Equitable remedies against 3rd parties Flashcards
What is meant by ‘strangers to the trust’?
Trustees or fiduciaries who breach their duties may be assisted by others or may transfer property to others in breach of trust or fiduciaries.
Equitable personal claims - What needs to be established?
The beneficiaries of a trust or fiduciary relationship may sue a stranger or third party if they can establish one of the following:
- Accessory liability
- Recipient liability
- Intermeddling
Equitable personal claims - Accessory liability
A stranger is liable under this if he dishonestly assists a breach of trust or fiduciary duty. Standard is objective. 3 elements necessary to establish:
- A breach of trust or fiduciary duty
- Assisted by the stranger
- The stranger is dishonest
Equitable personal claims - Recipient liability
Knowing receipt. Need the following elements:
- The trustee transfered trust property to a stranger in breach of trust
- The stranger received the property for the stranger’s own benefit
- The stranger received the property with the requisite degree of knowledge that the transfer of the property was in breach of trust or fiduciary duty or he later acquired that knowledge
The stranger is not liable unless and until he has knowledge of the breach of trust.
Equitable personal claims - Recipient liability - Knowledge of the recipient
1) Bona fide purchaser without notice - no claim can be brought against them
2) Knowing recipient/wrongdoer - His conscience is affected -a claim can be brought
3) Innocent volunteer - Claim can be brought
Equitable personal claims - Intermeddling
Where someone who is not a trustee does acts characteristic of a trustee he will be liable for any misapplication of trust property or other loss caused to the trust just as if he had been appointed an express trustee.
Proprietary claims - Bona fide purchaser
No proprietary claim can be brought
Proprietary claims - Wrongdoer
The stranger is an intermeddler or is guilty of recipient liability which means that his conscience is affected. Strangers who are guilty of intermeddling or recipient liability are liable as if they were trustees then you will use the tracing rules relevant to trustees.
Proprietary claims - Innocent volunteer
Clean substitution: A straight exchange of money or property for another asset with no mixing. Will be no difficulty bringing a proprietary claim. Purchase of an asset out of a mixture of trust money and the innocent volunteer’s own funds: Equity has the dilemma of choosing between two innocent parties: the beneficiaries on the one hand and the innocent volunteer on the other. The solution which equity adopts is that the trust and the innocent volunteer share the asset rateably in proportion to their contributions to the purchase price. Defence – inequitable result: Innocent volunteers will have a defence if they can show that tracing and the resulting proprietary claim would produce and inequitable result. NO CONSIDERATION THEN THEY CAN GET IT BACK.
