Remedies against third parties

Question 1

What is intermeddling?

Answer 1

A person who isn’t appointed as a trustee takes it upon themselves to act as one.

Question 2

What is the nature of liability for an intermeddling third party?

Answer 2

Personally liable for any loss they cause to be made to the trust.

Question 3

When is a third party in ‘knowing receipt’ of stolen trust property?

Answer 3

(i) Third party received the property in breach of trust or fiduciary duty;

(ii) third party received the property for their own benefit;

(iii) while in receipt, the third party had such knowledge making it unconscionable to keep the property.

Question 4

What happen if a third party becomes aware that trust property they received was in breach of trust after they disposed of it?

Answer 4

Nothing - no liability as they were faultless.

Question 5

What makes it ‘unconscionable’ to keep trust property?

Answer 5

(a) third party knows it belongs to trust;

(b) third party shuts their eyes to the obvious, e.g. they see a bank statement showing where the property was from;

(c) third party deliberately doesn’t ask questions despite suspicions about the origin of the property.

Question 6

When can a beneficiary bring a proprietary claim against a third party?

Answer 6

When they still hold the trust property.

Question 7

What are the capabilities of bringing claims against:

• Bona fide purchaser for value;
• Wrongdoing recipient; and
• An innocent volunteer?

Answer 7

• Nothing. If they purchased the property and had no notice that it belonged to a trust they are not capable of having a claim brought against them;
• Can bring a claim against them (i.e. intermeddler or knowing recipient) for the property (wrongdoing tracing rules)
• If they provided no consideration for the transfer a proprietary claim can be brought (innocent tracing rules)

Question 8

What are the wrongdoing tracing rules?

Answer 8

• If still in original form, proprietary claim over the property;
• If used to buy something new, can take the substitute property;
• If mixed with other funds, beneficiary can claim proportionate share in the mixed asset;
• If trustee made various withdrawals, Re Hallett and Re Oatway apply

Question 9

What are the innocent tracing rules?

Answer 9

If in original form/substituted, can assert proprietary claim over that.

If mixed, beneficiary can assert a proportionate share.

If various withdrawals were made, Clayton’s case and Barlow is used. However, no further claim over the property can subsist if the mixed funds went into the beneficiaries’ home.

Question 10

How can a claim be brought against a third party that assisted a trustee in their breach of trust?

Answer 10

If:

(a) there was a breach of trust;

(b) the third party assisted in that breach; and

(c) the third party acted dishonestly;

Then a personal claim can be brought against them. A professional e.g. a solicitor is often the target of such claims.