THIRD-PARTY LIABILITY
Lectures 11-14 (05-03-26 – 13-03-26)
Remedies
Personal claim against a trustee- personal remedy
Personal claim against fiduciary- proprietary or personal remedy
Proprietary claim over misapplied property/substitutes for that property- proprietary remedies
Personal claims against third parties- personal remedies
Can bring a claim against both a trustee/fiduciary and a third party provided there is no
double recovery (Adelaide Partnerships Ltd v Danison [2011])
There are two types of third-party liability: (1) dishonest assistance and (2) unconscionable receipt
Dishonest assistance arises where a third party dishonestly participates in a breach of trust by the
trustee or breach of fiduciary duty by a fiduciary
May arise in relation to any breach and the third party does not actually have to receive
trust property
Unconscionable receipt arises where a third party receives property within which the beneficiary
sustains a continuing equitable proprietary interest
The third party may be personally liable to account for the value of the property received, if
they received that property unconscionably
Liability is justified primarily on the basis of fault and the third party having wronged the beneficiary
with a degree of intent
Effectively a form of secondary (accessorial) liability, with the third party interfering in the
relationship between the beneficiary and trustee/fiduciary
Receipt based liability also helps a beneficiary to vindicate their property rights
The key advantages to a claim for third party liability include-
Providing a remedy when the trustee is insolvent
Providing a remedy where misappropriated trust property cannot be followed/traced
Since liability is fault-based, it has an almost vindictive quality and a deterrent effect
Dishonest assistance (accessory liability) comprises four elements (established in Baden Delvaux [1983]
and revised in Royal Brunei Airlines v Tan [1995])
(1) The existence of a trust or fiduciary relationship
(2) Breach of trust or fiduciary duty
(3) Assistance
(4) Dishonesty
a. It is irrelevant whether the trustee themselves is also dishonest and liability is not based on
receipt of property by the third party (Royal Brunei)
, Existence of a trust or fiduciary relationship
Since liability relates to assistance in breach of trust or fiduciary duty, there must be an initial trust
or fiduciary relationship in favour of the claimant
Breach of duty
Includes breach of trust (Royal Brunei) and breach of fiduciary duty (JD Wetherspoon)
Breach of trust in Royal Brunei for an agent firm collecting money from the purchase of
tickets obligated to hold that property on trust for the Airline (C), who instead used the
money for their own purposes, as authorised by the director and principal shareholder (third-
party)
JD Wetherspoon Plc v Van de Berg [2009]- directors of an agent company were liable as
third parties to the agent company’s breaches of fiduciary duty when acting for
Wetherspoons (C) on purchases/leases of property to be used as pubs (conflict of interest as
passed these on to competitors)
However, the mindset of the trustee/fiduciary in the process of that breach is irrelevant and only
the third party’s state of mind is relevant
Trustee is liable for any breach, even if he acted innocently, unless excused by an
exemption in the trust instrument or relieved by the court
Suggestion in obiter in Royal Brunei that a dishonest third party may still be liable even if
the trustee himself may escape liability (through exemption clause etc)
Assistance
A third party must be deemed to have assisted in fact with the breach of duty
Third party must have done something materially helpful towards the breach, but this does
not need to satisfy but-for causation (Adelaide Partnerships)
Positive actions which participate in the breach are clearly sufficient
Royal Brunei- a company has its own legal personality, so its director who gave the relevant
authorisation for the breaching actions is a third party liable for breach of trust)
JD Wetherspoon- most directors sued as third parties due to grant of authorisation by
signing letters)
Twinsectra Ltd v Yardley [2002]- assisting in laundering money is a common action giving
rise to third-party liability
Passive acquiescence may be sufficient
Adelaide Partnerships- husband had been involved in a breach and sought to hide the
misappropriated money in his bank account, with the court finding that the availability and
access to this bank amounted to assistance, even where she was unaware of what was
happening
Brinks Ltds v Abu-Saleh (No 3) [1995]- did not satisfy ‘assistance’ where E accompanied her
husband on trips to Switzerland (where he laundered stolen money) as she did so merely ‘in
the capacity’ as his wife and had not made any material difference to the continuing breach
Lectures 11-14 (05-03-26 – 13-03-26)
Remedies
Personal claim against a trustee- personal remedy
Personal claim against fiduciary- proprietary or personal remedy
Proprietary claim over misapplied property/substitutes for that property- proprietary remedies
Personal claims against third parties- personal remedies
Can bring a claim against both a trustee/fiduciary and a third party provided there is no
double recovery (Adelaide Partnerships Ltd v Danison [2011])
There are two types of third-party liability: (1) dishonest assistance and (2) unconscionable receipt
Dishonest assistance arises where a third party dishonestly participates in a breach of trust by the
trustee or breach of fiduciary duty by a fiduciary
May arise in relation to any breach and the third party does not actually have to receive
trust property
Unconscionable receipt arises where a third party receives property within which the beneficiary
sustains a continuing equitable proprietary interest
The third party may be personally liable to account for the value of the property received, if
they received that property unconscionably
Liability is justified primarily on the basis of fault and the third party having wronged the beneficiary
with a degree of intent
Effectively a form of secondary (accessorial) liability, with the third party interfering in the
relationship between the beneficiary and trustee/fiduciary
Receipt based liability also helps a beneficiary to vindicate their property rights
The key advantages to a claim for third party liability include-
Providing a remedy when the trustee is insolvent
Providing a remedy where misappropriated trust property cannot be followed/traced
Since liability is fault-based, it has an almost vindictive quality and a deterrent effect
Dishonest assistance (accessory liability) comprises four elements (established in Baden Delvaux [1983]
and revised in Royal Brunei Airlines v Tan [1995])
(1) The existence of a trust or fiduciary relationship
(2) Breach of trust or fiduciary duty
(3) Assistance
(4) Dishonesty
a. It is irrelevant whether the trustee themselves is also dishonest and liability is not based on
receipt of property by the third party (Royal Brunei)
, Existence of a trust or fiduciary relationship
Since liability relates to assistance in breach of trust or fiduciary duty, there must be an initial trust
or fiduciary relationship in favour of the claimant
Breach of duty
Includes breach of trust (Royal Brunei) and breach of fiduciary duty (JD Wetherspoon)
Breach of trust in Royal Brunei for an agent firm collecting money from the purchase of
tickets obligated to hold that property on trust for the Airline (C), who instead used the
money for their own purposes, as authorised by the director and principal shareholder (third-
party)
JD Wetherspoon Plc v Van de Berg [2009]- directors of an agent company were liable as
third parties to the agent company’s breaches of fiduciary duty when acting for
Wetherspoons (C) on purchases/leases of property to be used as pubs (conflict of interest as
passed these on to competitors)
However, the mindset of the trustee/fiduciary in the process of that breach is irrelevant and only
the third party’s state of mind is relevant
Trustee is liable for any breach, even if he acted innocently, unless excused by an
exemption in the trust instrument or relieved by the court
Suggestion in obiter in Royal Brunei that a dishonest third party may still be liable even if
the trustee himself may escape liability (through exemption clause etc)
Assistance
A third party must be deemed to have assisted in fact with the breach of duty
Third party must have done something materially helpful towards the breach, but this does
not need to satisfy but-for causation (Adelaide Partnerships)
Positive actions which participate in the breach are clearly sufficient
Royal Brunei- a company has its own legal personality, so its director who gave the relevant
authorisation for the breaching actions is a third party liable for breach of trust)
JD Wetherspoon- most directors sued as third parties due to grant of authorisation by
signing letters)
Twinsectra Ltd v Yardley [2002]- assisting in laundering money is a common action giving
rise to third-party liability
Passive acquiescence may be sufficient
Adelaide Partnerships- husband had been involved in a breach and sought to hide the
misappropriated money in his bank account, with the court finding that the availability and
access to this bank amounted to assistance, even where she was unaware of what was
happening
Brinks Ltds v Abu-Saleh (No 3) [1995]- did not satisfy ‘assistance’ where E accompanied her
husband on trips to Switzerland (where he laundered stolen money) as she did so merely ‘in
the capacity’ as his wife and had not made any material difference to the continuing breach
