# Breach of trust: equitable compensation and causation

> **Key takeaway:** Trustee in breach must restore the fund, but equitable compensation is confined to loss actually caused by the breach — assessed with hindsight at judgment date, not frozen at breach date. Leading case: Target Holdings Ltd v Redferns [1995] UKHL 10.

- **Jurisdiction:** England & Wales
- **Practice area:** Trusts And Chancery
- **Last reviewed:** 2026-07-21
- **Interactive page:** https://kttclegal.info/library/notes/TrustsAndChancery/breach-of-trust-remedies-overview
- **Keywords:** breach of trust, equitable compensation, Target Holdings v Redferns, causation, trustee liability

## What is this about?

Where a trustee acts in breach of trust, the traditional equitable remedy is restoration of the trust fund. This entry covers equitable compensation and the causation test that governs it — a distinct question from other remedies such as tracing or account of profits, which are outside its scope.

## What is the core rule?

The traditional rule is that a trustee in breach must restore the trust fund — either the specific asset lost, or compensation to put the fund back to what it would have been but for the breach — assessed with the benefit of hindsight at the date of judgment, not frozen at the date of the breach. Target Holdings v Redferns is the leading modern authority qualifying this in commercial/bare-trust contexts: equitable compensation is confined to loss actually caused by the breach, applying common-law-style causation, rather than automatic strict restoration regardless of causal link, where the underlying commercial transaction the trust was set up to effect had, in substance, proceeded as intended.

## What are the elements or test?

1. Was there a breach of trust (an unauthorised act by the trustee)?
2. What loss, if any, was actually caused by that breach — as distinct from loss the beneficiary would have suffered regardless?
3. Assess the resulting compensation with the benefit of hindsight at the date of judgment, not frozen at the date of breach
4. Where the underlying transaction the trust was set up to effect went ahead in substance despite the breach, compensation is limited to loss the breach actually caused

## Which authorities matter?

- **Target Holdings Ltd v Redferns [1995] UKHL 10, [1996] AC 421** — Confines equitable compensation to loss actually caused by the breach in a commercial/bare-trust context, rather than automatic strict restoration of the full sum regardless of causation, where the underlying transaction had in substance gone ahead as intended.

## How does this apply in practice?

This entry is deliberately scoped to compensation and causation rather than the full range of breach-of-trust remedies. Tracing and proprietary claims into substitute assets, account of profits, and removal of a trustee are separate remedies with their own tests, not covered here.

## What are common pitfalls?

- Assuming any breach automatically requires full restoration of the trust fund regardless of whether the breach actually caused the beneficiary's loss
- Assessing loss as at the date of the breach rather than with hindsight at the date of judgment
- Treating this entry's causation principle as covering tracing, account of profits, or trustee removal — those are separate remedies, not addressed here

## When would a practitioner use this?

Relevant when assessing what a trustee in breach may be liable to pay, particularly in commercial trust arrangements (such as solicitors holding client money) where the underlying transaction proceeded despite the breach.

## Quick reference

Trustee in breach must restore the fund, but equitable compensation is confined to loss actually caused by the breach — assessed with hindsight at judgment date, not frozen at breach date. Leading case: Target Holdings Ltd v Redferns [1995] UKHL 10.

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*Reference material from [KTTC Legal](https://kttclegal.info/), not legal advice. Work product supports instructing solicitors and barristers under their supervision. England & Wales.*