Liability of Strangers to the Trust (Recipient and Accessory Liability) Flashcards
what is recipient liability?
B can claim personally against a third party who received misapplied trust property or its traceable proceeds
this is called a ‘knowing receipt claim’
what are the requirements for a knowing receipt claim? (3)
(1) misapplication of trust property
(2) beneficial receipt by D of the misapplied trust property or its traceable proceeds for their own benefit
(3) knowledge by D that the property was misapplied, rendering the receipt unconscionable
(this is a fault-based claim but D need not have acted dishonestly)
when does a bank ‘beneficially’ receive to be exposed to a knowing receipt claim
does not receive money beneficially if money is credited to an account in credit
does receive money beneficially where money is put into an overdrawn account
if D does not have knowledge that they received misapplied trust property when they received it, but later gained the knowledge, will they be liable for a knowing receipt claim?
they must restore trust property to the trust otherwise they are subject to the claim
if D disposes of trust property before gaining knowledge, will they be liable for a knowing receipt claim?
not
what types of knowledge by D make receipt of trust property ‘unconscionable’? (3)
(1) actual knowledge
(2) wilfully shutting his eye to the obvious
(3) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make
if D only had knowledge of the circumstances which would put an honest and reasonable person on enquiry of obtaining misapplied trust property, what would make this knowledge ‘unconscionable’ in a knowing receipt claim?
if a reasonable person would have appreciated the transfer was in breach of trust or would have made inquiries or obtained advice that would have revealed the probability of breach of trust
what is accessory liability?
B can make a personal claim against a person who dishonestly assisted or procured a breach of trust by T
what are the 4 requirements to find someone liable for dishonest assistance for breach of trust?
(1) trust existed
(2) trustee committed a breach
(3) D assisted the trustee to commit the breach = D planned, committed, covered up, procured, or instigated and this was more than minimal
(4) D’s assistance was dishonest = objective standard that an honest person in possession of the same facts would consider their actions dishonest
can a D in an accessory liability claim avoid liability by claiming that T would have committed the breach anyway without their involvement?
no
what causation must a claimant in an accessory liability claim show?
the conduct assisted the breach AND but for the breach, the loss would not have occurred
no need to show direct link between the assistance and the loss
what are the remedies against a D in an accessory liability claim? (2)
(1) D is liable for loss caused by the breach they assisted
(2) D is potentially liable for profits they acquire from their assistance = but C must show the assistance was an effective cause of the profits (not ‘but for’)
