• not restitution of property.

Application to the Scenario
Sarah never personally received the £800,000.
However, she actively helped facilitate the breach by:

• preparing misleading documents;
• helping conceal transfers;
• assisting movement of funds offshore.

Therefore, liability may arise despite absence of personal receipt.


Elements of Dishonest Assistance
The claimant must generally prove:
1. Existence of a Trust or Fiduciary Duty
A trust relationship must exist.


2. Breach of Trust or Fiduciary Duty
The trustee must commit a breach.


3. Assistance by the Defendant
The third party must actively assist the breach.


4. Dishonesty
The assistance must be dishonest.


The Meaning of Dishonesty
Dishonesty has been heavily debated in equity.


Royal Brunei Airlines v Tan
Facts
A travel agency held airline ticket proceeds on trust for the airline.
The money was improperly used for business purposes.
Tan, the managing director, was sued for dishonest assistance.


Principle
Lord Nicholls held that dishonesty involved:

• an objective standard;
• but assessed against the defendant’s actual knowledge and circumstances.

Objective Standard
The court asks:
Would ordinary honest people regard the conduct as dishonest?


Subjective Factors
The court may consider:

• defendant’s experience;
• intelligence;
• knowledge;
• professional background.

However, the defendant’s personal belief that they acted honestly is not decisive.


Twinsectra Ltd v Yardley
Lord Hutton described dishonesty as a:
“combined test”
involving objective and subjective elements.
The conduct had to be:

• dishonest by ordinary standards;
  AND
• appreciated as dishonest by the defendant.

Barlow Clowes International Ltd v Eurotrust International Ltd
Lord Hoffmann clarified that:

• the defendant need not consciously reflect on honesty standards;
• it is enough that participation was contrary to ordinary standards of honest conduct.

Modern Position
Ivey v Genting Casinos (UK) Ltd
The Supreme Court confirmed:
✅ dishonesty is primarily objective.
The court assesses:

• the defendant’s actual knowledge and circumstances;
• but not whether the defendant personally believed the conduct was dishonest.

Application to the Scenario
Sarah is an experienced solicitor.
She:

• understood the suspicious nature of the transfers;
• deliberately assisted concealment;
• ignored obvious warning signs.

The court would likely conclude that her conduct was dishonest by ordinary standards.


State of Mind of Trustee Is Irrelevant
Dishonest assistance focuses on:
the third party’s dishonesty.


Important Principle From Tan
Lord Nicholls explained:
“What matters is the state of mind of the third party.”
Therefore:

• even if the trustee acted innocently,
• a third party may still be dishonest.

Meaning of Assistance
Assistance requires:
✅ active participation
There must be:

• helping;
• procuring;
• facilitating;
• or participating in the breach.

A causal connection must exist between:

• the assistance;
• and the breach itself.

Brown v Bennett
The court confirmed:

• assistance must relate to the breach in question.

Example of Insufficient Assistance
Brinks Ltd v Abu-Saleh (No 1)
Facts
Mrs Elscombe accompanied her husband on trips transporting stolen money.
She suspected wrongdoing but merely accompanied him for holidays.


Decision
The court held:
❌ no dishonest assistance.
Why?
Because she did not actively participate in the laundering arrangement itself.
Mere association was insufficient.


Application to the Scenario
Sarah actively:

• prepared documents;
• organised transfers;
• facilitated concealment.

Unlike Mrs Elscombe, Sarah directly participated in the breach.
Therefore, the assistance element is likely satisfied.


Remedy
The beneficiaries may seek:
Personal Compensation
Suppose trust losses equal:
£500,000
Sarah may be personally liable to compensate the trust for losses caused by her dishonest assistance.


Important Distinction
Dishonest Assistant

• personal liability only.

Knowing Recipient

• personal liability;
• sometimes proprietary liability.

Why No Proprietary Remedy?
Because the dishonest assistant may never possess trust property.
Liability arises from:

• participation in wrongdoing;
• not ownership or receipt.

Key SQE Principles
Dishonest assistance is:

• fault-based;
• personal in nature;
• dependent on active assistance;
• dependent on objective dishonesty.

Receipt of trust property is unnecessary.
The focus is on:

• participation;
• conduct;
• and honesty standards.

Conclusion
Dishonest assistance is an important equitable doctrine imposing personal liability on third parties who dishonestly participate in breaches of trust or fiduciary duty. Liability does not depend on receipt of trust property but on fault-based participation in wrongdoing. Modern courts apply an objective standard of dishonesty assessed in light of the defendant’s actual knowledge and circumstances. The doctrine plays a crucial role in ensuring fiduciary accountability and preventing third parties from facilitating breaches of trust.

​

 Equity and Trust – Knowing Recipient
Case Scenario
The trustees of the Harrison Family Trust manage:
£10 million
for the benefit of several beneficiaries.
One trustee, Daniel, improperly transfers:
£1 million
from the trust in breach of trust.
The money is transferred to Michael, a businessman, who receives the funds through a property transaction.
Michael:

• receives the trust assets directly;
• knows the transaction appears suspicious;
• deliberately avoids asking questions;
• later uses the money to purchase commercial property.

The commercial property later increases in value to:
£1.8 million
The beneficiaries bring proceedings alleging that Michael is a knowing recipient.
The court must determine:

• whether Michael received trust property;
• whether the property remains traceable;
• whether Michael possessed the required knowledge;
• and whether proprietary and personal remedies are available.

Knowing Recipient
Definition
A knowing recipient is:
a third party who receives trust property with knowledge that the property was transferred in breach of trust or fiduciary duty.
The recipient may:

• provide value;
  or
• receive the property voluntarily.

What transforms the person into a knowing recipient is:
knowledge of the breach.


Nature of Liability
Unlike dishonest assistance, knowing receipt may give rise to:
✅ proprietary remedies
AND
✅ personal remedies.
This dual liability makes knowing receipt highly attractive to claimants.


Why?
Because the recipient becomes:
a constructive trustee over the property received.
The claimant may therefore:

• trace the property;
• recover substitute assets;
• and sue personally for compensation.

Tracing Rule
The claimant may trace trust property into the hands of the knowing recipient.
This allows recovery of:

• original property;
• substitute assets;
• profits derived from the property.

Example From the Scenario
Michael receives:
£1 million
of trust money.
He purchases property now worth:
£1.8 million
The beneficiaries may potentially claim:

• the property itself;
• the increase in value;
• personal liability against Michael.

Criteria for Knowing Receipt
El Ajou v Dollar Land Holdings Plc
Three elements must generally be established:


1. Disposal of Assets in Breach of Fiduciary Duty
The trustee must improperly transfer trust property.


2. Receipt of Traceable Assets
The defendant must receive property traceable to the claimant’s assets.


3. Knowledge
The defendant must possess knowledge linking the property to the breach.


Receipt
Meaning
The defendant must actually receive the property.
Mere contractual entitlement is insufficient.


Criterion Properties Plc v Stratford UK Properties LLC
The House of Lords confirmed:

• actual receipt is required;
• the asset must pass to the defendant.

Direct Consequence Requirement
The receipt must result directly from the breach.


Example
Daniel transfers trust money directly into Michael’s account.
Michael purchases property with the funds.
This satisfies receipt.


Byers v Saudi National Bank
Byers v Saudi National Bank
The Supreme Court clarified:
✅ a continuing proprietary interest is necessary.
If trust property passes to a bona fide purchaser for value:

• the proprietary interest is extinguished;
• knowing receipt claims cannot later revive.

Example
Suppose Michael later sells the property to Emma:

• Emma pays full value;
• Emma has no knowledge of the breach.

Emma becomes a bona fide purchaser for value.
The beneficiaries cannot later revive proprietary claims against Emma even if she later discovers the breach.


Meaning of Knowledge
Core Difficulty
The meaning of “knowledge” remains uncertain and controversial.
Unlike dishonest assistance:
❌ dishonesty is not required.
The defendant may be liable without fraud or moral wrongdoing.


Types of Knowledge
Knowledge may broadly include:
1. Actual Knowledge
Direct awareness of the breach.


2. Implied Knowledge
Knowledge attributed through agents.


3. Constructive Knowledge
Knowledge the defendant ought reasonably to have possessed.


Baden Categories
Baden v Société Générale
The court identified five categories of knowledge.


Actual Knowledge Categories
Category 1
Actual knowledge.


Category 2
Wilfully shutting one’s eyes to the obvious.


Category 3
Wilfully or recklessly failing to make enquiries.


Constructive Knowledge Categories
Category 4
Knowledge indicating facts to an honest reasonable person.


Category 5
Knowledge putting an honest reasonable person on enquiry.


Application to the Scenario
Michael:

• noticed suspicious circumstances;
• deliberately avoided further investigation;
• proceeded with the transaction anyway.

This may amount to:

• wilful blindness;
• or reckless failure to enquire.

Potentially categories 2 or 3 under Baden.


Actual v Constructive Knowledge Debate
The courts disagree whether constructive knowledge alone is sufficient.


Narrow Approach
Re Montagu’s Settlement Trust
Megarry VC suggested:

• only actual knowledge categories should suffice;
• carelessness alone should not impose constructive trusteeship.

Broad Approach
Other cases accepted constructive knowledge as sufficient.
Examples include:

• Belmont Finance Corp v Williams Furniture Ltd (No 2)
• Agip (Africa) v Jackson

Unconscionability Approach
Bank of Credit and Commerce International (Overseas) Ltd v Akindele
Nourse LJ rejected rigid categorisation.
Instead, he proposed a broader test:
whether the recipient’s knowledge makes retention of the benefit unconscionable.


Modern Position
The current law remains uncertain.
Courts still refer to:

• Baden categories;
• unconscionability;
• actual versus constructive knowledge.

The doctrines overlap and remain flexible.


Application to the Scenario
Michael:

• recognised suspicious circumstances;
• consciously avoided proper enquiry;
• benefited from the transaction.

The court may conclude that retaining the property would be:
unconscionable.
Therefore, Michael may be liable as a knowing recipient.


Remedies
Proprietary Remedies
The beneficiaries may:

• trace the trust property;
• recover the commercial property worth £1.8 million;
• claim substitute assets.

Personal Remedies
The beneficiaries may also sue Michael personally for compensation.


Example With Figures
Original Trust Money
£1 million


Current Property Value
£1.8 million


Possible Recovery
Proprietary Claim
Recover property worth:
£1.8 million


Personal Claim
Compensation for losses if tracing partially fails.


Important Limitation
The beneficiaries cannot recover:
❌ £1.8 million property
PLUS
❌ another identical £1 million compensation for the same asset.
Double recovery is prohibited.


Key SQE Principles
Knowing receipt requires:

• receipt of trust property;
• traceability;
• sufficient knowledge.

The remedy may be both:

• proprietary;
• and personal.

Modern law focuses heavily on:

• unconscionability;
• recipient knowledge;
• fiduciary protection.

Conclusion
Knowing receipt is a significant equitable doctrine imposing liability on recipients of trust property transferred in breach of trust. Unlike dishonest assistance, knowing receipt may generate both proprietary and personal remedies because the recipient becomes a constructive trustee of the property received. The doctrine remains controversial due to continuing uncertainty surrounding the meaning of “knowledge,” particularly the relationship between actual knowledge, constructive knowledge, and unconscionability.

​

Equity and Trust – Innocent Volunteer
Case Scenario
The trustees of the King Family Trust hold:
£4 million
for the benefit of several beneficiaries.
One trustee, Frank, improperly removes:
£500,000
from the trust in breach of trust.
Frank gives:

• £100,000 cash;
• and a valuable painting worth £200,000

to his fiancée Alice as gifts.
Alice:

• pays nothing for the gifts;
• has no knowledge of the breach;
• genuinely believes Frank owns the assets personally.

Alice later:

• spends £60,000 renovating her home using the trust money;
• sells the painting and uses the proceeds to buy a holiday apartment.

The beneficiaries seek recovery of the trust property from Alice.
The court must determine:

• whether Alice is an innocent volunteer;
• whether tracing is available;
• whether tracing would be inequitable;
• and whether Alice may rely on change of position.

Innocent Volunteer
Definition
An innocent volunteer is:
a third party who receives trust property without providing consideration and without knowledge of the breach of trust.
The recipient must lack:

• actual notice;
• implied notice;
• constructive notice.

Important Distinction
The innocent volunteer differs from:
Bona Fide Purchaser for Value
because the innocent volunteer:
❌ gives no consideration.


Knowing Recipient
because the innocent volunteer:
❌ has no knowledge of the breach.


Application to the Scenario
Alice:

• received gifts;
• paid nothing;
• had no knowledge of the breach.

Therefore, Alice is likely an innocent volunteer.


Tracing Rule
General Rule
Trust property may generally be traced into the hands of an innocent volunteer.
This allows beneficiaries to recover:

• the original property;
• substitute assets;
• or traceable proceeds.

Example From the Scenario
The painting worth:
£200,000
was sold by Alice.
She used the proceeds to purchase a holiday apartment.
The beneficiaries may trace into:

• the holiday apartment as substitute property.

Limitation on Recovery
Against an innocent volunteer, recovery is generally limited to:
✅ the original value transferred
PLUS
✅ interest.
Usually:
❌ no account of profits.


Example
Suppose the holiday apartment increases in value to:
£350,000
The beneficiaries may not necessarily claim all profits generated because Alice acted innocently.


Inequitable Results Exception
Tracing may be refused where recovery would produce:
an inequitable result.


Re Diplock
Facts
Executors wrongly distributed estate funds to charities.
The charities innocently spent the money improving their buildings.


Problem
The improvements:

• may not have increased property value;
• became integrated into the buildings.

If tracing were allowed:

• the charities might be forced to sell their land;
• despite complete innocence.

Principle
The court recognised that tracing may be denied where recovery would unfairly prejudice innocent recipients.


Application to the Scenario
Alice used:
£60,000
to renovate her home.
The renovations:

• may not increase value proportionately;
• may be inseparable from the property.

If tracing forced sale of Alice’s home, this could produce a harsh and inequitable result.
The court may therefore limit or refuse tracing regarding the renovations.


Important Principle
The innocent volunteer must demonstrate:

• why tracing would be inequitable on the facts.

The defence is not automatic.


Kleinwort Benson Ltd v Lincoln City Council
The House of Lords confirmed:

• inequity must be demonstrated specifically on the facts.

Change of Position Defence
Modern Development
The modern defence of:
change of position
may protect innocent recipients.


Principle
The defence applies where:

• the recipient changed position;
• relied upon receipt of the property;
• and restitution would now be inequitable.

Lipkin Gorman v Karpnale Ltd
Lord Goff explained:
the defence applies where:
it would be inequitable to require full restitution.


Application to the Scenario
Alice received:
£100,000
innocently.
Believing the money was hers, she:

• spent £60,000 renovating her home;
• changed her financial position in reliance upon the gift.

This may support a change of position defence.


Example With Figures
Original Gift
£100,000


Amount Spent Reliantly
£60,000


Remaining Traceable Value
£40,000


Likely Recovery
The court may allow beneficiaries to recover only:
£40,000
rather than the full £100,000.


Why?
Because Alice changed her position innocently in reliance on the gift.
Requiring full repayment may now be inequitable.


Connection Between Diplock and Change of Position
Modern courts often view:

• change of position

as a broader modern development of the inequitable-results reasoning from Re Diplock.


Boscawen v Bajwa
The case suggests:

• change of position reflects logical development of Diplock principles.

Important Limitation
The defence only protects:
✅ innocent recipients.
If Alice knew about the breach:
❌ the defence would likely fail.


Key SQE Principles
An innocent volunteer:

• gives no consideration;
• lacks knowledge of the breach;
• may still face tracing claims.

However:

• tracing may be refused if inequitable;
• change of position may reduce liability.

Example Summary With Figures
Trust Money Wrongfully Given
£100,000


Innocent Reliance Expenditure
£60,000


Likely Recoverable Amount
£40,000
subject to tracing and equitable considerations.


Conclusion
An innocent volunteer is a recipient of trust property who provides no consideration and lacks knowledge of the breach of trust. Although beneficiaries may generally trace trust property into the hands of innocent volunteers, equity recognises important limitations where recovery would produce unfair or inequitable outcomes. Modern courts increasingly rely on the defence of change of position to balance the property rights of beneficiaries against fairness to innocent recipients who have altered their position in reliance upon the property received.

​

​Equity and Trust – Declarations


Case Scenario


The trustees of the Hamilton Family Trust manage a large investment portfolio for retired beneficiaries. The trustees disagree about whether the trust should invest in companies connected to fossil fuels and arms manufacturing.


Some trustees believe these investments are profitable and necessary to maximise returns for beneficiaries. Others refuse to approve the investments because they object on ethical grounds.


At the same time, the trust owns a historic family estate that has become extremely expensive to maintain. The trustees wish to sell the property to preserve the remaining trust assets, but the principal beneficiary strongly opposes the sale and repeatedly threatens legal action against the trustees.


The trustees are uncertain whether their proposed actions are lawful and seek guidance from the court.


⸻


Declarations


Definition


A declaration is an equitable remedy in which the court formally states the legal position or clarifies the rights, duties, or obligations of the parties.


Unlike damages or injunctions, a declaration does not directly order compensation or compel conduct.


Instead, the court declares:

• what the law is;

• how it applies;

• whether conduct is lawful;

• or how trustees should act.

⸻


Purpose of Declarations


Declarations are commonly used where:

• trustees require legal guidance;

• uncertainty exists about trust powers;

• beneficiaries challenge trustee decisions;

• trustees seek court approval before acting.

The remedy helps trustees administer trusts safely and properly.


⸻


Why Declarations Are Important


Although declarations may appear less forceful than injunctions or compensation, they are extremely important because they:

• clarify trustees’ duties;

• reduce litigation risk;

• protect trustees from later claims;

• confirm whether proposed conduct is lawful;

• guide future trust administration.

⸻


Practical Application


Ethical Investments


In the scenario, trustees disagree about ethical investments.


The court may issue a declaration clarifying:

• whether trustees must prioritise financial benefit;

• whether ethical concerns may properly influence investment decisions;

• whether refusal to invest constitutes breach of trust.

This resembles Cowan v Scargill.


⸻


Cowan v Scargill


Principle


The case concerned trustees of a miners’ pension fund.


Some trustees refused certain overseas and energy investments for ethical and political reasons.


The court declared that the trustees were in breach of trust because trustees generally must act in beneficiaries’ best financial interests.


⸻


Key Principle From the Case


Trustees must normally:

• prioritise beneficiaries’ financial welfare;

• act prudently;

• avoid allowing personal ethical views to override beneficiary interests.

However, modern trust law recognises some limited scope for ethical investing where consistent with beneficiary interests and trust purposes.


⸻


Difficult Administrative Decisions


Sale of Trust Property


In the scenario, trustees want to sell an expensive estate to preserve trust funds.


Because the principal beneficiary opposes the decision and threatens litigation, the trustees seek a declaration confirming that the proposed sale is lawful and properly exercised.


This resembles Cotton v Earl of Cardigan.


⸻


Cotton v Earl of Cardigan


Principle


Trustees administering an impoverished estate sought court approval for sale of estate property.


The principal beneficiary repeatedly challenged the trustees’ actions.


The court’s declaration helped confirm that the trustees’ decision was properly made and protected them from further claims.


⸻


What Declarations Can Clarify


Courts may declare:

• scope of trustee powers;

• validity of trustee decisions;

• proper interpretation of trust terms;

• rights of beneficiaries;

• legality of proposed transactions;

• duties owed by trustees.

⸻


Difference Between Declarations and Other Remedies


Declaration


States legal rights or duties.


Does not necessarily compel action.


⸻


Injunction


Orders someone:

• to stop doing something; or

• to perform a positive act.

⸻


Specific Performance


Compels performance of contractual or trust obligations.


⸻


Equitable Compensation


Provides monetary recovery for losses caused by breach.


⸻


Solving the Scenario


Ethical Investment Dispute


The court may declare:

• trustees must prioritise beneficiaries’ financial interests;

• refusal to adopt reasonable investment strategy may breach trust duties.

⸻


Proposed Sale of Estate


The court may declare:

• the trustees acted properly;

• the sale falls within trustee powers;

• the decision is lawful and prudent.

This protects trustees against future claims by dissatisfied beneficiaries.


⸻


Key SQE Principles


Declarations:

• are equitable remedies;

• clarify legal rights and duties;

• are especially important in trust administration;

• help trustees avoid liability;

• provide guidance where uncertainty exists.

Trustees frequently seek declarations before taking controversial or high-risk decisions.


⸻


Further Research


Important Cases


Cowan v Scargill


Important for:

• ethical investment;

• trustees’ duties;

• beneficiaries’ financial interests.

⸻


Cotton v Earl of Cardigan


Important for:

• trustee protection;

• sale of trust property;

• court guidance in difficult administration decisions.

⸻


Nestle v National Westminster Bank plc


Important for:

• trustee investment duties;

• standard of care;

• prudent investment principles.

⸻


Conclusion


Declarations are an important equitable remedy allowing courts to clarify the law and guide trustees in difficult or uncertain situations. Although they do not directly compel conduct or award damages, declarations play a vital role in protecting trustees, resolving disputes, and ensuring proper trust administration.

SQE – Equity and Trust – Equitable Compensation
Case Scenario
Nathan and Chloe are trustees of the Harper Family Trust. The trust contains investment funds intended for the benefit of several beneficiaries.
Without proper authority, Nathan transfers £300,000 of trust money into a speculative overseas investment scheme. The investment later collapses and the money disappears completely. The funds cannot be traced because the company has become insolvent and the money has passed through numerous international accounts.
The beneficiaries demand restoration of the trust fund. However, because the original money and assets no longer exist, restitution and tracing are impossible.
The beneficiaries therefore bring a claim for equitable compensation against Nathan.
The issue is whether the court can compensate the beneficiaries for the loss caused by breach of trust.


Equitable Compensation
Definition
Equitable compensation is an equitable monetary remedy awarded for breach of fiduciary duty or breach of trust.
The purpose is to place the beneficiaries back into the position they would have been in had the breach not occurred.
It operates similarly to common law damages but follows equitable principles.


Main Purpose
The remedy seeks to restore the trust fund or beneficiaries to the position they should properly occupy.
The court asks:
“What loss has the breach of trust caused?”


When Is Equitable Compensation Needed?
Equitable compensation is especially important where:

• trust property cannot be returned;
• tracing has failed;
• assets no longer exist;
• restitution is impossible;
• property has been dissipated.

Practical Application
Why Is Restitution Sometimes Impossible?
Ideally, trust property should simply be restored to the trust.
This may happen where:

• the asset still exists;
• the property can be traced;
• substitute property can be identified.

However, in the scenario:

• the money disappeared;
• the investment collapsed;
• the assets cannot be traced.

Therefore, returning the original property is impossible.
The beneficiaries must instead seek monetary compensation.


Difference Between Restitution and Equitable Compensation
Restitution
Restitution focuses on:

• returning the original property;
• restoring identifiable trust assets.

Example:
A trustee wrongfully transfers trust shares but the shares are still identifiable.
The court may order return of the shares.


Equitable Compensation
Equitable compensation applies where restoration is impossible.
The court instead orders the trustee personally to compensate the trust for the financial loss caused by the breach.


Practical Example
Example 1 – Compensation Required
A trustee improperly transfers £500,000 into a fraudulent investment scheme.
The company collapses and the money disappears permanently.
Because the money cannot be traced or recovered, the trustee may be ordered to pay equitable compensation equal to the loss suffered.


Example 2 – Property Destroyed
A trustee wrongfully sells trust artwork below market value and the artwork is later destroyed.
Since the property no longer exists, beneficiaries may seek equitable compensation for the value lost.


Relationship With Common Law Damages
Equitable compensation resembles damages because both provide monetary relief.
However, important differences exist.


Common Law Damages
Common law damages generally focus on:

• remoteness;
• foreseeability;
• causation rules.

Equitable Compensation
Equitable compensation focuses more strictly on:

• restoring the trust fund;
• fiduciary accountability;
• protecting beneficiaries.

Courts may apply more rigorous standards against trustees because fiduciary duties are strict.


Important Authorities
The principles were discussed extensively in Target Holdings Ltd v Redferns.
The case explored the relationship between equitable compensation and common law damages.
More recently, both equitable compensation and common law damages were awarded in Main v Giambrone.


Solving the Scenario
Nathan breached trust by:

• transferring trust money without proper authority;
• exposing the trust fund to improper risk;
• causing loss to beneficiaries.

Because:

• the money no longer exists;
• tracing is impossible;
• restitution cannot occur,

the court would likely award equitable compensation.
Nathan may therefore be personally liable to restore the lost £300,000 to the trust fund.


Key SQE Principles
Equitable compensation:

• is an equitable monetary remedy;
• applies mainly to breach of trust and fiduciary duties;
• restores beneficiaries to the position they would have occupied absent the breach;
• is commonly used where tracing or restitution is impossible.

The remedy protects beneficiaries where trust assets cannot physically be recovered.


Further Research
Key Cases to Review
Target Holdings Ltd v Redferns
Important for:

• relationship between equitable compensation and common law damages;
• causation principles in breach of trust claims;
• restoration of trust funds.

Main v Giambrone
Important for:

• concurrent award of equitable compensation and common law damages;
• solicitor’s fiduciary liability;
• professional negligence overlap.

AIB Group (UK) plc v Mark Redler & Co Solicitors
Important for:

• limits of equitable compensation;
• causation analysis;
• modern approach to assessing trustee liability.

Topics Closely Connected to Equitable Compensation
Further SQE revision should include:

• tracing in equity;
• proprietary remedies;
• constructive trusts;
• fiduciary duties;
• breach of trust remedies;
• account of profits;
• equitable rescission;
• restitution;
• causation in equity.

Conclusion
Equitable compensation is a key equitable remedy used where trust property cannot be restored or traced. It compensates beneficiaries for losses caused by breach of trust and aims to place them back in the position they would have occupied had the breach not occurred.
The remedy differs from restitution because it provides monetary recovery rather than return of property, and it reflects the strict accountability imposed on trustees and fiduciaries under equity.

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Equity and Trust – What Can Beneficiaries Recover in an Account of Profits?


Short Answer


The beneficiaries are not limited to recovering only one item.


Under an account of profits claim, the court may require the trustee to surrender all gains obtained from the misuse of trust property.


Therefore, in the scenario, the beneficiaries could potentially recover:

• the original £200,000;

• the increase in the property’s value;

• the rental income earned from the property.

The aim is to strip the trustee of every unauthorised benefit connected to the breach of trust.


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How This Works in Practice


Scenario


Emma improperly uses £200,000 of trust money to buy a property.


Later:

• the property value rises to £450,000;

• Emma earns rental income from tenants.

⸻


What Are the Beneficiaries Actually Claiming?


The beneficiaries are effectively saying:


“That property and its profits were generated using trust money, so the trustee should not keep any of the benefits.”


Equity therefore treats the profits as belonging to the trust.


⸻


Option 1 – Recovery of the Property Itself


The court may treat the property as held on constructive trust for the beneficiaries.


This means the beneficiaries may claim:

• ownership of the property itself;

• including its increased value.

So if the property is now worth £450,000, the trust may recover the full property worth £450,000.


⸻


Option 2 – Rental Income


Because the rental income was generated from property purchased with trust money, the beneficiaries may also claim:

• all net rental profits earned from the property.

Example:


If Emma received £60,000 in rent, the beneficiaries may claim that too.


⸻


Is the Original £200,000 Claimed Separately?


Usually, the beneficiaries do not recover:

• the £450,000 property value;

• PLUS another separate £200,000.

That would amount to double recovery.


Instead, the court normally gives a remedy representing the total value of the misused asset and profits.


⸻


Practical Understanding


If the Property Still Exists


The beneficiaries will usually prefer:

• the property itself;

• including all appreciation in value.

That already includes the original £200,000 invested.


They may additionally claim rental profits.


⸻


If the Property Has Been Sold


Suppose Emma sold the property for £450,000.


The beneficiaries may claim:

• the sale proceeds;

• plus any rental profits retained.

⸻


Main Principle


The trustee cannot keep any profit resulting from misuse of trust property.


Equity aims to remove the entire unauthorised gain.


The court focuses on:

• what the trustee gained;

    not merely

• what the beneficiaries lost.

Example Calculation


Initial Misuse


Trust money taken:
£200,000




Later Position


Property value:
£450,000


Rental income:
£60,000



Possible Recovery


The beneficiaries may recover:

• the property worth £450,000 (or sale proceeds);

• plus £60,000 rental profits.

Total possible recovery:
£510,000


The trustee does not get credit for the fact only £200,000 was originally taken because the profits arose entirely from misuse of trust assets.


⸻


Key SQE Principle


An account of profits is designed to:

• prevent fiduciaries from benefiting from breaches of trust;

• strip all unauthorised profits;

• prevent unjust enrichment.

The remedy may therefore exceed the original amount misappropriated.



Conclusion


The beneficiaries are generally entitled to recover the full benefit obtained through misuse of trust property, not merely the original sum taken. In the scenario, that could include:

• the property and its increased value; and

• rental income generated from it.

However, the beneficiaries cannot usually recover duplicate amounts that would overcompensate them. Equity seeks full restitution of unauthorised gains, not double recovery.

Equity and Trust – Account of Profits
Case Scenario
Emma is a trustee of the Carter Family Trust. The trust contains £500,000 intended for the benefit of several minor beneficiaries.
Without authorisation, Emma secretly uses £200,000 of trust money to purchase an investment property in Manchester in her own name. Over the next three years, the property market rises significantly and the property increases in value to £450,000. Emma also receives rental income from tenants during that period.
The beneficiaries discover the misuse of trust money and bring a claim against Emma.
The issue is whether the beneficiaries can recover only the original £200,000 or whether they are entitled to the profits Emma made from using trust property.


Account of Profits
Definition
An account of profits is an equitable remedy requiring a defendant to surrender profits improperly obtained through breach of fiduciary duty.
The remedy commonly arises where:

• trustees make unauthorised profits;
• trustees misuse trust property;
• trustees obtain secret benefits;
• fiduciaries profit from their position without consent.

The purpose is to prevent trustees from benefiting personally from breaches of trust.


Key Principle
A trustee must not profit from their fiduciary position unless fully authorised by:

• the trust instrument;
• the beneficiaries;
• or the court.

If a trustee improperly profits, equity requires the profit to be handed over to the beneficiaries.


Practical Application
Why is repayment of the original sum sometimes insufficient?
Simply repaying the original money may still leave the trustee with a personal gain obtained through breach of trust.
In the scenario:

• Emma used £200,000 of trust money;
• the property later became worth £450,000;
• Emma also earned rental income.

If Emma only repaid £200,000, she would keep the increase in value and rental profits generated using trust assets.
That would unfairly benefit Emma at the beneficiaries’ expense.


What Can the Beneficiaries Claim?
The beneficiaries may seek:

• repayment of the original trust money;
• profits generated from the property;
• increase in property value;
• rental income earned;
• any additional financial benefit linked to the breach.

The court may therefore require Emma to account for the full profits obtained from misuse of trust assets.


Why Equity Imposes This Remedy
Equity imposes strict fiduciary duties on trustees because trustees occupy positions of trust and confidence.
The remedy aims to:

• deter fiduciary misconduct;
• prevent unjust enrichment;
• protect beneficiaries;
• ensure trustees act loyally and honestly.

The trustee’s intention is often irrelevant.
Even if Emma acted in good faith, she may still be required to surrender the profits.


Difference Between Compensation and Account of Profits
Compensation
Compensation focuses on the beneficiaries’ loss.
The court asks:

• “How much has the trust lost?”

Account of Profits
Account of profits focuses on the trustee’s gain.
The court asks:

• “How much profit did the trustee make from the breach?”

The remedies therefore serve different purposes.


Practical Example
Example 1 – Account of Profits Granted
A trustee secretly uses trust funds to buy shares.
The shares double in value.
The beneficiaries may claim:

• the original trust money;
• the increase in share value;
• dividends received.

The trustee cannot retain profits arising from misuse of trust property.


Example 2 – Secret Commission
A trustee receives a hidden payment from a company in exchange for investing trust money with that company.
Even if the trust itself suffers no loss, the trustee may still have to surrender the commission because it was obtained through fiduciary position.


Remedies the Court May Grant
The court may order:

• repayment of profits;
• transfer of property acquired with trust money;
• tracing into substitute assets;
• constructive trust over profits;
• equitable compensation.

In some cases, beneficiaries may choose the remedy most advantageous to them.


Solving the Scenario
Emma clearly breached her fiduciary duties because she:

• used trust money without authority;
• placed herself in conflict with beneficiaries’ interests;
• personally profited from trust property.

The beneficiaries would likely succeed in claiming:

• the original £200,000;
• the increase in property value;
• rental income generated from the property.

The court may also impose a constructive trust over the property itself.
Emma would not be allowed to retain any profit obtained through misuse of trust assets.


Key SQE Principles
An account of profits:

• is an equitable remedy;
• applies mainly to fiduciaries and trustees;
• prevents unauthorised personal gain;
• focuses on defendant’s profit rather than claimant’s loss;
• may exceed the original amount misappropriated.

Trustees are strictly prohibited from profiting from their fiduciary position without proper authority.


Conclusion
An account of profits ensures trustees and fiduciaries do not benefit from breaches of trust or misuse of trust property. Where trustees make unauthorised gains, equity requires them to surrender both the original assets and any profits derived from those assets.
The remedy protects beneficiaries, enforces fiduciary loyalty, and prevents unjust enrichment arising from abuse of trust.

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Equity and Trust – What Falls Under Specific Performance Under UK Law
Definition
Specific performance is an equitable remedy where the court orders a party to carry out their contractual or trust obligation instead of merely paying damages.
The remedy is discretionary and will only be granted where damages are inadequate and the order is fair, practical, and enforceable.


What Falls Under Specific Performance
1. Contracts for the Sale of Land
This is the most common category.
English law treats every piece of land as unique. Because replacement property may not truly compensate the claimant, damages are often inadequate.
Example
A seller refuses to transfer a house after contracts are exchanged.
The court may order completion of the sale.


2. Transfer of Unique Property
Specific performance may apply where the item is rare or irreplaceable.
Examples include:

• antiques;
• rare artwork;
• unique shares;
• historic items;
• family heirlooms.

The claimant must show that damages would not adequately compensate for the loss.


3. Certain Commercial Contracts
Courts may grant specific performance where:

• the contractual obligation is clear;
• supervision is not difficult;
• damages are inadequate.

Example
A contract to deliver rare machinery unavailable elsewhere.


4. Trust Obligations
Courts may compel trustees to perform duties under a trust.
Examples include:

• transferring trust property;
• distributing trust funds;
• handing over trust documents;
• carrying out administrative duties required by the trust.

This principle is illustrated in Re Tillott.


5. Contracts Involving Shares in Private Companies
Specific performance may be granted where shares are not freely available on the market.
This is because damages may not allow the claimant to obtain equivalent shares elsewhere.


6. Negative Covenants (Indirectly)
Although technically enforced through injunctions, courts sometimes support contractual obligations indirectly through equitable remedies.
Example
A performer contracted not to sing for competitors may be restrained from doing so.
The court is not forcing performance, but is preventing breach of a negative promise.


What Does NOT Fall Under Specific Performance
1. Employment Contracts
Courts generally refuse to compel personal service contracts.
Reasons include:

• difficulty supervising performance;
• breakdown of trust and confidence;
• concerns about forcing labour against someone’s will.

Example
A theatre company cannot usually force an actor to continue performing.


2. Contracts Requiring Constant Court Supervision
Courts avoid orders requiring ongoing monitoring.
Example
A long-term construction project needing continuous supervision.
The court prefers damages instead.


3. Contracts Where Damages Are Adequate
If money can sufficiently compensate the claimant, specific performance will not usually be granted.
Example
Failure to deliver ordinary goods widely available on the market.
The claimant can simply buy replacements.


4. Uncertain or Incomplete Contracts
Specific performance requires clear contractual terms.
The court will refuse where:

• terms are vague;
• obligations are uncertain;
• important details are missing.

5. Contracts Obtained Unfairly
Equity requires clean hands.
Specific performance may be refused where there is:

• fraud;
• undue influence;
• misrepresentation;
• unconscionable conduct.

6. Discretionary Trust Decisions
Courts usually will not interfere with trustees exercising lawful discretion.
This principle is illustrated in Re Blake.
Example
Beneficiaries cannot normally force trustees to choose them for discretionary payments if trustees act properly.


Practical Scenario
Example 1 – Specific Performance Granted
Sophia contracts to buy a historic countryside manor.
The seller refuses to transfer the property after receiving a higher offer.
The court would likely grant specific performance because:

• land is unique;
• the contract is valid;
• damages are inadequate.

Example 2 – Specific Performance Refused
A football club attempts to force a player to continue playing under an employment contract.
The court would likely refuse because:

• employment relationships require personal cooperation;
• supervision is impractical;
• equity does not compel personal service.

Key Principles for SQE
Specific performance is:

• equitable;
• discretionary;
• available only where damages are inadequate;
• commonly used for land and unique property.

Specific performance will not usually be granted where:

• damages are sufficient;
• enforcement is impractical;
• supervision is difficult;
• the claimant acted unfairly;
• the contract concerns personal service.

Conclusion
Under UK law, specific performance primarily applies to contracts and trust obligations involving unique subject matter or situations where damages are inadequate. It is especially important in land transactions and trust administration.
However, courts refuse the remedy where enforcement would be unfair, uncertain, excessively supervisory, or inconsistent with equitable principles, particularly in employment and discretionary trust situations.

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Equity and Trust – Difference Between Specific Performance and Mandatory (Positive) Injunctions
Case Scenario
Olivia enters into a contract to purchase a rare historic property from Daniel. After exchanging contracts, Daniel refuses to complete the transfer because another buyer offers a higher price.
At the same time, trustees of a family trust refuse to provide beneficiaries with important trust documents and fail to distribute trust assets properly.
Separately, a construction company unlawfully blocks a private access road belonging to neighbouring landowners. The landowners apply to court seeking an order requiring the company to remove the obstruction.
The issue is whether the court should grant specific performance or a mandatory injunction.


Specific Performance
Definition
Specific performance is an equitable remedy ordering a party to perform an existing contractual or trust obligation.
The court compels the defendant to carry out the exact duty they previously agreed to perform.
It commonly arises in:

• contracts for the sale of land;
• trust administration;
• transfer of unique property.

Key Features

• Used where damages are inadequate.
• Most common in land contracts because land is unique.
• Enforces obligations already owed under a contract or trust.
• Discretionary remedy.
• Breach amounts to contempt of court.

Practical Application
In the scenario, Olivia seeks specific performance because:

• there is a valid contract for sale of land;
• Daniel refuses to complete the transfer;
• the property is unique;
• monetary damages may not adequately compensate Olivia.

The court would likely order Daniel to transfer the property.


Specific Performance in Trusts
Courts may use specific performance to compel trustees to perform trust duties.
Examples include:

• transferring trust property;
• distributing trust funds;
• handing over trust documents.

This principle appears in Re Tillott, where trustees were ordered to provide documents to beneficiaries.
However, courts generally will not interfere with trustees’ discretionary powers where trustees are entitled to choose beneficiaries or decide distributions properly.
This limitation is illustrated in Re Blake.


Mandatory (Positive) Injunction
Definition
A mandatory injunction is an equitable remedy ordering a party to carry out a positive act.
Unlike specific performance, it is not limited to enforcing contractual obligations.
The purpose is usually to:

• remedy wrongdoing;
• restore a previous position;
• prevent continuing harm.

Key Features

• Orders positive action.
• Broader than specific performance.
• Used to correct injustice or unlawful conduct.
• Discretionary remedy.
• Breach amounts to contempt of court.

Practical Application
In the scenario, the construction company unlawfully blocks the road.
The neighbouring landowners are not seeking enforcement of a contract.
Instead, they want the company ordered to remove the obstruction.
The court would therefore grant a mandatory injunction compelling positive action.


Main Difference Between the Remedies
The central distinction is the purpose of the order.
Specific performance:

• enforces an existing contractual or trust obligation;
• requires the defendant to perform what was originally promised.

Mandatory injunction:

• compels positive action more generally;
• aims to prevent or correct wrongdoing.

Although both remedies require a defendant to do something, their legal basis differs.


Why the Remedies Are Often Confused
The remedies are similar because both:

• are equitable remedies;
• are discretionary;
• compel action rather than payment of damages;
• are enforced through contempt proceedings.

However, the source of the obligation is different.
Specific performance arises from an existing duty under a contract or trust.
Mandatory injunctions arise where the court needs to compel action to achieve justice.


Solving the Scenario
Sale of the Historic Property
The correct remedy is specific performance because:

• Daniel entered into a valid contract;
• Olivia seeks enforcement of that agreement;
• land is unique;
• damages are inadequate.

The court would likely compel transfer of the property.


Trustees Refusing Documents
The court may order specific performance compelling trustees to fulfil their trust obligations and provide documents to beneficiaries.


Obstruction of the Access Road
The appropriate remedy is a mandatory injunction because the company must take positive steps to remove the obstruction and stop the continuing interference.


Conclusion
Specific performance and mandatory injunctions are both equitable remedies compelling action, but they serve different purposes.
Specific performance enforces obligations already existing under contracts or trusts.
Mandatory injunctions compel positive conduct to prevent or remedy wrongdoing more generally.
Both remedies are discretionary and breach of either order may result in contempt of court proceedings.

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