Trust - lecture 8

Trust - lecture 8

1. dishonest assistance

   • basis of liability - dishonest assistance , In order to be liable for dishonest assistance , there must be a breach of trust or fiduciary duty or someone other than the defendant , the defendant must have helped that person in the breach , and the defendant must have a dishonest state of mind.rwo main factors is missaplying compnay property and misapplying trust property
     • barnes v addy (1874) - this case is seen as tortious interfering economically with the company , Lassiter interfering with the misapplying with the compnay, , here strangers are not to be made constructive trustees because they merely act as the agents of trustees in transaction within their legal powers, court of equity may dissaprove, unless those agents receive and become chargeable with some part of the trust property or if they assist with knowledge in a dishonest and fraudulent design on the part of the trustees, , if a person dealing honestly as agents are at liberty to rely on legal powers of the trustees , and are not to have the character of trustees constructivey imposed upon them , then transaction of mind kind may safely be carried out , and those who create trust do expressly intend in the absence of fraud and dishonesty to exonerate such agents of all classes from the responsibilities which are incumbent by reason of fiduciary relations upon trustees

2. requirement for liability

   • existence of a trust or fiduciary relationship that concerns property, , breach of trust or compnay law in case of misapplied company funds, 3rd party must assist in the breach of trust or company law,dishnosty on the part of the 3rd party who assisted in breach of trust , the point is that equity wants recovery , therefore requirements are quite easy , normally satisfy all three and to show you assisting , receiving and assisting, the mental element of the assister is crucial , as this is dishonesty , but is problematic and difficult , no longer knowledge and has been raised to being dishonest as an equitable principle, not same as Criminal law,ther is also no requirement that the trustees must be aware be that they are acting in breach of trust or for the trustees to be dishonest
     • royal Brunei airline v tan (1995) - raised the case on dishonesty- per lord Nicholls , dishonesty is a necessary ingredient of accessory liability , it is sufficient , a liability in equity to make a good restig loss attaches to a person who doshnestyl procures or assists in a breach of trust or fiduciary obligations, it is not necessary that the trustee or fiduciary was acting dishonestly , although this will usually be so where the third party who is assisting him is acting dishonestly

3. test of dishonesty / original objective test

   • royal Brunei airline v tan - in most situations there is little difficulty in identifying how an honest person would behave , honest people do not knowingly takes others property , unless there is a good reason , honest person does not participate in transaction of he knows that it involves a misapplication of trust assets to the detriment of the beneficiaries, nor does an honest person deliberately close his eyes or ears or deliberately not ask questions , he learns something he would rather not know ,and then proceed regardless , all the investment involves risk , imprudence is not dishonesty although it may be carried out recklessly to lengths which call into question the honesty of the person making the decision , this is especially so if the transaction severs another purpose in which that person has an interest of his own,
   • royal Brunei airline v tan - her tan was the managing director of a travel company that booked flights on behalf of royal Brunei airlines , client money was supposed to be kept in separate account but had not been , the airline trued to claim against mr tan for dishonest assistance when his compnay went insolvent held the pricy council case that set out two parts test for dishonest assistance (a) did the defendant act an honest person would (b) based on someone with the defendants skill and experience
     • compare with case of abou-rahman , barlow and twinsectra
   • abou-rahma v abbacha - folowing a scheme of fraudulent transactions resulting in the loss of millions, the wronged party bought a claim founded on dishonest assistance against a Nigerian bank that the money has passed through it held that it clarified the law on dishonest assistance , , the barlow closes interpretation of the twinsectra judgement is the correct approach, meaning that effectively the tan test remains the correct test for dishonest assistance
   • barlow closes v eurotrust - barlow clowes, in breach of trust paid investor money to a compnay on the isle of man, that compnay went into liquidation and its director was found to have dishonestly assisted the breach held a further privy council judgement which states that the interpretation of the tan test in twinsectra had been objective and had not in fact involved subjective element, the defendant could be liable if they were to the reasonable person acting dishonestly
   • twinsectra v yardley - twinsectra lent £1 million to yardley to buy land, twinsectra had lent the money through a solicitor who gave an undertaking that the money would only be used for the purposes of buying the land in question , however the money was passed on via Yardley's solicior and largely dissipated on paying off debts held how judgement that interpreted the test in tan to include an apparently subjective element , did the person act dishonesty by ordinary standards , and did they realise that by those standards that they were acting dishonestly

4. subjective test

   • subjective test - subjective characteristics of dishonesty do not mean that individuals are free to set their own standards of honesty in particular circumstances , the standard of what constitutes honest conduct is not subjective , honesty is not an optional scale, with higher and lower values according to the moral standards of each individual , if a person knowingly appropriates another property he will not escape a finding of dishonesty simply because he sees nothign wrong in such behaviours
     • r v ghosh (1982)
     • re clowes (1994)
     • twinsectra v yardley (2002) - per lord Hutton , there is a further consideration in which supports the view that for liability as an accessory to arise the defendant must himself appreciate that what he was doing was dishonest by the standard of honest and reasonable men , a finding by the judge that a defendant has been dishonest is a grave finding, and it is particularly grave against a professional man , such as a solicitor, notwithstanding the issue arises in equity law and not in a criminal context , I think that it would be less than just for the law to permit a finding that a defendant has been dishonest in assisting in a breach of trust where he know of the facts which created the trust and its breach but has not been aware that what he was doing would be regarded by honest men as being dishonest - this is combined objective and subjective test

5. secondary liability

   • williams v central bank - someone called gale paid 6 million as part of fraud on William, gale was a solicitor, money was paid out from the central bank of Nigeria , issue was one of the limitation period, if you can sure fraudulent activity , longer and wider limitation period, case went to the Supreme Court, little about dishonest assistance , they made the point, secondly liability it is an ancillary liability where it is not direct , equity is trying to give a remedy , you have assisted you are liable , this therefore you wouldn't receive anything you have assistance , you have made liable for your assistance , you haven't received anything therefore you personally liable for what you have done , due to assistance as a secondary liability, no constrcutive trust, liable for restoration for the participation of the loss suffered, this is accountable personally and its clear shows a basis of liability of person accountability
   • brinks Ltd v Abu Saleh and others (No 3) the times oct 23 (1995) - warehouse and they hold goods such as gold bars and other valuable goods in warehouse and they do so in bailie stores, responsible if you dont owe them . armed robbery in November 1983, bullion worth millions were stolen, robbers included employees of brinks has inside person employed by brinks assistance with the criminal stealing, stolen this bullion and stores to sell it , the loot was put into the Barclays Bank , having laundered it , they withdrew the ,money of 5.5 million pounds, courts said in terms of the robbers they were directly liable, they commited the crime, therefore they were will be direct liability , they had actually property bullion , thus constructive trust was there, this is direct liability of the main person (robbers) because of unconscionable dishonest behaviour , not problem of imposing constructive trust due to having the actual property , in contrast of the receiver ......
     • does not get anything at all. number of people that assisted I that armed robber , bricks bought claims against 50% defendants, security guard , at brinks limited names mr black. he was prosecuted for the robbery of violence , what did he do ? he gave valuable assistance and inside information about relevance security matters to enable the robbers to commit the raid , he was assisting in the misapplication , mr black not an officer or director of brinks was in an employee of fiduciary duties, when eh used his knowledge to provide assistance to rob his employer, judge is the test of dishonesty and standard the test is dishonest , again is practical way of showing dishonesty, if you know what going on in a high level , knowledge is not ignored
   • AGIP v Jackson (1990) - AGIP had money stolen from him , concerned an accountant called Zdirr , he had person problem , problem he was the accountant cheques for large amount of money paid to GA. had the habit of changing the name of the payee , it went to the banks account controlled by zdiir instead of the actual compnay, but he didn't quite go that he wanted to move funds , so he asked with employed the firm of solicitors , Jackson and set up the companies to move fund for him , they could do it easier, solicitors did not receive the funds they just simply moved them . Zdiir is the one who committed the misapplication which is the direct liability was in position of trust and loyalty , company directors and trusting position they are in a fiduciary relationship in the company , issue of him vanishing goes to the people with money wit the solicior firm , bring in claim for dishonest assistance , solicitors moved the money this is an act of assistance
     • high court said solicits were doing could be assistance due to moving funds as an act , they do not receive any funds only assited, that isn't enough, test is your dishonesty assist, what about dishonest , silicorots said nothing in terms of the court hearings, millet LJ said secrecy is a badge of fraud , the solicitor didn't explain their actions , there silences show their dishonesty, they moved money how do we show dishonesty , we show it in equity by what you do , shows who you are, dishonesty is a crucial matters , thing that must be shown
   • Royal Brunei airlines v tan (1995) - said that BLT were the misapplied of the money , then said Brunei tan was an accessory , person who was assisting of the breach of trust, bought a claim of misapplying of assistance , pc held first al required breach of trust , second tan not necessary for him to receive anything , tan was dishonest, if you take someone property deliberately that would be considered dishonest , standard was an objective approach in the light of what you have done, i.e what are the standard people in the honest circumstances , if you acted in reckless disregarded of other peoples rights, he was in disregard of Brunei rights, which was there money which was held on trust, therefore the action that shows he was dishonest , due to be an objective test based upon his behaviour
   • Twinsectra v Yardly (2002) - funds were provided by twin for the purchase of particular property , this solicitor leach was not prepared to act for yardley (buyer of the property). he said to yardley, I cannot give the undertaking , but a second solicitor mr sims will be prepared to do so, the second solicitor transferred the funds without ensuring that they were used to purchase particular property , the money has been applied correctly and loan hasn't been paid, twinsectra not happy due to breach of contract , twin brings proceedings of dishonestly, HOL seeks to see negligence of dishonesty / not under taking the act for yardley , the second solicit misguided and negligent but not dishonesty thing to do, Mr sims didn't know, he didn't carry out his duties in a competent way , there is therefore the distinction put forward need negligence compared to dishonesty activity , were the solicit didn't carry out his task thus negligence not dishonesty , no liability due to it being negligent
     • if you turn a blind eye this is dishonesty , this doesn't apply in the case, however there isn't a blind eye due to his being a negligent act , this case represents the approach of courts a dual test objectively dishonest and subjectively dishonest, subject test - not only you are dishonest but subjectively , dishonest required dishonest by the defendant what he was doing, regarded a dishonest by honest people in which the solicitor has to realise that therefore , solicitors did not have the realisation as to the honest standard of It being dishonest, objective test - doesn't fall foul of the objective dishonesty
   • Dubai aluminium co Ltd v salaam (2003) - a solicitors firm vicarious liability for a partners dishonest assistance to a client , the senior partner of a firm drafted a consultancy agreement and other requisite documentation for a clients fraudulent enterprise , a compnay was induced to pay an amount of USD 50 million over time under this fraudulent consultancy agreement , the compnay sued the firm claiming that it was vicariously liable for their senior partners dishonest assistance to a client , issue whether the firm could be held vicariously liable for the dishonest assiatce of the partner in breach of fiduciary duty for wrongful act or omission during the ordinary course of business of the firm , under s.10 of the partnership act 1980, court said that was dishonest , actions and the knowledge was dishonest , thus the firm was held vicariously liable for the damage borne by the painters dishonest assistance ,
   • Barlows clowes in liquidation v Euro - barlow stole money from investors and said to be used for investment , in fact he missaplied it and used It for yachts to dissipate it . sort to launder the money through their investors money , they were found criminally liable , launder certain bank accounts in the isle of man , through using Peter, in particular there were three batched of money that was transferred to Peter to launder these monies to the isles of man 1)577 thousand on the 8th June 2)6 million on the 7th July 3)205 thousand , Peter knew about the stolen money but everyone said to him to avoid him due to him being a robber , the court said two things , the contract of these two and money being transferred , therefore Peter had the real possibility of stealing someones money , in light of this , his contact with below and this fraudeltn activity , this shows Peter was dishonest, both in subject and object ways , distinguished the case of twinsectra about not knowing the knowledge
   • Grupo Torras SA v Al-sabah (2000) - 2nd november , this is a subjective approach rather than the two approaches , if you know about the awareness of going on and you disregarded of what going on that is subjective dishonesty -lady Arden LJ - dealt with issue of dishonesty she followed blows decision and said unnecessary to show subjective dishonesty , it is efficient If the defendant knows the of the elements of the transactions which makes it dishonest according to the normally accepted standards of behaviour, on basis of this interpretation the test is predominately objective , there is a subjective part what the defendants actually knew at the time , lord justice Said dealing with liability of the bank , particular the trial judgment fond the bank knew in Nigeria , they did launder money in the bank account ,
   • Ivey v genting casinos (UK) Ltd (trading as crock fords club) (2017) - this case adopted the single standard of objective dishonesty, mr Ivey knew that certain brands of playing cards have a very slightly asymmetrical pattern on their backs and saw that this casino was using one such brand , so with help of an accomplice over a series of game, mr Ivey persuaded croupier to induldge his luck inducing superstitions , by turning some good cards along the shorter edge and other card along the longer edge, over a period of time the deck that the croupier was using became so arranged that mr Ivey could by looking at the back of the card , discern whether it was likely to be a good care or a bad care for the game he was playing, he then proceeded to bet larger sums on subsequent games, and carried on until the casino decided to use a new set of cards, by that time, he'd won £7.7 million
     • however he was refused payment after the casino pored over video footage of all his games and finally figured out how mr Ivey had gamed the casino , so mr Ivey filled a civil suit against the casino demanding to be paid, and the casino resisted on the basis that he has cheated , to decide on the soundness of the casinos allegation , it was necessary to consider whether mr Ivey has been dishonest, supreme court said civil case made its way through the court system and finally in 2017 landed up before 5 judge of Supreme Court , this was cicil case , Supreme Court decided that there was no logical or principled basis for the civi and criminal law to have different tests for dishonesty , therefore resolved to set the record on dishonesty straight once and for all in respect of both , the civil and the criminal law, SC chose to apply what was previously the civil law test for dishonesty across the broad
       • although the Supreme Court identified a few problems with the ghost test , its principal objection to the ghost test was that it gave rise to the counter intuitive result that the less the defendants standards conform to what society in general expects, the less likely he is to be held criminally responsible for his behaviour , what Ivey does not to , it was widely reported that the sc had dropped the second limb of the ghost test. this is plainly an oversimplification , the principal problem that the Supreme Court identified with the ghost test did indeed arise because the second limb thereof but the Supreme Court solution was far subtler than merely amputating the second limb , instead it adopted the test that already applied in civil law contexts and explained it in these terms ....
         • " facts finding must first ascertain facts, the reasonableness of otherwise of his belief is a matter of evidence often in practice determinative, going to whether he held the beleif, but it is not an additional requirement that his belief must be reasonable, the question is whether it is genuinely held, when once his actual state as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact finder by applying the objective standards of ordinary decent people, there is no requirement that the defendant must appreciate that what he had done is , by those standards dishonest
   • exception
     • yussouf v solicitors regulatory authority (2018)- this case concerned an appeal against the respondents solicitors regulation authority adjudication panel , on the grounds that the panels finding of dishonesty were based upon two-stage test of dishonesty, namely the objective and subjective test and that the panels refusal to hold an oral hearing was unfair given the finding of dishonesty, it was held that whilst the panel had correctly applied the objectively element of the test of dishonesty , it should have afforded the appellant the opportunity to explain her conduct before considering a finding of dishonesty, case was remitted to the solicitors regulation authority adjudication panel to be considered afresh, on April ms yussouf first applied to the solicitors regulation authority (SRA) for a certificate of satisfaction of suitability to be a solicitor and admission to the roll, in her application she had answered no to the question whether she had a county court judgement issued.
       • against her , a search by the SRA revealed a CCJ was issued against her on 30 october 2009 , the appellant subsequently withdrew her application , on 8 march 2016 the appellant submitted a second application for admission to the roll and a practicing certificate , this was dismissed by an adjudicator on the grounds that the appellant has acted dishonestly by failing to disclose the CCJ issued in 2009 when making her first application , appellant applied for a review of that decision by the SRA adjudication panel , on the grounds that at the time she had a genuine albeit mistaken , belief that she did not have to disclose a CCJ where payment had been satisfied , she further contended that whilst she has Read the questions without care and attention to detail, she has not been dishonest, furthermore the appellant legal representatives submitted that if the panel was minded to refuse the application having considered the written representations , the appellant should be afforded oral hear
         • the panel refused the appellants request for an oral hearing because it considered it had sufficient documentary evidence to determine that the appellant had acted dishonesty and that there were no exceptional circumstances to determine otherwise , the appellant subsequently appealed to the high court, primarily on the grounds that the panel acted unfairly in refusing to allow an oral hearing before making its finding of dishonesty , namely the objective and subjective test , the judgement was handed down by John Howell , In his judgement , he referred to the Supreme Courts ruling in Ivey v geneting casinos, this confirmed albeit obiter that the test for dishonesty was an objective one , where what is objectvily judged is that standard of behaviour , given any known actual state of mind of the actor as to the facts
           • in general medical council v Krishna (2017) the judge had stated that the law in regulatory or disciplinary proceedings was as stated in Ivey , the same as in civil and criminal proceedings , therefore Ivey and krishnan applied, it was held in this instance that the difference between the objective and subjective elements in the test for dishonesty was not that the former had no regard to the individuals state but that the latter did . in this instance it was held that the panel did have regard to the appellants state of mind when she had completed the relevant parts of the application state of mind when she had completed the relevant parts of the application form and therefore it correctly applied the objective test
             • with regards to the panels refusal for holding an oral hearing , it was held that in considering whether the appellants had acted dishonestly , if such factual issues arose or such an explanation was advanced , fairness required that an opportunity should be provided to give oral evidence on such matters , held that the panel could not fairly draw the adverse interferences that they had about the appellants honesty from the inconsistent statements about her knowledge of the judgement without giving her the opportunity to respond to them, it was possible that her explanation of events could result in a finding of incompetence and carelessness rather than dishonesty, held the appeal was allowed and the matter was remitted to the adjudication panel of the SRA for consideration, therefore it confirms that when considering whether an applicant has acted dishonestly , fairness requires that the opportunity be granted to give evidence on such matters orally
               • except when oral evidence could truly make no difference