Breach

Charter plc and another v City Index Ltd [2006] All ER (D) 145 (Oct); TLR 27 October

A knowing recipient of funds transferred in breach of trust is, while also a person liable, entitled to recover a contribution under the Civil Liability (Contribution) Act 1978 from any other person responsible for the damage to the trust. Section 1 of the Civil Liability (Contribution) Act 1978 provides: ‘(1) any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).’ Section 6 provides: ‘A person is liable in respect of any damage for the purposes of this Act if the person who suffered it is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise).’ A disposition in breach of trust gives rise to damage, loss or harm both to the trust and the beneficiaries resulting in liability on the part of both the trustee and a knowing recipient, based on that breach of trust and the requisite knowledge, to compensate for that damage, loss or harm by restoring to the trust or beneficiary the equivalent to that which was lost. The decision of the Court of Appeal in Friends’ Provident Life Office v Hillier Parker May & Rowden [1997] QB 855 (CA), that a claim in knowing receipt was one to recover compensation in respect of damage, was binding. In any event it did not necessarily follow that a cause of action that could be described as restitutionary was not also for the recovery of compensation and so within s6(1) of the Act. The remedy for knowing receipt was compensatory within the provisions of s6(1) even if it might also be described as restitutionary.