Unit 9

Question 1

What is a stranger / third party?

Answer 1

Anyone who is not a trustee.

Question 2

When would a personal claim be better against a stranger?

Answer 2

Where there is no trust property due to dissipation. Bs will claim compensation against the stranger(s).

Question 3

When would a proprietary claim be better against a stranger?

Answer 3

When the trust property is still identifiable (i.e. not dissipated) whether in its original or substituted form.

Question 4

What are the 3 ways a stranger can be personally liable?

Answer 4

Recipient liability (stranger receives misapplied trust property).

Accessory liability (stranger assists T to misapply the trust property).

Intermeddling (where stranger acts like a T - will be liable as one).

Question 5

What is recipient liability?

Answer 5

Stranger received property in breach of trust / F duty;

Receives property for own benefit;

Has requisite degree of knowledge / later acquires such knowledge. The requisite degree of knowledge is the knowledge rendering it unconscionable for the stranger to retain / deal with the trust property (Bank of Credit and Commerce International v Akindale).

Question 6

What is accessory liability?

Answer 6

T breaches trust / F duty;

Stranger assists the breach;

Stranger was ‘dishonest’ (dishonesty is necessary and means not acting as an honest person would in the circumstances - Royal Brunei Airlines v Tan. Stranger does not need to know they were dishonest - Ivey v Genting Casinos. Stranger still liable even if they were not aware this transfer was in breach of trust / F duty (Barlow Clowes International v Eurotrust International).

Question 7

What is intermeddling?

Answer 7

Where someone, who is not a T, does acts characteristic of a T.

Will be liable as if they had been appointed as a T.

Mara v Browne; Lyell v Kennedy

Question 8

What is B’s position in relation to a proprietary claim against a stranger who is a bona fide purchaser for value of the legal title of trust property without notice?

Answer 8

Prop. claim NOT possible (purchaser has overreached B’s equitable title to trust property).

Can bring action against T + proceeds of the sale.

Question 9

What is B’s position in relation to a proprietary claim against a stranger who is a wrongdoer for recipient liability (constructive trustee).

Answer 9

Prop. claim possible.

If property has changed form, consider the equitable tracing rules (see unit 8).

Question 10

What is B’s position in relation to a proprietary claim against a stranger who is an innocent volunteer?

Answer 10

Volunteer = gave no consideration.
Innocent = no knowledge of breach.

NO personal claim BUT prop. claim is possible with DIFFERENT tracing rules:

• Clean substitution: 100% of trust money on the asset. B can claim.
• Mixed substitution: X% of trust money on asset. B can claim proportionate share of the asset (which will include increase / decrease in the asset’s overall value).
• Withdrawals from a mixed bank account: first in, first out (Clayton’s Case). Clayton’s Case not used where it would lead to an unjust / inequitable result (Barlow Clowes International v Vaughan; Russell-Cook Trust v Prentis).

DEFENCE for VI - where B regains the property and this leaves the innocent volunteer in an inequitable position (Re Diplock).