3P effect of the trust - cases Flashcards
[KR] Re Montagu’s ST (1987) (HC)
Situatoin :
- D assigned furniture (he was to inherit) to Ts
- Ts were supposed to make inventory of pieces for family settlement and hold the rest for D absolutely
- Instead, Ts released all to D absolutely
- D sold some during his lifetime
=> HC held that D not lb for knowing receipt bcs had neither actual knowledge nor constructive notice of the clause
+ knowledge of his solicitor (who by the time D received the chattels had genuinely forgotten about the clause) could not be imputed to him
[KR] BCCI v Akindele (2001) (HC)
Situation :
- Employees of a company (C), acting in fraudulent breach of fiduciary duties to employers, made C enter into ag w/ D = prominent business man
- D gained abt $17m from the ag
=> HC held that D not lb bcs didn’t have requisite knowledge of emp’s breach of trust
- dishonesty not a prerequisite for lb in knowing receipt
- test for knowledge = whether the recipient’s state of knowledge was such as to make it unconscionable for him to retain the benefit of the receipt
[DA] Royal Brunei Airlines Ltd v Tan (1995) (PC)
- P airline appointed company (D=mg director) as its agent for sales of transpº,
- comp meant to hold money received from sales on trust for P
- W/ D’s knowledge and assistance, comp paid money into its own acc instead of separate one + used money for its own purposes (in breach of trust)
=> PC held that D lb in knowing receipt
- objective standard for dishonesty: acting dishonestly = “not acting as an honest person would act in the circumstances”
[DA] Novoship (UK) Ltd v Mikhaylyuk (2014) (CA) (MP)
Main point = need for causal link btw dishonest assistance and profit for which D being asked to account
=> CA denied claim in dishonest assistance where D’s profit caused by unexpected change in the market rather than assistance in breach
Group Seven Ltd v Notable Services LLP (2019) (CA) (MP)
Main point : test for dishonesty = whether D’s conduct objectively dishonest acc to standards of ordinary decent people
=> no requirement that D subjectively appreciate that what he did was dishonest (// Ivey test)
[DA] Twinsectra Ltd v Yardley (2002) (HL)
- Y wanted to borrow money form T to purchase property
- T required sollicitor’s undertaking, given by S2, who promised that loan moneys would be used only for said acquisition of property
- S2 released money to S1 who paid them out on Y’s instructions,
- S1 took no steps to make sure it was only applied to acquisition of said property (it wasn’t)
=> T sued S1 for dishonest assistance of S2 (bankrupt) in breach of trust
=> HL upheld 1st instance judge finding that S1 not dishonest bcs honestly believed undertaking given by S2 wasn’t his problem
=> deliberately failing to make inquiries for fear of finding out smth he didn’t want to know not dishonesty, applying standards of reasonable and honest people (= crim dishonesty test)
[T] Saunders v Vautier (1842) (HC)
Main point = S v V powers
Te left shares on trust to Ts for his son V until he turned 25, V aged 21 sought to claim trust fund
=> HC allowed him to get it bcs was absolutely entitled to it and competent to give Ts discharge
[T] Re Hallett (1880) (CA)
Main point = restricting ambit of Clayton’s case + cherry picking
- Solicitor held bonds on trust for Mrs C,
- improperly sold them and mixed money w/ his own in bank acc, dissipated some money from the acc
- Mrs C claimed to trace proceeds into his bank acc
=> CA held that H was presumed to have dissipated his own money first, Clayton’s case didn’t apply here – cherry picking instead
[T] Re Hallett - quote by Jessel MR
‘where a man does an act which may be rightfully performed, he cannot say that that act was intentionally and in fact done wrongly’
=> idea that wrongdoer can’t say ‘no the money I dissipated was trust money and the money I kept mine”
[T] Re Oatway (1903) (HC)
Main point = cherry picking
In breach of trust, T paid trust money into his personal bank acc, then used some money to buy some shares and dissipated the rest
=> HC held that Bs could trace trust money into the shares, cherry picking rather than Clayton’s Case again
[T] Roscoe v Winder (1915)
Main point = lowest intermediate balance rule
- W wrongfully transferred money he held on behalf of C into his own account, dissipated it,
- later put more (of his own) money into the account, went bankrupt and died.
- C sought to recover all the money (abt £300)
- TIB for W ag that C only entitled to £25 = lowest intermediate balance in the account
=> HC agreed w/ TIB, C only entitled to lowest intermediate balance
[T] bishopgate investments v Homan (1995) (CA)
Main point = no backwards tracing into assets D obtained before misappropriating trust money
M had a company, MCC, w/ overdrawn bank acc – M misappropriated trust money from employee’s pension fund and put it into overdrawn acc
=> CA held that trust money could not be tranced into assets of comp via overdrawn bank acc : ‘there can ordinarily be no tracing into an asset which is already in the hands of the defaulting trustee when the misappropriation occurs.’ (Legat LJ)
[T] bishopgate investments v Homan - Legat LJ quote
‘there can ordinarily be no tracing into an asset which is already in the hands of the defaulting trustee when the misappropriation occurs.
[T] Brazil v Durant International corp (2015) (PC)
Main point = backwards tracing may be possible ‘where there is a close causal and transactional link between the incurring of a debt and the use of trust funds to discharge it’ (Lord Toulson at [34]
D company controlled by mayor of Sao Paulo & his son, they received abt £10m bribes, transferred through accs held by D – C = municipality of Sao Paulo sought to recover the money (which D held on CT for C)
=> PC held that C could trace the money backwards here bcs ‘part of a coordinated scheme’ / interconnected transactions
