Liability of Strangers:
Barnes v Addy: trustee decided to hand over duties to another upon the advice of his solicitor. The new trustee took the money for himself. Generally, strangers to the trust are not liable as constructive trustees unless they receive the trust property or have assisted dishonestly.

Dishonest Assistance:
Baden v Societe Generale: it is a question of fact as to whether there has been dishonest assistance

Brinks v Abu-Saleh: gold and valuables was stolen by a number of people acting together. The defendant had driven with her husband in the car to where he was to deposit the stolen goods. As she was unaware of the goods she was not liable as she did not further the breach of trust.

Subjective Test for dishonesty= defendant's own standards of honesty; did they think they were acting dishonestly?
Objective Test for dishonesty= ordinary standards of honesty
Combined Test for dishonesty= did the defendant realise they contravened ordinary standards of honesty?

Royal Brunei Airlines v Tan: Royal Brunei appointed another agent to act on their behalf in a sale. Proceeds were to be held on trust for the airlines but the company used it themselves with the assistance of Tan (managing director). Held, the objective test would be applied although there was a subjective element (an entirely subjective approach was declined).

Twinsectra v Yardley: Solicitor kept beneficiary's money on a Quistclose trust but paid the money out contrary to the trust's purpose. A subjective standard towards his dishonesty was rejected and a combined approach was accepted. It would be unfair to apply the objective test if he did not realise what he was doing was ordinarily dishonest.

Barlow Clowes International v Eurotrust: Defendant was involved in a fraudulent investment scam. The defendant was found to be dishonest and upon appeal it was held that the defendant's knowledge had to be as such to render his participation contrary to normally acceptable standards.

Abou Rahmah v Abacha: solicitor claimant was asked to help a country through payments in return for money of a trust fund. He paid the money and the bank manager had suspicions. Held, the bank was not dishonest based upon the objective test in Barlow. Barlow was not departing from Twinsectra, it was merely a "guidance as to the proper interpretation".

Starglade Properties v Nash: Lawsuit was bought against a company by two claimants who agreed the damages would be held on trust by one to the other whom instead used the money for themselves. Held, it is for the court to decide what the ordinary standard of honest behaviour is and how to apply it.

Dubai Aluminium v Salaam: company was defrauded of money by their partner's firm employee. The Partner firm was held to liable for the wrong. As this is a fault-based wrong it can be bought in action in both common law and equity.

Williams v Central Bank of Nigeria: Claimant paid money on trust to solicitor over an investment, solicitor paid money to bank and kept some for himself. Williams bought a claim 24 years later against the bank for dishonest assistance. Under S21 Limitations Act 1980, the limitation does not apply for claims of dishonest assistance but only if the trustee himself has been dishonest, not the third party as although equity can treat them as a trustee they are not.

Knowing Reciept (receiving the trust property):
Eagle Trust Plc: company agreed to underwrite claimant company's shares. The defendant company had underwritten their company by the claimant's employer. "It is only necessary to know the money was trust money" for knowing receipt to be found.

El Ajou v Dollar Land Holdings: Did they know the money was trust money?

Disposal of assets in breach of fiduciary duty/ trust
The beneficial receipt by the defendant's assets
Knowledge on part of the defendant

Criterion Properties v Stratford UK Properties: Claimant company was to be taken over by another company who the defendants would not want to work with and so the claimants could be bought out of the joint venture. The claimant bought a claim for knowing receipt as this money would then not be received via the claimant's assets. Contractual rights created by contract do not equal knowing receipt.

Belmont Finance v Williams Furniture (no2): Overpaying for a company by claimant at an inflated price was held to be "suspicious" and therefore the claimants must have realised the situation.

Baden Societe Generale: Baden Scale of Knowledge of Receipt:

Actual Knowledge
Wilfully shutting one's eyes to the obvious
Wilfully and recklessly failing to make enquiries as an honest and reasonable man would
Knowledge of circumstances which would indicate the facts
Knowledge of circumstances which would put a man of inquiry

Re Montagu's Settlement Trusts: duke was assigned father's property upon the father's death. He forgot this and when given money by the trustee spent it all. Held, when forgetting the facts of the circumstance there may not be actual knowledge.

BCCI v Akindele: BCCI was involved in fraud, Akindele agreed to lend bank money to cover up the fraud. This would be returned with interest. The interest was so large that it raised the question of whether knowledge of suspicious actions were going on. Baden's scale was rejected and a single test of unconscionability was formed. "Was the recipient's state of knowledge as such to make it unconscionable for him to retain the benefit?"

City Index Ltd v Gawler: Treasury manager of company was addicted to gambling and stole from emploter to pay losses. City Index agreed to settle the claim of receipt but bought a claim against the company's employer for failing to notice. Can receipt amount to damage by another person?

Armstrong v Winnington: fraudsters stole credits from company. Although the Baden scale was overruled it could still help in determining whether the defendant's receipt was unconscionable.

Authur v Attornery General of the Turks: there is a duty to restore trust property in equity.

	Created by cadhla_corrigan almost 10 years ago

LLB Trusts and Equity (10. Liability of Strangers and Tracing ) Note on Liability of Strangers and Tracing, created by cadhla_corrigan on 06/05/2014.

Liability of Strangers and Tracing