Dear Peter and Mindy,

I thought the same as Peter, but I'm not sure what happens where further (consequential) loss is suffered.

Take the case of a covenant to settle after-acquired property. Damages are awarded for a breach of that covenant which put T in the position in which he would have been if the contract had been performed properly. Those damages are substantial and must be held for B. Therefore T can recover the difference in value between the work done by S and non-defective work, or the cost of curing the defective work, and must hold those damages for B. In Lloyds v Harper, an underwriter’s father promised the managing committee of Lloyds that he would, if his son defaulted, pay all his son’s creditors. The court held that from the date of the guarantee, the managing committee were trustees of the benefit of F’s promise. Per Fry J: "it seems to me that the insurance brokers who contract in Lloyd's room with underwriting members of Lloyd's on behalf of merchants, and other owners of property, who may not be members of Lloyd's, become trustees for the benefit of those outside persons of the right which they have, as cestuis que trust, to call upon the committee, as their trustees, to enforce a contract entered into for their benefit." In other words, the right to enforce the contract is held on trust, so T can sue S and holds damages for B.

Losses consequent on the breach of contract are more difficult. Say that S's negligence means that T misses out on a (foreseeable) opportunity to sell on trust property at a profit within the terms of his authority. That loss is consequent on the breach of contract, but strictly speaking it is B who suffers that loss (or can it be said to be T?).

A claim in negligence obviously has to be founded on a duty of care. Buncefield tells us only that B's 'equitable ownership' is sufficient to establish a duty of care to B, the content of that duty being a duty not to damage the trust res. The Court of Appeal in that case was "prepared to hold that a duty of care is owed to a beneficial owner of property (just as much as to a legal owner of property) by a defendant, such as Total, 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." Therefore the damage caused was not pure economic loss, but consequential loss. Since there is no damage to trust property in the case you proposed, this doesn't help.

However, in reaching that conclusion, the CA in Buncefield also relied on White v Jones. Lord Goff's analysis in White v Jones was this: where D assumes responsibility to one person with a view to conferring a benefit upon another, in circumstances where the latter will be without a remedy should D fail to discharge that responsibility, a duty of care to that person will arise. If a duty to take care is owed directly to B, B can recover loss consequent on a breach of that duty. But this claim would not require B to join T since we are concerned with a duty owed directly to B which does not depend on the trust (except to the extent that it is the trust that enables us to identify the relevant third party).


Tatiana Cutts

________________________________________
From: Peter Radan [peter.radan@mq.edu.au]
Sent: 21 June 2011 13:03
To: obligations@uwo.ca
Subject: Re: ODG: Calculation of damages to trustee

Dear Jason/Mindy,

Does not the answer to the second part of the problem lie in cases such Lloyd's v Harper(1880) 16 Ch D 290 and Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 which hold that when a trustee sues for breach of contract - in this case against the solicitor - the trustee recovers losses to the trust - ie the losses ultimately suffered by the beneficiaries - and holds the damages recovered on trust?

As to the first part of the problem, and not being all that well versed in the law of negligence, can one be negligent in engaging the services of a solicitor?

Peter Radan


On 21 June 2011 20:19, Jason Neyers <jneyers@uwo.ca<mailto:jneyers@uwo.ca>> wrote:

I post on behalf of Mindy Chen-Wishart:

Grateful for any thoughts on this:

a trustee (T) hires a solicitor (S) to do a job for the trust. S does it negligently, and T sues S for breach of contract. My question is, how are the damages quantified?

Assume (1) that T acted negligently in hiring S, in the sense that it was reasonably foreseeable that S would perform the job negligently (maybe the job was outside S's area of expertise). T will be in breach of trust and so liable to the beneficiary (B) for the resultant loss. This loss seems, I think, to be that occasioned by S's own breach. So it is possible to say that T suffers that loss personally, meaning that T's claim against S will naturally be for that amount. This is the easier case.

Now the harder case. Assume (2) that T did not act negligently in hiring S. T has now committed no breach of trust, so is not liable to B, so suffers no loss personally. As a result, we might expect that T's claim against S would be nominal only. But is it? Or does it yield damages quantified by reference to B's loss (which S would then hold for B)? And if so, by what reasoning? In particular, is B's trust right somehow brought into the reckoning? (Should we see the answer to this as yes on the strength of Colourquest? But again, by exactly what reasoning?)

Incidentally, I cannot see that it matters, in either case, whether B requires T to sue S (whether really, or using the Vandepitte procedure): even if so, the claim is surely still T's.



Mindy

--
Jason Neyers
Associate Professor of Law
Faculty of Law
University of Western Ontario
N6A 3K7
(519) 661-2111 x. 88435





--
Professor Peter Radan
Macquarie Law School
Faculty of Arts
Macquarie University NSW 2109
AUSTRALIA

Tel: +61 (0)2 9850-7091
Fax: +61 (0)2 9850-7686
Email: peter.radan@mq.edu.au<mailto:peter.radan@mq.edu.au>