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Knowing assistance—a plea for help
Published online by Cambridge University Press: 02 January 2018
Extract
The recent refusal by the Appeal Committee of the House of Lords to grant leave to appeal to their Lordships' House in the case of Agip (Africa) Ltd v Jackson means that an opportunity has been lost to clarify the law with regard to the liability of a third party who helps a fiduciary commit a breach of trust. The difficulty is further compounded when one bears in mind that the ultimate appeal in Lipkin Goman v Karpnale did not involve one of the original defendants, Lloyds Bank, whose liability for enabling the gambling-addicted solicitor to sustain his predilection by cashing cheques for him was considered only by Alliott J and the Court of Appeal.
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- Copyright © Society of Legal Scholars 1992
References
2. [1991] 3 WLR 116 at 134, noted by Peter Birks at (1989) 105 LQR 528.
3. [1991] 3 WLR 10, noted in respect of the decisions by Alliott J and the Court of Appeal by Peter Birks at (1989) 105 LQR 352.
4. Specifically, Selangor United Rubber Estates v Cradock (No 3) [1968] 1 WLR 1555(‘Selangor’); Karak Rubber Co Ltd v Burden (No 2) [1972] I WLR 602 (‘Karak’); Rowlandson v National Westminster Bank Ltd [1978] 1 WLR 798 (‘Rowlandson’): and Baden, Deluaux and Lecuit v Société Général pour Favoriser le Développment du Commerce et de l'Industrie en France SA [1983] BCLC 325 (‘Baden Deluaux’)..
5. Apart from the two cases mentioned above, Carl Zeiss Stiftung v Herbert Smith (No 2) [1969] 2 Ch 276 (‘Carl Zeiss’); Belmont Finance Corpn Ltd v Williams Furniture Ltd [1979] Ch 250 (‘Belmont No 1’)..
6. Per Peter Gibson J in Baden, Delvaux [1983] BCLC 325 at 403.
7. Ed P. V. Baker, Sweet & Maxwell, 29th edition, 1990, pp 193–194.
8. For example, Hanbury & Maudsley Modern Equity, Stevens, 13th edition, 1989, uses the term ‘intermeddles’ generically to cover all cases where a third party becomes a constructive trustee.
9. [1986] 1 Ch 199 at 209:‘… if one, not being a trustee and not having authority from a trustee, takes upon himself to intermeddle with trust matters or to do acts characteristic of the office of trustee, he may thereby make himself what is called in law a trustee of his own wrong …’.
10. [1891] 1 Ch 337, where solicitors, following the death of the sole trustee and before a new trustee could be appointed, realised the trust investments and reinvested the proceeds of sale in a mortgage having what turned out to be an insufficient security.
11. (1889) 14 App Cas 437, where during the 22 years it took to resolve the question of entitlement to an estate, the deceased's agent continued to collect rents from the tenants without telling them of the landlord's death.
12. [1985] 2 NZLR 41. The case is the subject of an analysis by Charles Harpum in (1987) 50 MLR 217: the case note also discusses the first instance decision in Lipkin Gorman [1987] 1 WLR 987(Alliott J) and the judgment of Megarry VC in Re Montagu [1987] Ch 264.
13. Ibid, at 69.
14. Inter alia, by Harpum (1986) 102 LQR 114, 267 at 115, 130.
15. (1874) LR 9 Ch App 244.
16. Both the facts of Barnes v Addy itself, and those of the later decision of Re Barney [1892] 2 Ch 265 illustrate the criteria.
17. Harpum, op cit, note 14, supra, at p 148, suggests that because of the narrowness of the criteria in Barnes v Addy, cases where the allegation of knowing assistance succeeds will of necessity be rare.
18. As in Lee v Sankey (1873) LR 15 Eq 204.
19. As in Eaves v Hickson (1861) 30 Beav 136.
20. As in Saar v Ashwell [1893] 2 QB 390.
21. (1874) 9 Ch App 244 at 251–252.
22. [1983] BCLC 325 at 404.
23. Per Peter Gibson J in Baden Delvaux expressly adopting Belmont (No 1)..
24. Op cit, note 14, supra, p 146.
25. Per Buckley LJ in Belmont (No 1) [1979] Ch 250 at 267, who equates the two forms of knowledge, though Peter Gibson J in Baden Delvaux treats them as distinct. See Harpum, op cit, note 14, supra, p 123.
46. (1881) 17 Ch D 437.
27. [1896] 1 Ch 199.
28. [1942] 1 Ch 219.
29. [1964] AC 465.
30. In view of the fact that the agent will not have received trust property for his own benefit, the terminology of ‘liability to account’ is preferred to that of ‘constructive trustee’: see Harpum, op cit, note 14, supra, p 118, and Oakley, A.J. Constructive Trusts, Sweet & Maxwell, 2nd edition, 1987, pp 88–89Google Scholar, citing Re Barney [1892] 2 Ch 265 as authority that there has to be the receipt of property before there can be a constructive trust properly so called. Sir Peter Millett writing in (1991) 107 LQR 71 at 83 also pleads for a clear-cut distinction between receipt-based liability and fault-based liability.
31. See Gray, Elements of Land Law, Butterworths, 1st edn, 1987, pp 45–48 Google Scholar, citing Pilcher v Rowlings (1872) 7 Ch App 259 at 268 and Maitland Equity, pp 110 et seq. See also Harpum, op cit, note 14, supra at pp 267–270 and 290, relying on Re Diplock [1948] Ch 465, and Millett, op cit, note 30, supra, at pp 80–81.
32. [1968] 1 WLR 1555 at 1579.
33. Ibid, at 1579.
34. Ibid, at 1580 D.
35. Ibid, at 1581.
36. Ibid, 1590.
37. Ibid, 1590–1591.
38. Harpum, op cit, note 14, p 152.
39. Op cit, note 14, p 153.
40. Ibid, p 154.
41. Per Buckley at 267–268; Orr LJ at 270; Goff LJ at 273–275.
42. Noted [1985] BCLC 256; Court of Appeal Transcript No 65 of 1985.
43. See note 31, supra, for an explanation of the term.
44. [1987] I WLR 987, at 986 et seq..
45. [1987] Ch 264.
46. [1987] 1 WLR 987 at 997.
47. [1969] 2 Ch 276, relying in turn on Nelson v Larholt [1948] 1 KB 339, which despite Denning J's statement that the defendant was liable for failure to infer, was classified (appropriately) by Sachs LJ in Carl Zeiss as an example of ‘Nelsonian’ knowledge, ie a wilful shutting of eyes.
48. Ibid, at 300–301.
49. Loc cit, note 44, at 1005.
50. Loc cit, note 41.
51. [1948] Ch 465, though Sir Peter Millett in (1991) 107 LQR 71 at 81 argues that the statement from Re Diplock is taken out of context.
52. Op cit, note 12.
53. Ie the wrongful disposition of the chattels came about because of what Megarry VC called ‘an honest muddle’.
54. See also Oakley, op cit, note 30, p 103 et seq..
55. See Millett, op cit, note 51, supra, at 82.
56. See the comment in note 30.
57. See Oakley, op cit, note 30, chapter 1.
58. [1987] 1 WLR 987 at 1005–1006.
59. Ibid, at 1006, emphasis appearing in the judgment itself.
60. [1989] 1 WLR 1340 at 1349.
61. Ibid, at 1352.
62. Ibid, at 1356.
63. Ibid, at 1373.
64. Emphasis appearing in the judgment itself.
65. Ibid, 1387.
66. As required by Re Diplock [1948] Ch 465. It was accepted by Millett J that Z occupied a fiduciary position towards his employers by virtue of the opportunity he had to control their funds.
67. 1989] 3 WLR 1367 at 1387–8.
68. Ibid at 1388. Cf the comments on Selangor above.
69. See Harpum, op cit, note 14, for a similar classification.
70. [1989] 3 WLR 1367 at 1389.
71. Ibid, at 1389, echoing the views of Harpum, op cit, note 14, and Oakley, op cit, note 30.
72. Such difference, it may be noted, did not deter Alliott J in Lipkin Gorman..
73. [1991] 3 WLR 131.
74. We can only speculate at this stage what effect the recent Council Directive of 10 June 1991 on Money Laundering (91/308/EEC) will have on this privilege. Such confidentiality (established by Tournier v National Provincial & Union Bank of England [1924] 1 KB 461) has already been eroded by the Police and Criminal Evidence Act 1984, s 9(1), the Drug Trafficking Offences Act 1986, ss 24 and 27, and the Prevention of Terrorism (Temporary Provisions) Act 1989, s 12.
* I am grateful to Professor G. Dworkin and Dr F. M. B. Reynolds for their helpful comments on earlier drafts of this article. They do not necessarily agree with the views expressed in the article.