Trust - Lecture 9

Trust - Lecture 9

1. basis of liability for unconscionable receipt

   • it is a secondary accessory liability, and the analogy is that of a handler, the handler helps dispose of this goods, instead of assisting it is the act of receiving
     • Re Montagus settlements (1987) - where he distinguished unconsionable receipt of tracing, number of points, first standard should be unconscionable which was adopted in Akindele.this was appropriate for equity, there is something wrong where you have received, unconscionable but not simply negligent , unconscionable, is the development of equity , another point receipt in this context is person liability , same way in the dishonest assister personally liable for their assistance, in which you are personally liable for your receipt, if you received amount of misapplied property , the shares you have got them ,your personally liability is capped on what you have received in which you have to account of it, you need to give back what you have got thus , you liable for what you have received , thus you are at fault the way you have received therefore you are personally liable
       • liability assistance is that it could be whole of the loss of the amount is taken , no cap whereas for receipt personally liable for what you have received but you go for assistance because recovering is better
     • criterion properties plc v Stratford UK properties - the house of lords say we do not have no problem for unconscionable receipt, they said we have nothing wrong with unconsionbable receipt, as a mental element
     • Charter Plc v city index - clearly without doubt unconscionable is the standard, they said they are happy with the approach of unconsuionability , coa in para 8 said the standard in unconscionable, therefore that is the liability confirming that is the best , person to have the property , refer to akindele , with judges approval in which they do not give reasons, knowledge has been rejected

2. Requirment for liability : 1) dispositions of property in breach of trust or company law 2) beneficial receipt by third party 3) unconscionable receipt on the part of the recipient

   • BBCI v Akindele - coa confirms the test is unconsionabilty , it has changed from knowing receipt (dishonesty not standard) to unconscionable receipt, it is clear that is the standard , when It was knowing receipt, what was the standard of knowledge , different cases said different things , what is known and what is ought to have known, therefore judge he wanted something different , he chooses unconsionability , in equity they wanted to go back to a starting point - chancery division , mr justice carnwath evidence is looked at , he was examined 'I regarding as taking money to a deposit to an account to another account to earn interest, what interest means is to earn interest' well I do not know , I only know that it secures my money and it gives additional interest , probability was agreement was short, he didn't seek any legal advice that is his evidence shown in the high court
     • this matter then went to COA , facts were akindele got mixed up in a fraud when he received money from , question was he to us the Newley found test or was he an unconsionable recipient ? we were told he received 15% interest , this turned out as a good rate of interest of money being mixed on fraud - lord justice N said dishonestly is not the approach , there is a difference between dishonest interest and unconsionability receipt , he makes the point that there was great debate as what was the standard of knowledge for liability? is it what you actually know or what you have ought to know ?
       • judge referred back to case of RE montages settlements - as it is an important case , courts accepts personally liability i.e. fault liability for what you have done, thus it represents what you have taken , he says in para 2 : ' in considering liability has arisen In the case of receipt of property, unconsionable of receipt sufficiently effected tp justify the position of a trust' knowledge is no longer the test it is an unconscionable receipt as the standard of approach , it also goes on to says that is necessary is the recipients state of knowledge is to make it unconsionable for him or her to retain the benefit of the receipt, this test is unconsionability , how to show the mental element , if you know what is going in a high degree you are acting in unconsionable way
         • held that the defendant knowledge did not make it unconsionable to retain benefit of receipt , since he was unaware of the fact which was questioned the nature of the transaction , given evidence , all he was interested is the interest rate , and he didn't know about the fraud , high rate of interest was sufficient to impose liability since he didn't know anything it is not an unconsionable interest he did not have to account for the receipt and thus not liable
   • twinscetra v yardley (2002) - this case is about assitance, comments about judges were obiter, lord millet , suggested that the standard of receipt is undoubtedly about restitution and it is strict without showing mental element (unconsionable) following this approach , that for receipt it ought to be strict liability for strict, simply you received and thus you are personally liable and do away without the mental element , he favoured the restitution approach , fundamental difference between equity and restitution , equity should modify its approach , but it cannot because it has established need for the mental element , it does not change precedence based nature of equity , equity for receipt is that it should have the mental element which is unconsionable that you are acting unconsionable based on your knowledge , that is the standard of equity , equity will not change its position , remain its position that there is a mental element, it may be made redundant ,
     • but the standard is there on receipt of the unconsionable on the test for knowing
   • Armstrong v winnington (2012) -this case of admissions trading , the court had to deal with the issue of liability , the HC referred to akindele para 130-132 broadly it was in a commercial context the carbon emissions, judge Stevens referred to the para that knowledge was important referred to a textbook that knowledge is relvena to whether you are acting conscionable or not , para 132 - in a commercial context that types of kmowedge i.e the emphasis being actual knowledge the possibility of imploratory if the defendnat knew that it will be sufficiently for liability , judge went onto say what you are ought to have known would also render receipt unconsionable which is controversial, there are two criticism , it cannot overturn akindele, some judges were emphasising knowledge which we have move away from , this cause is suggesting a move back to knowledge, as the law stands it Is unconsionable receipt
   • starglade properties v Nash (2010) - court dealt with the issue of objective and subjective knowledge , it was a case where they suggested the double approach , the court dealt with unconsionable receipt, by saying in para 57-59, leading case is akindele making the point dishonesty is not the test, judge repeatted the test in akindele , the single test - is whether the recipient state of mind of mind in such that he , look at knowldge test , the flexibility test , need for flexibility and certainty, requires the courts to consider what is right ,the nature and extend of the defendants knowledge and the circumsatnce relating to the receipt and general terms of the knowledge , knowledge takes key and judges takes all the circumstances, rejects Armstrong case, actual knowledge could lead to unconsionability and failure to make inquires, conclusion was Mr Nashs dishonesty meant he was an unconsionable recipient as he enquired further
     • he would have known he was not entitled to the property, failure to make enquiry leads to liability
   • papamichael v national westminister bank - court deals with issue of the standard of knowledge in a wide ranging judgement , para 247 - unconsionable receipt , judge dishonesty is not standard what I said before, it is pretty clear the of knowledge is actual and constructive (ought to have known) up to judge to determine all of this, general approach to the matter looking at all the facts , trial judge hears the witness , he found liability in akindele , knowledge is crucial and it is not the test
   • respondents case - Arthur v turks and Caicos island - court said claim could be brought on the facts of unconsionable receipt , judge was right not to strike out that claim
   • Lipkin gorman v karpnale - Mr Cass who worked for them, cast had a personal problem as he reduced the substantial sums of money from his clients account , his other problems was he was a gambler, he stole to fund his addiction to gamble, he went off and gambled at the palyboy club , he gambled £300,000 and lost it over a period of few months he was regarded as a low-level gambler, the claim that was brought in the high court , was for unconsionable receipt, firstly cass diverted his funds and moved them onto a building society account in his own name, when mr case went off he gave them a cheque or he gave them cash the payboy club said to the court 'we are the playboy club we do not enquire much and do not enquire about them, in any event case either gave us cash or he gave us alternately a cheque in his own name so we though we was dealing with his money and did not know he was a thief , they said they are not the police, conclusion there was no liability
     • lack of knowledge in the general sense confirmed they were not an unconsionable recipient, assisting it is the act of receiving
   • Polly peck v nadir - nadir moved misapplied money through bank in Northern Cyprus , one of the issues was the liability of this bank, in particular for its receipt of 42 million pounds, the bank here exchanged Turkish money sterlings , court made the point by exchanging currency you were doing this for you own benefit , the coa decided , the recipient bank had a very limited knowledge and there was a misapplication as it was simply was a pipe the money was pass through them , the coa said because it is large amount of money It is not in itself sufficiently for liability , because of its lack of knowledge therefore if this case came before the courts today the answer would be the same although there was beneficial receipt it was not an unconsionable receipt, court said evidence against the bank was speculative
   • houghton v fayers - dishonest is not the standard rule
   • bank of America v arnell and Sharon Jane Haddon - it concerned a mr arnell, and he met a miss handdon, mr arnell was introduced as a sponsor of the racing , they met each other on several occasions at car events, and did not know him well but did change telephone numbers, in august 1997, he phones her and said can you assist me with a transaction and was told she would receive a cheque of 25,750 and launder it for him and she will receive 750, mr arnelll met her and said accompany me to your bank , 25,000 was withdrawn in cash with the money put into that, a claim was brought against miss Haddon being an unconsionable receipt, judge said ' she was naive and was duped but she was innocent although she understood money laundering, she did not know mr arnell was involved and thought he wanted some help