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Liability Of Strangers Notes

GDL Law Notes > GDL Equity and Trusts Notes

This is an extract of our Liability Of Strangers document, which we sell as part of our GDL Equity and Trusts Notes collection written by the top tier of Cambridge/Bpp/College Of Law students.

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E&T: Liability of Strangers

17:15 Introduction

- Stranger: someone not appointed a trustee.

- 1. Trustee de son tort (constructive trustee). Mara v Browne [1895]: [Smith LJ]: intermeddles with trust matters or does acts characteristic of trustee ? treated as expressly appointed trustee. not breach of trust per se: does not purport to act on own behalf with trust property ? assumes office to act on behalf of beneficiaries.

- 2. Stranger personally liable to account to beneficiary for breach of trust. a. knowing receipt: knowingly receives or deals with property traceable to breach of trust.
? personal claim needed: dissipation prevents tracing. b. dishonest/knowing assistance: dishonestly assists or procures breach of trust. ('accessory liability' - Royal Brunei Airlines v Philip Tan Kok Ming [1995]: [Ld Nicholls]).
? personal claim needed: no receipt - cannot trace.

- Personal liability of recipients + accessories. proprietary liability: recipient of property misappropriated from trust obliged to return property/proceeds (unless bona fine purchaser for value without notice) - but: liability ends when property/proceeds dissipated. personal liability: recipient must account to bs. for loss to trust - even after property dissipated.
+ dishonest assistance: personal liability even thought may never have received trust property. ds. liable as 'constructive trustees': but N.B. not actually ts. - just treated as ts. ? liable for losses.
[Lionel Smith]: 'liable as a constructive trustee = liable even though he is not actually a trustee'.

- Background to classification of strangers' liability: Barnes v Addy [1874]: [Ld Selborne LC]: 2 types of liability.

1. d. receives + becomes chargeable with some part of trust property.

2. d. assists with knowledge in a dishonest + fraudulent design of ts.
? debate: level of 'knowledge' required + whether dishonestly necessary.

- Levels of knowledge: the 'Baden' scale - Baden v Societe Generale SA [1983]: [Peter Gibson J].

Level of knowledge (Baden)

Classification (Baden + Agip (Africa) v Jackson [1990])

(i). actual knowledge. Actual knowledge. (ii). wilfully shutting one's eyes to the obvious.

(iii). recklessly failing to make inquiries honest + reasonable man would make.

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