Accessory and Recipient Liability

Question 1

What kind of remedy are accessory and recipient liabilities?

Answer 1

Personal liability

Question 2

Does seeking a personal remedy against a third party depend on the third party having trust property currently in their possession/control?

Answer 2

No

Question 3

Knowing receipt

Answer 3

A third party may be liable to the beneficiary if he knowingly received trust property or its traceable proceeds

Question 4

Requirements for knowing receipt

Answer 4

• Breach of trust
• Receipt of trust property
• ‘Knowingly’

Question 5

What is important regarding the receipt of trust property?

Answer 5

Property must be received for the recipient’s own use and benefit

Question 6

Baden Delvaux categories of knowledge (5)

Answer 6

• Actual knowledge
• Wilfully shutting one’s eyes to the obvious
• Wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make
• Knowledge of circumstances which would indicate the facts to an honest and reasonable man
• Knowledge of circumstances which would put an honest and reasonable man on inquirt

Question 7

Current test of level of knowledge required for knowing receipt liability

Answer 7

BCCI v Akindele
“The recipient’s state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt”

Question 8

Armstrong v Winnington Networks

Answer 8

State of knowledge requires subjective awareness of possible impropriety and reasonable person would have realised the breach or made inquires

All five Baden categories could render receipt unconscionable in a commercial context

Question 9

Does the unconscionable knowledge have to be at the time of the receipt?

Answer 9

Could be, but sufficient if acquires the knowledge at any time whilst property is in his possession

Question 10

Dishonest assistance

Answer 10

Imposes personal liability on someone other than the trustee/fiduciary who has assisted in the breach of trust

Question 11

When is liability for dishonest assistance particularly valuable?

Answer 11

• The trustee has disappeared or is impecunious
• Following/tracing has not given rise to a proprietary claim
• Individual has not received trust property

Question 12

Requirement for accessory liability

Answer 12

• Breach of trust
• Assistance
• Dishonesty

Question 13

Royal Brunei Airlines Sdn Bhd v Tan 1995

Answer 13

The trustee’s state of mind irrelevant to the question of the accessory’s liability

Question 14

Brinks v Abu-Saleh 1996

Answer 14

F: Wife accompanied husband on trips to Switzerland as he laundered the process from gold theft
I: Did that amount to assistance?
H: No, as it didn’t contribute to husband’s breach of duty, even though the wife was supposed to make it less suspicious

Question 15

Grupo Torras

Answer 15

In dishonest assistance, the causal link does not have to be necessarily precise

Question 16

Royal Brunei v Tan 1995

Answer 16

F: T director of a company acting as agent for RBA, company sold tickets holding proceeds for RBA, used ticket money for own purposes, became insolvent
I: Was he liable for dishonest assistance?
H: Yes, and a standard of dishonesty established (rather than knowledge/notice)

Question 17

Definition of dishonesty

Answer 17

“Not acting as an honest person would in the circumstances”, usually requiring “conscious impropriety”

Objective test, as clarified in Barlon Clowes - “although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective”