From: Kelvin F.K. Low <kelvin.low@gmail.com>
To: ODG <obligations@uwo.ca>
Date: 07/04/2010 16:14:47 UTC
Subject: Re: Beneficial owners can sue for negligently-caused economic loss toproperty
Hi Duncan,

Like yourself, I'm a long way from being a tort lawyer but I think Rob's point is that the trustees should only be allowed to recover for their own consequential losses, not that of their beneficiaries. It is one thing to recover the value of the property lost (which was conceded, I believe) and even lost income that said property will earn on the basis of what I believe has increasingly been called vindicatory or substitutive damages (or in the context of contract, damages to "compensate" for "loss" of the performance interest). It is another matter to recover damages for consequential losses suffered by someone else. There is, of course, nothing to stop a trustee, like any other legal owner, from recovering its own consequential losses. Its quite another matter allowing a trustee to recover its beneficiary's consequential losses. I'm inclined to agree with Rob, although I acknowledge the point is controversial.

It is unlikely to arise very often since most trust beneficiaries do not enjoy the direct use of trust assets. If they do, they usually also have possession of them and can bring tort actions of their own on the basis of their possessory rights. Where they do not enjoy the use of the assets but merely benefit from their fruits (by way of income), then again their rights to their trustee's rights will not create any "black hole" either. It seems to me that it is only where their enjoyment of the use of the assets is less than possessory that this matter rears its ugly head. If it seems unfair, it only needs to be remembered that parties are usually free (though arguably not in this case) not to employ the device of a trust in their property holding. If they choose to use a trust for whatever reasons that may appear good to them, then there seems no reason why they should not also take the "bad" along with the "good". It bears repeating that equitable title is not merely legal title subject to the defence of equity's darling.

In any event, my reading of the case suggests that this was not the point being considered by the Court of Appeal. The trustees were not party to the appeal. Consideration of their own claim against the defendants had been deferred by the trial judge and there was no appeal from that decision. This decision seems entirely unorthodox and arguably contrary to Waller LJ's own earlier decision in Barbados Trust Co Ltd v Bank of Zambia [2007] EWCA Civ 148.

Cheers,

Kelvin

On 7 April 2010 18:56, Sheehan Duncan Dr (LAW) <Duncan.Sheehan@uea.ac.uk> wrote:
Dear all,

A question about the damages, because I'm not following this - mostly because I'm a long way from being a tort lawyer. The legal title to the pipeline in question was held by what the court describe as a vehicle company who I assume have no interest bar bare legal title. If the trustee sues, I imagine they would recover damages based on the damage/destruction of the pipeline for which they would need to account to the beneficiaries, but Shell's consequential losses are irrecoverable (if I understand Rob aright). I'm not sure I see why though. If Shell were full legal owner (no trust just Shell) would they not be able to recover consequential damage - and any economic loss, or is that too remote? If they could recover as legal owners, why is this case different assuming for the moment they have a substantive cause of action?

Duncan

Dr Duncan Sheehan
Senior Lecturer in Law
Norwich Law School
University of East Anglia
Norwich NR4 7TJ
United Kingdom

Phone:44(0)1603 593255

Papers at http://ssrn.com/author=648495
See my BePress site at http://works.bepress.com/duncan_sheehan

>-----Original Message-----
>From: Kelry Loi [mailto:kelryloi@hku.hk]
>Sent: Thursday, April 01, 2010 4:11 AM
>To: 'Lionel Smith, Prof.'
>Cc: 'ODG'
>Subject: RE: Beneficial owners can sue for negligently-caused
>economic loss to property
>
>Dear colleagues,
>
>Negligence
>
>Following Lionel's point, the tortfeasor's duty of care is owed to the
>trustee, not beneficiary. Thus, the tortfeasor ought to compensate the
>trustee (not beneficiary) for the trustee's (not
>beneficiary's) loss, though
>the trustee has to account to the beneficiary for the recovery.
>
>Joining the trustee to the action allows the process to be
>shortcircuited.
>But that is just the process; it might change the party who is paid. It
>shouldn't change the amount that the tortfeasor has to fork
>out. What he
>pays the trustee/beneficiary should be the loss suffered by
>the trustee (for
>which the trustee accounts to the beneficiary); not the (greater) loss
>suffered by the beneficiary.
>
>Conversion
>
>Prof Andrew Tettenborn has a piece ((1996) 55 CLJ 36) questioning a
>beneficiary's right to sue in conversion (cited by the CA in
>MCC Proceeds v
>Lehman Bros [1998] 4 All ER 675). MCC Proceeds referred to The Aliakmon
>[1986] AC 785 as authority denying a beneficiary's right to sue in
>negligence, and that was regarded as one of the factors for denying a
>beneficiary's right to sue in conversion. Does it now mean that
>beneficiaries should be allowed to sue in conversion too?
>
>Happy holidays!
>
>Kelry.
>
>(Mr) Kelry C.F. Loi
>Asst Prof, Faculty of Law
>University of Hong Kong.
>
>
>-----Original Message-----
>From: Lionel Smith, Prof. [mailto:lionel.smith@mcgill.ca]
>Sent: Thursday, April 01, 2010 6:18 AM
>To: Jason Neyers; Colin Liew
>Cc: ODG
>Subject: Re: Beneficial owners can sue for negligently-caused
>economic loss
>to property
>
>Jason's two points are intimately linked.
>The rights against rights theory says that the beneficiary's right is a
>right in or against the trustee's ownership of the asset. The
>beneficiary
>does not have any direct right against the tortfeasor, who
>owes a duty of
>care to the trustee.
>If however the trustee is joined as a party, then it becomes
>possible to
>adjudicate his right against the tortfeasor, and also his
>obligation to the
>beneficiary to account for the recovery to the beneficiary. If
>all parties
>are joined, then a court can make an order that short circuits the two
>claims.
>Lionel
>
>
>On 31-03-10 15:32 , "Jason Neyers" <jneyers@uwo.ca> wrote:
>
>Dear Colleagues:
>
>I was wondering if anyone had any thoughts about this case. I
>suppose one's
>view might depend ultimately on how one views the rights enjoyed by the
>equitable owner. If they are simply "rights against rights" as
>I have heard
>argued at the various Obligations conferences, then the
>decision appears
>wrongly decided.
>
>I was also a little surprised with the ease that the Court of Appeal
>side-stepped The Aliakmon:  what difference in justice is made when the
>legal owner is joined?
>Jason Neyers
>Associate Professor of Law
>Faculty of Law
>University of Western Ontario
>N6A 3K7
>(519) 661-2111 x. 88435
>
>
>Colin Liew wrote:
>Dear all,
>
>
>
>The English Court of Appeal in Shell UK Ltd & Ors v Total UK Ltd & Ors
>[2010] EWCA Civ 180
><http://www.bailii.org/ew/cases/EWCA/Civ/2010/180.html>
>has decided (at [142]) that a duty of care is owed to a
>beneficial owner of
>property by a defendant who can reasonably foresee that his negligent
>actions will damage that property. If, therefore, such property is, in
>breach of duty, damaged by the defendant, that defendant will
>be liable not
>merely for the physical loss of that property but also for the
>foreseeable
>consequences of that loss, such as the extra expenditure to which the
>beneficial owner is put or the loss of profit which he incurs.
>Provided that
>the beneficial owner can join the legal owner in the
>proceedings, it does
>not matter that the beneficial owner is not himself in
>possession of the
>property.
>
>
>
>
>The appeal arose out of the 2005 Buncefield fire where, due to the
>negligence of Total (as found by David Steel J in March 2009),
>substantial
>damage was caused to the Hertfordshire Oil Storage Terminal.
>At issue in
>this appeal, however, was whether Shell could claim damages
>against Total in
>respect of economic losses caused to it as beneficial owner of land and
>facilities at Buncefield.
>
>
>
>
>Regards,
>
>Colin
>
>
>