Remedies against 3rd Party

Question 1

Intermeddling

Answer 1

A 3rd party not a trustee but takes it upon themselves to act if they were, will be held personally liable for any losses caused by their action (trustee de son tort)

Question 2

Knowing receipt liability

Answer 2

1. A 3rd party receiving trust property may be liable if:
   (a) they receive knowing that property was transferred to them in breach of trust; or
   (b) they receive without providing consideration, without any knowledge that it belong to trust but gain knowledge while in receipt of property and before they spend (dispose it).
2. the state of knowledge must be that unconscionable for him to retain the property:
   (a) actual knowledge
   (b) wilfully shuts eyes on the obvious
   (c) deliberately decide not to ask any questions notwithstanding suspicions of the property

Question 3

Equitable proprietary claims

Answer 3

1. Bona fide purchaser for consideration: equity darling. No proprietary claim can be made.
2. Wrongdoing recipient: intermeddler or knowing receipt. Harsher tracing rules apply (everything is presumed against a wrongdoer)
3. Innocent voluteer: no knowledge or notice of breach but provided no consideration. Tracing rules are kinder than to wrongdoing.

Question 4

Wrongdoing tracing rule

Answer 4

Same as breached trustee

Question 5

Innocent tracing rules

Answer 5

1. If 3rd party still hold trust property in its original form, beneficiaries may assert proprietary claim to recover it.
2. If 3rd party used trust property to buy sth new, beneficiaries can assert a claim against new property (clean substitute)
3. If 3rd party mixed trust funds with own money and purchase property in their own name, the beneficiary can assert claim against proportionate share in the mixed assets, whether that asset has increased or decreased in value.
4. If 3rd party mix trust funds with own money in the account , the beneficiaries will use tracing rules in Clayton and Barlow.
   5.Re Diplock defense: If an innocent party using mixed money to improve building they already owned the beneficiary will not be able to trace any interest into that improvement (e.g. using mixed fund to install kitchen to building)

Question 6

Dishonest assistance (accessory liability claim)

Answer 6

If a 3rd party assists trustee in the commission of breach of trust or fiduciary duty, Beneficiaries may bring personal claim against them up to value of any loss plus interest that their assistance has caused.
Conditions:
1. there must be a breach
2. 3rd party must have assisted in the breach = positive act
3. 3rd party must have acted dishonestly : objective test: if an honest person would have acted differently? (3rd party knowledge of its assistance is not relevant)