A successful claim against the fiduciary may result in an award of compensation for loss, disgorgement of gain or restitution of property misappropriated by the fiduciary. But it will sometimes be impossible for the plaintiff to obtain complete relief, particularly if the fiduciary is insolvent or beyond the jurisdiction of the court. In some of these cases, the plaintiff may be able to pursue third parties who participated in the breach of duty. The principles governing the imposition of liability on participants are discussed in this chapter. This chapter principally examines the liability of third parties under the so-called ‘two limbs’ of Barnes v Addy. Liability under the first limb arises when the defendant has knowingly received property in breach of fiduciary duty. Liability is imposed under the second limb on a defendant who knowingly assists the commission of a breach of fiduciary duty. But, as the cases make clear, third parties can be held accountable on other equitable grounds. Finally, a common law claim can sometimes be brought in unjust enrichment against the third party which does not require proof of a breach of fiduciary duty.

The fiduciary may not be the only person who is accountable for a breach of fiduciary obligation. Other parties may also be liable. Suppose a solicitor misappropriates client money and then pays it into his wife’s bank account. The solicitor might also have been helped to commit the breach by an accountant who gave the solicitor access to the client account. Will these third parties – the wife and accountant – be liable in equity for their participation in the fiduciary’s breach? If the solicitor is solvent, the answer to this question may not matter much. The solicitor will be ordered to restore the money to the fund, together with compound interest to compensate for the loss of investment opportunity caused by the misappropriation. But if the solicitor is insolvent, the client will look to other participants in the fraud with ‘deep pockets’ to recover her funds.

This chapter examines the circumstances when a stranger to a trust becomes liable as if he is a trustee because he has become involved in some way with a trust. The stranger will be liable to compensate the trust fund for any losses suffered. This is relevant where the trustees canot be found or where a trustee is bankrupt and therefore has no funds with which to compensate the trust fund. There are three instances where a stranger will become liable as if he were trustee: either acting as a trustee de so tort, or knowingly receiving trust property or knowingly assisting in a breach of trust. The test for liability where a third party receives trust property has varied over the years . The test today is based on unconscionability. The test for dishonest assistance is based on an objective test for dishonesty. This is more in line with the criminal test of dishonesty and replaces a combined test which involves a subjective element on behalf of the wrongdoer. Where a third party holds himself as if he were a trustee but intermeddles with the trust property then he may be liable.