Hi Duncan,

Sorry about that. I guess I missed the point in your earlier e-mail.

That is a matter of some controversy. The widely accepted view is that the Vandepitte procedure is simply a process of short-circuiting two claims into one. Instead of having the beneficiary sue the trustee to sue the tortfeasor or contract counterparty in breach, the Vandepitte procedure allows both claims to be combined into one single "claim". The role of the trustee as either co-plaintiff or co-defendant simply depends on whether he is joining in the action willingly or otherwise. If it is simply procedural, then Shell does not have a direct cause of action. If it is not, then there needs to be some explanation as to how this substantive cause of action springs to life by joining the trustee. Shell as beneficial owner only has an equitable interest but breach of contract, conversion and negligence are all common law causes of action. I suspect that there would be some fairly loud cries of fusion if one simply says that joinder elevates its interest to that of a legal interest. If what it has is a right to its trustee's rights, then if the trustee can only recover (a), then likewise, Shell can only recover (a). I don't believe this is the case and I think that the trustee can also recover (b) but the income that may be generated for the trustee (who does not actually run a business of selling and transporting its own oil) is different from the losses actually suffered by Shell. For the trustee, the lost income would be calculated, I believe, on the basis of the market rate for use of the pipelines. That may not, and I suspect would not, be the equivalent of Shell's actual losses. Moreover, such recovery by the trustee would be held on trust for all the beneficiaries and not just Shell.

Yes, there is more than a hint of the legal black hole that plagued the House of Lords in Alfred McAlpine. Hence the same issues are rearing its head. Has the right-holder suffered loss? If so, how is this "loss" quantified? If not, can the right-holder sue to recover the loss suffered by a third party? If so, when can it do so and, equally importantly, why?

As to the trustee's inability to claim being an assumption behind the decision, this seems an odd assumption to make considering most of the cases actually cited by the Court of Appeal support the trustee's ability to claim (at least on their explicit reasoning) rather than the beneficiary's ability to do so himself, which seems (to me) to be entirely unsupported by authority. On hindsight, perhaps Steel J ought to have considered the trustee's claim at the same time as Shell's claim instead of defering it as this would put all the relevant issues before the court. The fear, I suspect, is that by considering the claims separately, the courts might end up deciding that Shell cannot recover because corum A decides that Shell's claim ought to be mediated through the trustee's cause of action whereas corum B considers that the trustee has suffered no loss and the proper plaintiff is Shell, with the result that even though both courts consider that Shell ought to succeed one way or another, the end result is that it fails.

Cheers,

Kelvin

On 8 April 2010 00:38, Sheehan Duncan Dr (LAW) <Duncan.Sheehan@uea.ac.uk> wrote:

Kelvin and others,

I can see that. What I'm wondering is this. If the trustee has only bare legal title, his losses do not include the consequential losses suffered by Shell in being unable to use the pipeline. Shell (as beneficiary of the trust), if they have a substantive cause of action in tort, might recover a) the value of the property lost and b) the income that the asset would have generated which they themselves lose. If this is (or should be) simply a matter for the Vandepitte procedure with the beneficiary taking over the trustee's cause of action Shell can't recover b), just a) because the trustee could only recover a) unless you can stretch the cases on recovery of a third party's loss, which on a relatively fast reading seems to be the import of Malkin's Nominees. Shell has a better (more financially advantageous) claim if it is a substantive cause of action and there is something of a black hole here, although as you say only in very specific circumstances.

The trustee's claim was not at issue, but I suspect that an assumption that the trustee can't recover Shell's consequential losses lies behind this decision.

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

From: Kelvin F.K. Low [mailto:kelvin.low@gmail.com]
Sent: Wednesday, April 07, 2010 5:15 PM
To: ODG

Subject: Re: Beneficial owners can sue for negligently-caused economic loss to property

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
>
>
>

From:	Kelvin F.K. Low <kelvin.low@gmail.com>
To:	ODG <obligations@uwo.ca>
Date:	08/04/2010 01:09:10 UTC
Subject:	Re: Beneficial owners can sue for negligently-caused economic loss toproperty