Read the summary and the most important questions on 8. Actions against third parties

• 2 Equitable Personal Claims Against Strangers

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• 2.1 Accessory Liability (Requirements)

• What is the definition of accessory liability in Royal v Brunei and is active assistance necessary in Brinks ltd v Abu-Saleh?

  A stranger is liable for dishonestly assisting a breach of trust (Royal Brunei). This requires active assistance in the breach of trust (Brinks ltd v Abu-Saleh).

• Explain the facts in Royal v Brunei and why the airline was able to claim compensation for dishonest assistance?

  Borneo Leisure Travel (BLT) was a trustee holding the ticket sale money on trust for Royal Brunei Airlines. BLT breached the trust by using the flight ticket money. The director of BLT assisted the company's breach.

• !!It must be established that the person was dishonest!! = What is the definition of 'dishonesty' in Royal v Brunei and what type of test is used to determine the standard of dishonesty? Explain the subjective element of this test?

  'Dishonesty' is 'not acting as an honest person would in the circumstances' (Royal Brunei Airlines v Tan). The standard of dishonesty is objective. This objective test also involves a subjective element in that the defendant will be judged against the standards of a reasonable man, in which the reasonable man has the particular experience and knowledge of the defendant.

• Is it necessary to show that the defendant knew that he was being dishonest? What are the main authorities and how does this build on from the objective test in Royal v Brunei?

  The decision in Twinsectra v Yardley was clarified in Barlow Clowes v Eurotrust and subsequently by Abou-Rahmah Abacha and Starglade Properties Ltd v Nash which stated that it was not necessary to show that the defendant knew that he was being dishonest. This was also confirmed in Groups Seven Ltd v Notable Services which stated that the standard of dishonesty was objective and therefore the defendant's view on what was honest or not was irrelevant.

• Is it necessary for the defendant to know the exact details of the breach of trust or fiduciary duty? What is the main authority?

  The defendant need not know the exact details of the breach; the defendant will be liable if he knew he was assisting in some illegal scheme (Barlow Clowes v Eurotrust).

• 2.2 Recipient Liability

• What are the three elements that must be present for recipient liability?

  1. Breach of trust/fiduciary duty by transferring trust property to a stranger
  2. The stranger received the property for their own benefit
  3. The stranger has the requisite degree of knowledge that the transfer of the property was in breach of trust/fiduciary duty or he later acquired that knowledge

• What level of knowledge suffices for recipient liability and is it necessary to show that the stranger was dishonest? What is the main authority?

  The stranger is liable for recipient liability if his knowledge made it unconscionable for him to retain the property (BCCI v Akindele). It is not necessary to show that the stranger was dishonest.

• What are examples of the level of knowledge needed to render a stranger liable of recipient liability? 

  Wilfully shutting one's eyes to the obvious or willfully failing to make enquiries constitute such knowledge.

• Does the stranger have suffiient knowledge if they are suspicious about the origins of the trust property, but deliberately refrains from asking questions about it?

  Yes, the stranger's knowledge raised his suspicions and he made a conscious decision not to ask questions to discover the origins of the property. This would make it unconscionable for him to retain it.

• What is meant by constructive knowledge in determining the stranger's level of knowledge?

  Constructive knowledge includes knowledge of circumstances that would have caused a reasonable person to deduce that there might have been some wrongdoing. Constructive knowledge may be sufficient.