Liability Flashcards
what is knowing receipt
when a third party receives property knowing it is being transferred in breach of trust
must receive assets for own benefit
Consequences of knowing receipt
Return property
compensate for any loss
account for any profit
liable as constructive trustee / trustee de son tort
can you be liable for knowing receipt if you receive it innocently but later become aware of breach
not liable when you receive it but liable when you find out about breach
defense to knowing receipt
bona fide purchaser for value without notice overreaches interest. interest is transferred to proceeds of sale
types of knowledge for knowing receipt
Baden:
1-3 actual knowledge for knowing receipt
4 and 5 constructive knowledge - not enough
- actual knowledge
- willfully closing your eyes to the obvious
- willfully and recklessly failing to make inquiries that an honest and reasonable person would make
- info that would indicate facts
- info that would be out on inquiry
time limit for claims of knowing receipt and dishonest assistance
no time limit
what is dishonest assistance
dishonestly assists in breach of trust
consequences of dishonest assistance
liable as constructive trustee regardless of whether any property passes through their hands
compensate for loss
account for profits
meaning of dishonesty for dishonest assistance
Dishonest according to objective onlooker and D knew a reasonable person would think it was dishonest
is dishonest assistance personal or propriety liability and what difference does this make
personal - claimant queues with all other claims against D is D dies or becomes insolvent.
is tracing proprietary or personal remedy
proprietary
what is tracing
substituting new assets for old
what is following
follow same asset from person to person
is tracing a remedy
no - use tracing to identify property then apply a remedy
what can equitable tracing do that tracing in common law cannot do
trace into /through mixed funds
follow property into hands of people who don’t know about breach
take increase in value
trace through electronic transfers
When can you use equitable tracing
equitable interest in property or property was transferred in breach of fiduciary duty
honest trustee rule
when trust money is mixed with T’s money, equitable tracing assumes T spend there own
rule in roscoe v winter
When T later puts money into same account trust money equity won’t allow tracing into that money. Cannot assume T is replacing money unless clear evidence. Can only claim lowest intermediate balance.
rule in clayton’s case
equitable tracing assumes first in, first out when funds from several trusts are mixed.
What are B’s choices when T buys an asset in breach of trust
decide to keep it as trust property
take a lien over it
what is a lien
right to take possession of property until T pays what is owed
what happens if property is gone e.g. bank account empty
no more tracing
can you trace backwards e.g. takes mortgage, buys house, uses trust to pay off mortgage in breach. Can you trace into house?
only if you can show a link between acquisition and breach of trust
what if trust property is mixed with property belonging to an innocent volunteer
B and the innocent third party have equal claims to it.
