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Equitable Liability of Strangers

kazzasingh's version from 2018-05-03 08:55


Question Answer
Barnes v Addy [1874] Lord Selborne stressed the need to protect agents who act for trusts where they have acted honestly and within the terms of their agency.
Mara v Browne (1896)"ʺIf one, not being a trustee and not having authority from a trustee, takes upon himself to intermeddle with the trust matters or to do acts characteristic of the office of trustee, he may thereby make himself what is called in law a trustee of his own wrong — i.e. a trustee de son tort, or, as it is also termed, a constructive trustee"ʺ
Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001]A recipient will only be personally liable if his knowledge at any stage rendered it unconscionable to retain the trust assets he had received


Question Answer
Re Montagu’s ST [1987]Memory --> A stranger will not be taken to have knowledge ‘of a fact he once knew but has genuinely forgotten’
Agip (Africa) Ltd v JacksonKnowledge acquired after receipt --> Millett J stated that a recipient would not be liable as a constructive trustee for knowing receipt until they know about the breach of trust.
Carl Zeiss Stiftung v Herbert Smith & Co. [1969]Rumour --> knowledge that a trust is being claimed in litigation is generally insufficient to found liability.

Degrees of knowledge --> Baden v Société Générale [1983]

Question Answer
(A)Actual knowledge
(B) Manifest Shipping Co [2003]Wilfully shutting one’s eyes to the obvious --> such knowledge requires ‘a conscious reason for blinding the eye. There must be at least a suspicion of a truth about which you do not want to know and which you refuse to investigate’
(C)Wilfully and recklessly failing to make such enquiries as an honest and reasonable man would make
(D)Knowledge of circumstances which would indicate the facts to an honest or reasonable man
(E)Knowledge of circumstances which would have put an honest and reasonable man on enquiry
Eagle Trust Plc v SBC Securities Ltd [1992]Critical commentary --> liability based upon constructive knowledge of the Baden types (d) and (e) would be inappropriate to commercial transactions because the basis of commercial transactions should be trust and not suspicion
Agip (Africa) Ltd v JacksonReceipt --> The recipient must have received the property for his own use and benefit

Dishonest Assistance In (or Procurement of) a Breach of Trust

Question Answer
Agip (Africa) Ltd v Jackson‘The basis of the stranger’s liability is not receipt of trust property but participation in a fraud’.
Dubai Aluminium Co Ltd v. Salaam [2002]The similarity between equitable liability for dishonest assistance and tortious liability at common law tort has grown stronger with the recent acceptance by the House of Lords that the partners of a solicitor liable for dishonest assistance may be held vicariously liable where the acts of dishonest assistance was rendered in the ordinary course of the firm’s business
JD Wetherspoon Plc v Van de Berg & Co Ltd [2009]Trust --> There is no requirement for there to be trust property, and even if there were such a requirement, confidential information acquired by a fiduciary is capable of being trust property
Twinsectra Ltd v Yardley [2002]Dishonesty --> Since Tan (Barlow Clowes International Ltd (In Liquidation) v Eurotrust International Limited [2006]) it is clear that dishonesty is a necessary ingredient of liability for ‘knowing’ assistance. The test of ‘dishonesty’ is‘an objective standard’, but subjective considerations enter into this ‘objective test’. ‘When called upon to decide whether a person was acting honestly, a court will look at all the circumstances known to the third party at the time. The court will also have regard to the personal attributes of the third party such as his experience and intelligence and the reason why he acted as he did.’
Starglade Properties Ltd v Nash [2010]The objective standard ‘is applied to specific conduct of a specific individual possessing the knowledge and qualities he actually enjoyed’.
Cowan de Groot Properties Ltd v Eagle Trust plc [1992]Dishonesty is evidenced by ‘commercially unacceptable conduct in the particular context involved’