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Liability Of Strangers Notes

GDL Law Notes > GDL Equity and Trusts Notes

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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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