Remedies Against Third Parties Flashcards
What is intermeddling?
Where a third party who is not expressly appointed as a trustee, but takes it upon themselves to act as if they were, will be held personally liable for any losses caused by their actions as if they were an expressly appointed trustee.
What are the elements of knowing receipt?
The third party has received property in breach of trust or fiduciary duty;
The third party has received that property for their own benefit; and
While in receipt of the property, the third party has such knowledge that makes it unconscionable for them to retain or deal with the property as if it were their own.
When must the third party know of the breach to be liable for knowing receipt?
When they receive trust property.
While in receipt of trust property and before they spend it.
The the third party will not be liable where they only become aware that they received trust property after they have disposed of that property.
When will a third party’s state of knowledge make it unconscionable for him to retain or deal with trust property?
The third party knows that the property belongs to a trust.
The third party wilfully shuts their eyes to the obvious.
The third party deliberately decides not to ask any questions notwithstanding they have their suspicions about the origins of the property.
What are the three categories of third party for equitable proprietary claims?
Bona fide purchaser for value without notice.
Wrongdoing recipient
Innocent volunteer
What are the tracing rules for wrongdoing trustees?
The same tracing rules as they would use against a wrongdoing trustee.
What are the tracing rules for innocent volunteers?
If the third party still holds trust property in its original form, the beneficiaries can assert a proprietary claim against that property to recover it.
If the third party has used trust property to buy something new, the beneficiaries can assert a proprietary claim against that new property. This is a case of ‘clean substitution’
If the third party has taken trust funds and mixed this with their own money to purchase property in their own name, the beneficiaries can assert a proprietary claim against that mixed asset. The beneficiaries will claim a proportionate share in the mixed asset whether that asset has increased or decreased in value.
If the third party has taken trust funds and paid this into their own bank account mixing it with money of their own, before making various withdrawals from that bank account, the beneficiaries will use the tracing rules of Clayton’s Case and Barlow Clowes v Vaughan to determine into what forms of property they can trace.
What defence does an innocent volunteer have when it comes to the mixing of monies in a bank account?
Re Diplock Defence: If an innocent third party receives trust money and uses that money to improve buildings they already
own, then the beneficiary will not be able to trace any interest into that improvement.
When does the Red Diplock Defence not apply?
As against wrongdoing recipients.
If an innocent third party takes trust money and combines it with their own to put down a deposit on a house, the beneficiaries can assert an interest in that house proportionate to their contribution.
What are the elements of dishonest assistance?
There must have been a breach of trust or fiduciary duty.
The third party must have assisted in that breach. The assistance must been some kind of positive act rather than mere passivity.
the third party must have acted dishonestly.
How is an assistant adjudged to have acted dishonestly?
Whether the ordinary honest person (imbued with the same experience and intelligence as the actual defendant) would have acted differently knowing what the actual defendant knew.
Does the third party need to know that they are assisting in a breach of trust?
No, dishonest assistance will arise if the third party knows that they are actively assisting some form of illegal scheme.
