Third Party Liability

Question 1

Reasons for claims against third parties

Answer 1

• where its a personal claim and the trustee is bankrupt/insolvent
• where the third party is in a better financial state
• where the property is dissipated
• where the value has fallen

Question 2

Options for claiming against third parties

Answer 2

Personal claims: for dishonest assistance
Proprietary claims: for unconscionable receipt

Question 3

Basis of third party liability for breach of trust

Answer 3

• where third parties knowingly involve themselves in the breach of trust they will be liable to the beneficiaries for breach of trust alongside the trustee- barnes v addy

Question 4

Dishonest assistance

Answer 4

• where the third party has counselled, procured or encourages or assisted the trustee to commit the breach with knowledge of the circumstances giving rise to the breach
• leading Cade- royal Brunei airlines sdn bhd v tan
• key elements are assistance and dishonesty

Assistance: third party must have assisted the trustee to commit the breach

Dishonesty: walker v stones. Hybrid test as it includes subjective and objective elements
- what were the facts as believed by the third party?
- whether a reasonable person would consider it dishonest

Barlow clowes international ltd v euro trust international

Question 5

Dishonest assistance crucial points to note

Answer 5

• trustee does not have had to have acted dishonestly
• third party doesnt need to have made a gain
• dishonest assistance needs to have a direct connection to the breach

Brinks v Abu-Saleh

Question 6

Remedies for dishonest assistance

Answer 6

Compensation: beneficiaries can claim against the third party for compensation only if the dishonest assistance was the direct cause of the breach

Account of profits: beneficiaries can claim an account of profits from the third party. Profit must have directly arisen from the breach- novoship ltd v mikhayluk

VL: e.g a solicitor acting dishonestly and the firm being vicariously liable- Dubai aluminium co v salaam

Question 7

Unconscionable receipt

Answer 7

• arises where the third party has received property from a trustee in breach of trust
  2 situations
  1. Property still in third parties hands
• can trace the property or claim original price if its fallen in value
  Can be defeated by bonafide purchaser and s62 LRA 2002

2. Property no longer in third parties hands
   - unconscionable receipt
   - beneficiaries must prove that the third party received the property dishonestly knowing it was a breach of trust
   To succeed
3. Receipt of property by third party
4. Breach of trust duty
5. Beneficiary receipt of property
6. Dishonesty

Defeated by a bonafide purchaser and s62

Question 8

Exceptions

Answer 8

Bonafide purchaser
- no claim can succeed as the beneficiaries rights have already been defeated

Section 29 LRA 2002
- where property has been registered at the land registry by another party, there can be no claim