Liability for the Misapplication of Trust Fund in the Post-AIB Era

Abstract

<p>The decisions of the House of Lords in Target Holdings Ltd v Redferns (Target) and the Supreme Court in AIB Group (UK) PLC v Redler (AIB) suggest that English law on the award of personal remedies for trustees’ misapplications of trust funds has entered a new era. However, judicial practice in this new era shows that the lower courts have exhibited an incentive to circumvent the rule formulated in AIB (AIB rule). This incentive is mainly materialised through two tactics adopted by the lower courts: intentionally excluding and improperly interpreting the AIB rule. This article explores these tactics to (a) better understand how they function and (b) identify the reasons the lower courts adopted them. The final section discusses the implications of the analysis. It is contended that, to mitigate the harshness of the rule making trustees liable to pay the full amount of misapplied trust funds, the ideal approach is to rely on section 61 of the Trustee Act 1925 to relieve trustees from some or all of their liabilities, rather than to distort the rules governing substitutive performance claims.</p>