Trusts 6 - Remedies against Third Parties

Question 1

Claims against third parties?

Answer 1

Recipient liability - possible to bring a proprietary and/or personal claim against a third party if they are in receipt of trust property given to them in breach of trust of fiducial duty.

Accessory liability - possible to bring a personal claim against a third party if they have assisted a trustee in breach of trust or fiduciary duty.

Also common law claims such as a claim in restitution

Question 2

Intermeddling

Answer 2

Not a trustee, but takes upon themselves to act as if they were.
Held personally liable for losses caused by action as if they were trustee.

Question 3

Equitable recipient liability (knowing receipt)

Answer 3

Personal claim up to value of trust property plus interest from date of receipt.
Have to be aware (if not can treat as their own)

Elements of claim;
-third party has received property in breach of trust or fiduciary duty
-third party has received property for their own benefit
-while in receipt third party has such knowledge that makes it unconcsionable for them to retain or deal as their own.

Must either know or gain that knowledge while in receipt.
Not liable after disposal

Unconscionable?
-third party knows it belongs to trust
-third party wilfully shuts eyes
-third party delibaretly decides not to ask any questions notwithstanding they have their suspicions about the origins of the property.

Not clear whether constructive liability can be held as what the reasonable person should have seen/done.

Question 4

Equitable proprietary claims

Answer 4

Third party still holds property (proprietary claim, priority when bankrupt)

-Bona fide purchases for value without notice; no claims

-Wrongdoing recipient- intermeddler or would have been guilty of knowing receipt on grounds their conscience is affected. Proprietary claim

-Innocent volunteer - no knowledge or notice, no consideration for transfer of property, proprietary claim (kinder rules, not everything is presumed wrong against a wrongdoer).

Question 5

Wrongdoing tracing rules

Answer 5

-original form may assert proprietary claim

-clean substition (used to buy something new)

-taken funds and mixed with own to purchase (proportionate share by equitable lien over mixed asset, increase or decrease in value).

-Third party has taken funds and paid this into their own bank account mixing it with money of their own before making various withdrawals (Re Hallett and Re Oatway apply).

Question 6

Innocent tracing rules

Answer 6

-original form assert a proprietary claim

-clean substitution, assert a proprietary claim

-taken trust funds and mixed with own money to purchase, claim proprotionate value

-third party taken funds and paid into own account mixing with money of their own (Use Clayton’s Case and Barlow Clowes v Vaughan)

Defence when using to improve buildings they already own;
-not improved value such as money has dissapated
-improvement has increased value but would be inequitable to force sale (Re Diplock defence)
Does not apply when wrongdoing or mixed funds.

Question 7

Equitable personal accessory liability

Answer 7

Assist in breach of fiduciary duty, may bring personal claim against them up to value of loss assistance caused (plus interest).

-must be breach of fiduciary duty

-third party must have assisted (not an omission)

-third party must have acted dishonestly (NOTE not the trustee).

Dishonesty?
Ordinary honest person (imbued with same experience and intelligence as actual defendant) would have acted differently knowing what the defendant knew.
-Objective test.
Does not need to know assissting breach of duty just some sort of illegal scheme.

Question 8

Claims arising out of a fiduciary duty

Answer 8

• Other claims against third parties not just confined to beneficiaries. Principles of other relationships can also bring claims.