Mosley v Popley

Equitable remedies for dishonest assistance in a breach of trust are ordinarily personal remedies, including equitable compensation. They do not generally permit a claimant to recover, by proprietary relief, an asset which never formed part of the trust estate. Property owned by a company is not treated as trust property merely because the company’s shares are trust property. That distinction cannot be avoided by describing the remedy as flexible or personal. In the absence of a proper basis for lifting the corporate veil, the claimant cannot require the property to be transferred to the company or trust. A claim seeking only such relief discloses no reasonable cause of action.

Andrew Popley brought proceedings concerning White Owl Barn, a property owned by Atem Ltd, whose shares were held by a trust. He alleged that Atem and Alan Mosley had dishonestly assisted breaches of trust connected with the sale of the property and sought orders setting aside the sale and rectifying the register.

Deputy Master Bartlett refused Mr Mosley’s application to strike out the claim. Mr Mosley appealed, arguing that the property had never been trust property, that the relief sought was unavailable to the claimant, and that no derivative claim was available.

1. Appeal allowed. The claim disclosed no reasonable cause of action for the relief claimed and was ordered to be struck out. The order of Deputy Master Bartlett was set aside.
2. The relevant trust property was the shares in Atem Ltd, not White Owl Barn. The property had been owned legally and beneficially by Atem. It therefore could not be restored to the trust as trust property.
3. The distinction between a proprietary claim and a personal claim was material. Dishonest assistance gives rise to a personal claim for equitable compensation, which is distinct from knowing receipt and does not itself justify an order transferring non-trust property to the transferor or to a company owned by the trust. The court relied on and applied the analysis in Sinclair Investments v Versailles Trade Finance Ltd [2011] 4 All ER 335.
4. The equitable principle that a trustee must restore lost trust assets or compensate the trust estate, stated in Target Holdings v Redferns [1995] 3 All ER 785, did not support recovery of property which had never belonged to the trust. The Master had confused the possibility of specific restitution with a desire to recover a non-trust asset.
5. Property owned by a company could not be equated with property owned by the trust without lifting the corporate veil. No such basis existed. The company had not been established as an engine for fraud, and the claimant did not seek to rely on veil-piercing. Any claim to the relief sought would more naturally be Atem’s claim, not Mr Popley’s.
6. Permission to appeal was refused. The existing undertaking was modified so that Mr Mosley could pursue possession only through possession proceedings. Costs were summarily assessed.

• High Court (Chancery Division): Appeal from the judgment and order of Deputy Master Bartlett dated 9 May 2012. The appeal was allowed, the order below was set aside, and the claim was struck out.