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Liability of strangers (Dishonest assistance/accessory liability (Royal…

- - - - Someone not expressly appointed a trustee - 'a person who by mistake or otherwise assumes the character of trustee" (Lewin on Trusts)
        
        Trustee of his own wrong - liable as if a trustee
        
        "Strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees" - per Lord Selborne Lc, Barne v Addy (1874)
        
        "Nothing more than a formula for equitable relief" - per Ungoed-Thomas J, Selangor United Rubber Estates Ltd v Craddock (No 3) (1968)
- - - - Limited category
      - Volunteer/purchaser
      - Cause of action - per Hoffman J, El Ajou v Dollar Land Holdings plc (1994)
        
        Disposal of C's assets in breach of trust or fiduciary duty
        
        Beneficial receipt by D of assets which are traceable as representing the C's assets
        
        Knowledge on D's part that the assets received are traceable to a breach of trust or fiduciary duty
  - - - Cause of action
        
        Trust or fiduciary duty
        
        Breach
        
        Assistance in breach by defendant
        
        Dishonesty by accessory - Royal Brunei Airlines v Tan (1995)
- - - - i) Actual knowledge
      - ii) Willfully shutting one's eyes to the obvious
      - iii) Wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make
        
        Objective test comes in here
    - - iv) Knowledge of circumstances which would indicate the facts to an honest and reasonable man
      - v) Knowledge of circumstances which would put an honest and reasonable man on inquiry
    - - Re Montagu - need Baden (i), (ii) or (iii)
      - Belmont v Williams - questioned whether constructive knowledge might be sufficient
  - - - "Grave doubts about its utility in cases of knowing receipt" - per Nourse LJ, BCCI v Akindele (2001)
      - "All that is necessary is that the recipient's state of knowledge should be such as to make it unconscionable for him to retain the benefit of the receipt"
    - - '"Unconscionable" gives no guidance' - Birks
      - "The herald of equity should be wearing more distinctive clothing" - per Tipping J, Marshall Futures Ltd v Marshall (1992)
      - Stevens in No New Landmark - no objective definition, always changing
      - Nicholls in Knowing Receipt - not sufficiently certain for test applied in court
      - Charter plc v City Index Ltd (2007)
      - Criterion Properties plc v Stratford UK Properties (2002) - "Akindele demonstrates a more flexible approach" - per Carnwath LJ
      - Starglade v Nash (2010) - High Court definition of unconscionable - actual knowledge putting a reasonable man on enquiry
      - Farah Construction Pty Ltd v Say-Dee Pty Ltd (2007)
      - Armstrong v Winngton (2012) - making enquiries and not following through = unconscionable
        
        "Lewin [on Trusts], ...(and others - Goff v Jones [Law of Unjust Enrichement] comment that, despite Akindele, the Baden classification of knowledge is still useful in distinguishing different types of knowledge for the purposes of determining what kind of knowledge makes it unconscionable for the defendant to retain the trust property"
        
        "The position can be summarised as follows: (1) Barden types (1) to (3) knowledge on the part of a defendant render receipt of a trust property 'unconscionable'. It is not necessary to show that the defendant realised that the transaction was 'obviously' or 'probably' in breach of trust or fraudulent; the possibility of impropriety or the claimant's interest is sufficient."
        
        "(2) Barden types (4) and (5) knowledge also render receipt 'unconscionable' but only if, on the facts known to this defendant, a reasonable person would either have appreciated that the transfer was probably in breach of trust or would have made inquiries or sought advice which would have revealed the probability of the breach of trust" - per Stephen Morris QC
- - - - "1) Purely subjective standard, whereby a person is only regarded as dishonest if he trangresses his own standards of honesty, even if that standard is contrary to that of reasonable and honest people. This has been termed the 'Robin Hood' test"
      - "2) Purely objective standard, whereby a person acts dishonestly if his conduct is dishonest by the ordinary standards of reasonable and honest people, even if he does not realise this"
      - "3) Combines an objective rest and a subjective test, and which requires that before there can be a finding of dishonesty it must be established that the defendant's conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards the conduct was dishonest. I will term this the combined test"
        
        "I consider that the courts should continue to apply the test that dishonesty requires knowledge by the defendant that what he was doing would be regarded as honest by honest people"
        
        "A finding by a judge that a defendant has been dishonest is a grave finding, and it is particularly grave against a professional man, such as a solicitor"
        
        Lords Stynn, Steyn and Hoffman agreed
        
        Lord Millett dissented - "It is not necessary that he should actually have appreciated that he was acting dishonestly; it is sufficient that he was"
        
        "I think that we should return to the traditional description of the head of equitable liability as arising from 'knowing assistance'"
  - - - "If by ordinary standards a defendant's mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards"
      - "There is an element of ambiguity which may have encouraged a belief that the Twinsectra case had departed from the law as previously understood and invited inquiry not merely into the defendant's mental state about the nature of the transaction in which he was participating but also into his views about generally acceptable standards of honesty. But they do not consider that this is what Lord Hutton meant"
      - "For the reasons given by my noble and learned friend, Lord Hutton, I consider that those principles require more than knowledge of the facts which make the conduct wrongful. They require a dishonest state of mind, that is to say, consciousness that one is transgressing ordinary standards of honest behaviour"
      - "Consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour"
  - - - Not dishonest - only negligent/incompetent
        
        Failing to act - Duke of Norfolk v Hibbert
        
        Foolishly failing to enquire
        
        Abou Rahmah v Abacha - having "general" suspicions"
      - Dishonest
        
        Accepting an illogical explanation - Statek v Alford
        
        Deliberately not enquiring - Barlow Clowes v Eurotrust