Claims Against Third-Party Recipients of Trust Property
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Equitable Allowances Or Restitutionary Measures for Dishonest Assistance and Knowing Receipt
Whayman D. Equitable allowances or restitutionary measures for dishonest assistance and knowing receipt. Northern Ireland Legal Quarterly 2017, 68(2), 181–202. Copyright: © Queen's University School of Law. This is the final version of an article published in Northern Ireland Legal Quarterly by Queen's University School of Law. DOI link to article: https://nilq.qub.ac.uk/index.php/nilq/article/view/34 Date deposited: 10/08/2017 Newcastle University ePrints - eprint.ncl.ac.uk NILQ 68(2): 181–202 Equitable allowances or restitutionary measures for dishonest assistance and knowing receipt DEREK WHAYMAN * Lecturer in Law, Newcastle University Abstract This article considers the credit given to dishonest assistants and knowing recipients in claims for disgorgement, with greater focus on dishonest assistance. Traditionally, equity has awarded a parsimonious ‘just allowance’ for work and skill. The language of causation in Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908 suggests a more generous restitutionary approach which is at odds with the justification given: prophylaxis. This tension makes the law incoherent. Moreover, the bar to full disgorgement has been set too high, such that the remedy is unavailable in practice. Therefore, even if the restitutionary approach is affirmed, it must be revised. Keywords: disgorgement; equitable allowances; remoteness of gain; dishonest assistance; knowing receipt. isgorgement in equity has become more widely available. It is familiar as against a fiduciary where the profits of the defaulting fiduciary’s efforts are appropriated to the pDrincipal, seen in cases such as Boardman v Phipps .1 In Novoship (UK) Ltd v Mikhaylyuk , the Court of Appeal held that disgorgement is available in principle against accessories (meaning dishonest assistants and knowing recipients) to a breach of fiduciary duty. -
Tracing Is a Process Not a Remedy
Tracing - Scenario 1(b): Trustee Mixes Trust Money - Tracing is a process not a remedy. With His Own In His Account, subsequently - It allows us to identify a new asset as the purchases property with some money in the substitute for the old (Foskett v McKeown). account, then exhausts remaining money. - Tracing follows the value of the beneficiaries - SOLUTION: Re Oatway: We get an property, not the property itself (following). exception to the rule in Hallett’s estate: if the wrongdoer purchased assets which still exist, Distinguishing Tracing; Following & Claiming then it is presumed that he did so with the - Following is the process of following the same stolen money and the beneficiaries are asset as it moves from hand to hand. entitled to the assets. - Claiming refers to the process of recovering property, or the substitute for that property (This - Scenario 1(c): Trustee Mixes Money With His refers to the Barnes v Addy; knowing receipt, Own In His Account, and makes payment in knowing assistance doctrine - MUST and out of that account. CONSIDER THIS AFTER TRACING). - SOLUTION: Lofts v McDonald: Lowest Intermediate Balance Rule: trust cannot claim more than the lowest intermediate balance Tracing at Common Law - credited to the wrongdoer’s bank account Tracing is not unique to equity, however at CL it - If it went up from the lowest point, that is requires that the property you are tracing is not the trust’s money. identifiable, giving rise to problems with banks. - - Although you are deprived of a proprietary Equity has developed rules for identifying remedy, not personal remedies. -
Landmark Cases in Tracing – a Pitch
Landmark Cases in Tracing – A Pitch Landmark Cases in Tracing A pitch for an edited collection of in-depth case analyses Dr Derek Whayman, Newcastle University. [email protected] Prof Katy Barnett, University of Melbourne. [email protected] Theme and Justification Tracing is a process and claim used for recovering misappropriated property, mainly that originally held on trust or by a corporation. It allows claimants to recover not only the original misappropriated property, but also its substitute – what the property was exchanged for in a subsequent transaction. Since this claim is a right of property, it brings the claimant the advantage of priority over other creditors in insolvency and access to any increase in value, either in the property itself or from the substitute. If the property is passed to or from another person or, say, a shell company, the right to claim follows that property and is not left on the person. From this, it is no wonder it is popular with claimants. However, tracing is still under-researched and under-theorised. There is little agreement as to how this claim can be justified theoretically, what its limits are and how they vary in accordance with the multitude of different facts the courts have seen and will see in the future. Academics and judges are still feeling their way around its fundamental questions. Yet not only are the answers to these theoretical questions controverted, they go to the heart of what every litigant wants to know: what may or may not be claimed? These questions are of fundamental importance on a practical basis too. -
Claims Against Third-Party Recipients of Trust Property
Cambridge Law Journal, 76(2), July 2017, pp. 399–429 © Cambridge Law Journal and Contributors 2017. This is an Open Access article, distributed under the terms of the Creative Commons Attribution-NonCommercial-ShareAlike licence (http:// creativecommons.org/licenses/by-nc-sa/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the same Creative Commons licence is included and the original work is properly cited. The written permission of Cambridge University Press must be obtained for commercial re-use. doi:10.1017/S0008197317000423 CLAIMS AGAINST THIRD-PARTY RECIPIENTS OF TRUST PROPERTY DAVID SALMONS* ABSTRACT. This article argues that claims to recover trust property from third parties arise in response to a trustee’s duty to preserve identifiable property, and that unjust enrichment is incompatible with such claims. First, unjust enrichment can only assist with the recovery of abstract wealth and so it does not assist in the recovery of specific property. Second, it is difficult to identify a convincing justification for introducing unjust enrich- ment. Third, it will work to the detriment of innocent recipients. The article goes on to show how Re Diplock supports this analysis, by demonstrating that no duty of preservation had been breached and that a proprietary claim should not have been available in that case. The simple conclusion is that claims to recover specific property and claims for unjust enrichment should be seen as mutually exclusive. KEYWORDS: trusts, third parties, proprietary claims, knowing receipt, res- titution, unjust enrichment, Re Diplock. I. INTRODUCTION According to orthodox trust principles, where property is transferred in breach of trust, a beneficiary can either bring a proprietary claim to recover the property or a personal claim against a knowing recipient of the trust property (hereinafter, the combination of these two claims will be referred to as the “equitable regime”). -
Remodelling Knowing Receipt As a Gains-Based Wrong
Whayman D. Remodelling Knowing Receipt as a Gains-Based Wrong. Journal of Business Law 2016, 7, 565-588. Copyright: This is a pre-copyedited, author-produced version of an article accepted for publication in Journal of Business Law following peer review. The definitive published version is available online on Westlaw UK or from Thomson Reuters DocDel service. Date deposited: 12/09/2016 Embargo release date: 01 September 2017 This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License Newcastle University ePrints - eprint.ncl.ac.uk Remodelling Knowing Receipt as a Gains-Based Wrong Derek Whayman* [email protected] Newcastle Law School Newcastle University 21–24 Windsor Terrace Newcastle upon Tyne NE1 7RU Abstract This article analyses the nature of knowing receipt. It finds its previous characterisations as a form of unjust enrichment or trustee-like liability wanting in the face of newer authority and complex commercial situations. It argues that knowing receipt is a gains-based profit- disgorging wrong and this best describes its remedies. 1. Introduction The action in knowing receipt is an invaluable tool in the armoury of the claimant who wants to recover misapplied trust or company property from a stranger to the trust or fiduciary relation. It might be that the trustee or fiduciary is a man of straw or has disappeared or simply that the recipient is easier to sue. Then, provided the claimant can show that the recipient beneficially received property traceable to a breach of trust of fiduciary duty with cognisance of that breach, a personal claim exists.1 However, the precise nature of knowing receipt and particularly how this translates into the remedy available – namely quantum – is contested. -
Dishonest Assistance and Accessory Liability Paul S
David Salmons Dishonest Assistance and Accessory Liability Paul S. Davies, Accessory Liability, Oxford: Hart Publishing, 2015, 294 pp, hb £54.99 INTRODUCTION There are numerous examples within private law where a third party can be held liable for playing a role in another person’s breach of duty. This can be relevant in claims such as ‘dishonest assistance’ and ‘inducing a breach of contract’.1 The language of each of these forms of liability seems to imply that they focus on different types of involvement. For example, assistance is not necessarily synonymous with inducement. This has resulted in ‘pockets’ of third party liability, whereby there are separate formulations of third party liability depending on the primary wrong (a crime or a breach of duty committed by another person).2 Nonetheless, it has been suggested by a number of commentators that it is possible to draw together claims against those who involve themselves with primary wrongs under the concept of ‘accessory liability’.3 Paul Davies’ book, Accessory Liability, provides a welcome analysis which seeks to provide coherence to ‘accessory liability’ by demonstrating that a unified approach can be used to determine the way in which such cases are treated. Whether or not one agrees that it is possible to unify the pockets of accessory liability, it is worth stating that Davies’ book is a thoroughly researched and insightful publication. This book presents a challenging, and powerful, argument that the various forms of accessory liability can be drawn together, and Davies’ framework provides a clear way towards achieving that goal. In this review, the major point of divergence with Davies’ proposition is that the inclusion of the equitable action for dishonest assistance creates a number of problems for this general concept of accessory liability. -
'Dishonest and Fraudulent Design' Requirement in Accessorial Liability
THE PLACE OF THE ‘DISHONEST AND FRAUDULENT DESIGN’ REQUIREMENT IN ACCESSORIAL LIABILITY FOR ASSISTING IN A BREACH OF TRUST OR FIDUCIARY DUTY TANYA SHANKAR* Currently in Australia, a plaintiff may sue a third party on the basis that such party has knowingly assisted in a trustee or fi duciary’s dishonest and fraudulent design in furtherance of the latter’s breach of trust or fi duciary duty. This is known as the equitable claim of accessorial liability. The ‘dishonest and fraudulent design’ limitation has received considerable criticism. This paper will investigate whether this requirement has any justifi cation in principle and/or legal policy as a component of the test for accessorial liability, by evaluating its strengths and weaknesses. It is suggested that the removal of this limitation is necessary, because it is both incoherent and unfair. Equity should be able to intervene where the third party can be shown to have dishonestly assisted in any breach of trust or fi duciary duty, regardless of whether the defaulting trustee or fi duciary has additionally exhibited any fraudulent behaviour. I INTRODUCTION It may be impossible or impractical for a benefi ciary or principal (‘plaintiff’) to sue their trustee or fi duciary (‘primary wrongdoer’) for harm which has resulted from the latter’s breach of trust or fi duciary duty.1 In these circumstances, the plaintiff may cast the net of liability over a third party who has knowingly assisted in a ‘dishonest and fraudulent design on the part of the trustee or fi duciary’.2 This equitable claim is known as ‘accessorial liability’3 or the ‘second limb’ of the rule in Barnes v Addy,4 the formulation of which prevails in Australia as a result of the High Court of Australia’s infl uential dicta in Farah.5 * LLB (Hons) (University of South Australia), Grad Dip (Legal Practice) (College of Law). -
Honours Paper Final
THIRD PARTY LIABILITY FOR ‘KNOWING RECEIPT’ AND ‘KNOWING ASSISTANCE’ POST-GRIMALDI v CHAMELEON MINING NL (NO 2) Claire McGowan This thesis is presented for the Honours degree of Bachelor of Laws of Murdoch University 2012. I declare that this is my own account of my research. Signed: ………………………………. COPYRIGHT ACKNOWLEDGEMENT I acknowledge that a copy of this thesis will be held at the Murdoch University Library. I understand that, under the provisions of s51.2 of the Copyright Act 1968, all or part of this thesis may be copied without infringement of copyright where such a reproduction is for the purposes of study and research. This statement does not signal any transfer of copyright away from the author. Signed: …………………………………………………………... Full Name of Degree: Bachelor of Laws with Honours Thesis Title: Third Party Liability for ‘Knowing Receipt’ and ‘Knowing Assistance’ Post-Grimaldi v Chameleon Mining NL (No 2) Author: Claire McGowan Year: 2012 Abstract This paper examines the position of third party liability for ‘knowing receipt’ and ‘knowing assistance’ under Barnes v Addy in Australia following the decision of the Full Court of the Federal Court of Australia in Grimaldi v Chameleon Mining NL (No 2). Grimaldi demonstrates that third party liability under Barnes v Addy is a primary, fault based liability concerned with the wrongdoing of the third party. There remains a technical distinction between the ‘two limbs’ of Barnes v Addy on the basis that a dishonest state of mind on the part of the breaching fiduciary or trustee is required to trigger liability for knowing assistance, but not for knowing receipt. -
Questions Concerning Third Party Recipient Liability in Equity and Unjust Enrichment
‘THE RECEIPT OF WHAT?’: QUESTIONS CONCERNING THIRD PARTY RECIPIENT LIABILITY IN EQUITY AND UNJUST ENRICHMENT JOACHIM DIETRICH∗ AND PAULINE RIDGE† [This article argues that equitable recipient liability should not be displaced by a strict liability claim in unjust enrichment. Furthermore, recent judicial and academic suggestions to the contrary fail to engage in a proper analysis of the requisite elements of either claim. In particular, the questions of whether there has been a ‘receipt’ of trust property and whether proprietary relief is available have been glossed over. To demonstrate the complexity and confusion surrounding both the equitable and unjust enrichment claims the article considers (against the backdrop of proprietary claims reliant on the priority/tracing rules) the application of equitable recipient liability and unjust enrichment theory to a simple fact scenario and then more complex variations. It is argued on doctrinal and policy grounds that equitable fault-based liability best reconciles the competing claims of the beneficiary of a trust or fiduciary relationship, and the third party recipient of trust property. The High Court of Australia, in its recent decision of Farah Constructions Pty Ltd v Say-Dee Pty Ltd, reached similar conclusions on a number of key points.] CONTENTS I Introduction............................................................................................................... 48 II An Overview of Possible Claims in Equity.............................................................. 51 III General -
Obligation and Property in Tracing Claims
CORE Metadata, citation and similar papers at core.ac.uk Provided by Newcastle University E-Prints Obligation and Property in Tracing Claims Derek Whayman* [email protected] Newcastle Law School Newcastle University 21–24 Windsor Terrace Newcastle upon Tyne NE1 7RU Abstract Tracing is said to be merely a process and separate from claiming. It is then characterised as a set of pure property identification rules which cannot vary from claim to claim. However, the development of tracing in equity relied heavily on the fiduciary obligation to support its rules. While many of tracing’s rules can be justified independently of the fiduciary obligation or rationalised as evidential presumptions, others cannot. This means it is impossible to detach the process from the claim. Furthermore, it would be undesirable to do so because it would reduce the flexibility of tracing. Introduction Tracing, according to the present conventional wisdom, is a process used to support a number of separate, mostly proprietary, claims. “[A] clear distinction must be drawn between the rules of following and tracing, which are essentially evidential in nature, and rules [of claiming] which determine substantive rights.”1 Any peculiarities of the claim should remain there and not fall in the rules of tracing. All tracing does is make the link – it identifies where the value is, whether it passes through a link between old property and its new substitute and to what extent. For example, if I spend £100 on a vase, tracing only says that the vase is subject to any claim that the £100 was. -
Knowing Receipt and the Law of Restitution
467 Recovery of Misappropriated Trust Money From Third Parties: Knowing Receipt and the Law of Restitution S R Scott* Introduction A strength of the law of restitution is that it provides a means to reconsider existing rights and remedies. One area that restitution lawyers are turning their attention to, is the recovery of one's money from a third party. Two claims in particular - the commonlaw claim of'money had and received' and the equitable claim of 'knowing receipt', are attracting their attention. Assume that I steal your money and give it to another - the 'third party'. Through the medium of money had and received you may be able to recover the value of the money from the third party. The knowing receipt claim also facilitates the recovery of money from a third party, but in slightly different circumstances. This is when the'thief' is a trustee, the money is misappropriated trust money, and the plaintiff is the beneficial owner. Notwithstanding this general similarity, these claims operate in different ways. The focus of money had and received is on the third party's receipt of the plaintiff's money. The third party's knowledge is relevant only for determining the availability of defences, such as change of position. Subject to defences, a successful claim culminates in an order that the third party repay the value of the plaintiff's money actually received. Turning to the knowing receipt claim, while there is disagreement as to the state of knowledge that a third party must have, the orthodox view is that knowledge is a prerequisite. -
Restitution of Unjust Enrichment Case List for the Examination Room in 2019
RESTITUTION OF UNJUST ENRICHMENT CASE LIST FOR THE EXAMINATION ROOM IN 2019 Enrichment Moses v Macferlan (1760) 2 Burr 1005 Prudential Assurance Co Ltd v HMRC [2018] UKSC 39 Planche v Colburn (1831) 8 Bing 14 Benedetti v Sawiris [2013] UKSC 50, Greenwood v Bennett [1973] QB 195 Weatherby v Banham (1832) 3 C&P 228 Leigh v Dickeson (1884) 15 QBD 60 Falcke v Scottish Imperial Insurance Co (1886) 34 ChD 234 Cressman v Coys of Kensington (Sales) Ltd [2004] EWCA Civ 47, [2004] 1 WLR 2775 Gibb v Maidstone &Tunbridge Wells NHS Trust [2010] EWCA Civ 678; [2010] IRLR 786 At the expense of the Claimant Edwards v Lee’s Adminstrators 96 SW 2d 1028 (1936) Investment Trust Companies v HMRC [2017] UKSC 29 Prudential Assurance Co Ltd v HMRC [2018] UKSC 39 Aiken v Short (1856) 1 H & N 210 Lloyds Bank v Independent Insurance [2000] 1 QB 110 Khan v Permayer [2001] BIPIR 95 Macdonald Dickens & Macklin v Costello [2011] EWCA Civ 930, [2012] QB 244 Kleinwort Benson Ltd v Birmingham City Council [1997] QB 380 Relfo Ltd v Varsani [2014] EWCA Civ 360 Butler v Rice [1939] Ch 286 Banque Financiere de la Cité v Parc (Battersea) Ltd [1999] AC 221 Bank of Cyprus UK Ltd v Menelaou [2015] UKSC 66, [2016] AC 176 Clarke v Shee & Johnson (1774) 1 Cowp 197 Gebhardt v Saunders [1892] 2 QB 452 Failure of Basis (Consideration) Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 Crown Prosecution Services v Eastenders Group [2014] UKSC 26, [2015] AC 1 Goss v Chilcott [1996] AC 788 (PC) Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55, [2008] 1 WLR 1752, [39]-[45].