P.G. Turner

TRACING TO AND FRO

THE era of civil litigation to recover the proceeds of fraud continues and, with it, the elaboration of principles of judge-made law as to when defrauded persons may recover. These principles reflect a truth of human nature. Apart from the silly, reckless and brazen, those who commit fraud wish their takings to be undetectable. A crucial development in the history of English law, therefore, was to accept that, for some purposes, persons may make juridical claims not only to an asset originally taken from them, but also to other assets representing the original: Maitland, “Trust and Corporation”, in Selected Essays (Cambridge, 1936), 171–72. The concept of assets “representing” the original assets is at the heart of the equitable and common law doctrines of tracing and civil recovery for fraud.

RESCISSION OF THE DOCTRINE OF RESCISSION FOR FRAUD

THE decision in Robb v National Crime Authority [2014] EWHC 4384 (Ch); [2015] Ch. 520 has an ironic aspect. Etherton C. upheld the claims of 71 buyers of off-the-plan properties to be developed in Turkish Northern Cyprus. Robb had defrauded them. They had paid sums to Robb, Robbs company, or Robbs agents. Robb later caused those sums to be transferred into his personal bank account with a London bank, intending to transfer the funds to a bank in Thailand. Since 71 of the investors had rescinded their investment contracts, the Chancellor held those investors entitled to trace their moneys into the London bank account. The irony is that the Chancellors reasoning would itself unravel the modern doctrine of rescission for fraud.

THE NEW FUNDAMENTAL NORM OF RECOVERY FOR LOSSES TO EXPRESS TRUSTS

THE principles for recovering monetary relief for losses to express trusts have recently been uncertain, especially in “commercial” situations. Where trustees undertook to hold money on trust for a lender and to advance the money to a borrower after receiving security documents, the trustees no doubt breach the trust by advancing the money without first receiving the security documents. However, since Target Holdings v Redferns [1996] A.C. 421, it has been uncertain what measure of relief the lender-beneficiary can recover – and especially whether the measure differs according to (1) whether the form of relief claimed is a general accounting or “equitable compensation” for only particular defaults or (2) whether the circumstances are “commercial”. Under the accounting doctrines as traditionally applied, trustees unable to vouch for trust assets they earlier received could not reduce their liability by showing that part or all of the loss would have been suffered even had they performed the trust correctly. The trustees were responsible for the misapplied sum regardless of causal enquiries. But, in Target , the House of Lords – emphasizing the commercial nature of the case – denied a lender-beneficiarys claim to recover the full sum wrongly disbursed by trustees. The significance of the case has been contested. Did Target change a fundamental norm of monetary relief for losses suffered through breach of trust – a norm applicable regardless of whether the form of relief claimed is a general accounting or equitable compensation for only particular defaults? Did Target instead leave the traditional accounting doctrines untouched, and create a new remedy of equitable compensation for breach of trust? Or did Target establish a “commercial” exception to traditional principles of trustee accountability, an exception limiting the quantum of relief? Indeed, was Target decided per incuriam ?

INADEQUACY IN EQUITY OF COMMON LAW RELIEF: THE RELEVANCE OF CONTRACTUAL TERMS

THE decision of the Court of Appeal in AB v CD [2014] EWCA Civ 229; [2014] 3 All E.R. 667 concerned a distinctive feature of equitys auxiliary jurisdiction. Unlike situations in which a claimant invokes equitys exclusive jurisdiction to enforce or protect the claimants purely equitable rights, a claimant seeking equitable relief in aid of his or her legal rights must show that the relief available at common law, if any, would be inadequate to do justice. Thus, a contract party (for example) must cross a threshold before an injunction or specific performance will be granted. Equitys refusal to intervene where adequate relief is available at law properly makes equitable relief in the auxiliary jurisdiction special. The ordinary operation of the law of contract, and that of the courts, could be unjustifiably disrupted if every threatened or actual breach attracted these forms of discretionary equitable relief. But can a contract party tilt the balance of discretion towards the grant (or the refusal) of such relief by relying on a particular term in the contract?

Indictable Offences Tried Without An Indictment

After a trial by jury with an extraordinary feature, Mr Clarke and Mr McDaid were convicted of causing grievous bodily harm with intent to do so1 and were sentenced to imprisonment for 12 years.2 The offence of causing grievous bodily harm with intent was triable by indictment but not summarily.3 The extraordinary feature of the trial in Clarke was that, through oversight, a bill of indictment charging the defendants was only signed after the evidence had closed, when the jury was about to retire. Thus, for most of the trial the Crown Court had before it no indictment charging the defendants with the offences for which they were being tried.4 On a referral from the Criminal Cases Review Commission, the Court of Appeal upheld the convictions on the ground that no prejudice or consequential injustice was identified.5 The Law Lords reasoned differently,6 allowing an appeal and quashing the convictions.7 Signature of the bill of indictment was essential to constitute an indictment: without a signed indictment the ‘trial’ was incapable of supporting convictions. These clear conclusions immediately affirm a measure of strictness in the formal requirements for constituting indictments and conducting trials of indictable offences. Practical and theoretical implications will be apparent, given the tensions between personal liberty and public order epitomised in the criminal trial. As Lord Bingham said, ‘it may be thought that if the state exercises its coercive power to put a citizen on trial for serious crime a certain degree of formality is not out of place’.8 The affirmation of some formal strictness in criminal proceedings is also striking at present, when legal thought is ‘sympathetic to an approach which eschews formalism and technicality’,9 especially since that very approach, recently much developed in this area,10 was the basis of the decision that was overturned, and had some attraction for two of the Law Lords.11