Rollerteam Limited v Linda Riley

Equitable compensation for breach of trust is assessed by restoring the beneficiary to the position that would have existed but for the breach. The court applies ordinary causation principles, but equitable compensation is not governed in every respect by common-law damages rules. Depending on the evidence, the court may assess a lost chance in percentage terms, or determine the counterfactual on the balance of probabilities. Clear probabilities should be preferred where they can be established.

A trustee’s statutory relief under Trustee Act 1925, section 61 requires consideration of honesty and reasonableness, followed by a discretionary balance between fairness to the trustee and the effect on the beneficiary. A trustee has an equitable right to indemnity for expenses properly incurred in performing the trust, even where the trust instrument contains no express reimbursement clause, unless clear words exclude that right.

Rollerteam Limited was the beneficiary under a trust deed by which Linda Riley held property at Parkgate Road, Battersea. In an earlier judgment, the court found that Linda had breached trust by failing to implement directions in 2015 and 2017 to transfer or sell the property with vacant possession.

This further trial concerned the consequences of those breaches. Rollerteam claimed equitable compensation for mortgage payments, lost use or rental opportunity and legal costs. Linda advanced broad equitable defences, sought relief under section 61 of the Trustee Act 1925, and brought a counterclaim for mortgage, repair, insurance, services and utilities expenditure. The central issues were causation, the appropriate measure of equitable compensation, statutory relief, equitable indemnity and set-off.

1. Equitable compensation and causation. The court applied the ‘but for’ test recognised in Target Holdings v Redferns [1996] AC 421. On the counterfactual, compliance with the 2015 direction would probably have resulted in transfer of Parkgate, discharge of the mortgage and vacant possession by 2016. The 2017 direction therefore became otiose.
2. Lost opportunity. Common-law rules concerning lost chances did not determine the equitable claim. Following Maguire v Makaronis [1997] 188 CLR 449, the remedy is fashioned to achieve practical justice. A percentage assessment may be appropriate where the evidence requires it, but clear probabilities must be used where available. The clear probability was that Rollerteam intended to sell Parkgate, not let it or occupy it. No compensatable loss for rental or occupation was therefore established.
3. Legal costs. The evidence did not justify an award for the claimed 2015 costs. A limited allowance of £7,500 was made for transactional work connected with the 2019 transfer direction that would not have been incurred but for Linda’s earlier breaches.
4. Section 61 relief. Applying Santander UK Plc v R A Legal Solicitors [2014] EWCA Civ 183, the court assumed that Linda had acted honestly and reasonably in 2015, then balanced fairness to her against the effect of relief on Rollerteam. Relief was refused because it would unfairly leave Rollerteam bearing expenditure caused by the breach.
5. Counterclaim and indemnity. Under Hardoon v Belilios [1901] AC 118, Linda had an equitable indemnity for properly incurred repair and insurance expenses despite the absence of express contractual reimbursement. However, equitable set-off extinguished those claims, save for £334.44 insurance incurred in 2015. Other counterclaim items were unproved or would not have arisen absent the breach.
6. Rollerteam was awarded £7,500, subject to set-off of £334.44. Judgment was entered for Rollerteam against Linda for £7,165.56.

First-instance judgment. The court referred to its earlier judgment in the same litigation, [2023] EWHC 107 (Ch), which had determined the underlying breaches of trust. That earlier judgment was not an appeal decision.