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Home » Target Holdings Ltd v Redferns

Target Holdings Ltd v Redferns

Target Holdings Ltd v Redferns is a leading English trusts law decision on causation and the proper measure of equitable compensation for breach of trust in a commercial setting. The House of Lords clarified that compensation in equity is not automatic upon proof of breach. Instead, the beneficiary must demonstrate that the loss claimed was caused by the trustee’s breach.

The decision reshaped earlier, more rigid approaches that required reconstitution of the trust fund regardless of causation, aligning equitable compensation more closely with compensatory principles found at common law.

Facts of Target Holdings Ltd v Redferns

In Target Holdings Ltd v Redferns, Target Holdings Ltd acted as a mortgage lender and advanced a total of £1,525,000 for a property transaction. The money was paid to Redferns, a firm of solicitors, who were instructed to hold the funds on trust pending completion of the purchase and execution of a mortgage in Target’s favour. The borrower was Crowngate Developments Ltd, which intended to purchase property at 60–64 Great Hampton Street, Hockley.

Under the terms of the transaction, Redferns were expressly required not to release the loan monies until the purchase had completed and the mortgage had been properly executed. Until those conditions were satisfied, Redferns were to retain the funds as trustees for Target Holdings Ltd.

Crowngate, however, was engaged in a fraudulent scheme. Although the property was in fact being purchased for £775,000, it was represented to Target as a £2 million transaction. In breach of their instructions, Redferns released £1,490,000 of the trust money to a company called Panther Ltd before completion of the purchase and before the mortgage was created.

The purchase was ultimately completed, but the overall venture failed. Crowngate defaulted on the loan and entered liquidation. When the property was sold, Target Holdings Ltd recovered only £500,000. As a result, Target suffered a substantial financial shortfall.

Target Holdings Ltd brought proceedings against Redferns, arguing that the solicitors had breached their trust obligations by releasing the money prematurely and that they were therefore liable to account for and restore the trust funds that had been wrongly paid away.

Procedural History

At first instance, Warner J held that Redferns had breached the trust by releasing the funds before completion. The case then proceeded to the Court of Appeal, where the majority held that once the trust property was misapplied, Redferns incurred an immediate liability to reconstitute the trust fund.

According to that view, liability arose independently of whether the loss would have occurred even if the breach had not taken place. Ralph Gibson LJ dissented from this approach.

The matter ultimately came before the House of Lords for final determination in Target Holdings Ltd v Redferns.

Issues

The House of Lords was required to address several important issues:

  1. Whether a trustee who commits a breach of trust in a commercial transaction is automatically liable to restore the entire trust fund, irrespective of causation.
  2. Whether equitable compensation requires proof of a causal connection between the breach of trust and the loss suffered by the beneficiary.
  3. How principles traditionally applied to family or other non-commercial trusts should operate in the context of modern commercial trust arrangements.

These issues lay at the heart of the dispute in Target Holdings Ltd v Redferns.

Target Holdings Ltd v Redferns Judgement

The House of Lords held that Redferns were not liable to repay the £1,490,000. The leading judgement was delivered by Lord Browne-Wilkinson.

The House concluded that although Redferns had plainly breached the trust by releasing the money prematurely, Target Holdings Ltd would have suffered the same loss even if the breach had not occurred. The loss arose from the fraudulent overvaluation of the property and Crowngate’s subsequent insolvency, not from the early release of the funds.

In Target Holdings Ltd v Redferns, the House of Lords rejected the argument that a trustee must always reconstitute the trust fund following a breach. Lord Browne-Wilkinson emphasised that both at common law and in equity, liability is fundamentally compensatory. A defendant is only liable for loss caused by their wrongful act and is not responsible for damage that was not caused by that act.

While acknowledging that equity has historically developed different remedial mechanisms, particularly in traditional trust contexts, the House of Lords held that some causal connection between breach and loss is still required. Because Redferns’ breach did not cause Target’s loss, no equitable compensation was payable.

Conclusion

Target Holdings Ltd v Redferns stands as a cornerstone authority on equitable compensation for breach of trust in commercial transactions. The House of Lords confirmed that a trustee’s liability is limited to loss actually caused by the breach and rejected the automatic reconstitution of trust funds in the absence of causation.

By doing so, the case introduced a more principled and commercially realistic approach to equitable remedies, ensuring that compensation in equity remains fair, proportionate, and firmly grounded in demonstrable loss.