Dishonest assistance is a form of personal liability for wrongfully assisting or helping the trustee commit a breach of trust.
Essentially, it is a form of accessory liability.
Elements:
Breach of Trust
There must be a breach of trust or breach of fiduciary duty to attach to, but dishonest assistance can apply to any form of breach of trust. The significance of the breach is not relevant.
Assistance or Procurement [1]
EG: encouraging misappropriation of trust assets, introducing the trustee to persons who can launder / forge the trust funds, procuring the trust assets, covering up breach etc.
The assister does not necessarily have to come into contact with the trust property to be liable.
Dishonesty
The mental element of dishonesty was once framed as knowledge. This has since been rejected; it is the assister that must be dishonest.
In Royal Brunei Airlines v Tan, a company was acting as a travel agent for RBA, selling tickets for them. It then held the ticket proceeds on trust for RBA. The travel agent then mixed the proceeds and spent it in the course of business. When the travel agent went insolvent, RBA sued the managing director (T).
The court held that the primary breach (committed by the trustee) did not have to be dishonest (it could even be innocent) for a third-party assister to be liable. Instead, it is the dishonesty of the assister that is relevant.
Dishonesty is an objective test.
Nicholls LJ seemed to intimate that the test for dishonesty ought to be objective (though not binding as it was a PC decision). [2]
In Twinsectra v Yardley, the majority held that the test for dishonesty is a combined objective-subjective test where both elements have to be satisfied.
Millet (Dissent): combined standard ought not to apply in civil cases. He interprets Nicholls LJ’s standard as objective.
Believed to be the correct interpretation of Nicholls LJ in Royal Bruneli.
In Barlow Clowes v Eurotrust, investors handed money over to BC (£140m in total). BC passed the money onto E, before being moved offshore as part of a ponzi scheme to make them untraceable. Director of E (H) sued by liquidators of BC for dishonest assistance.
The court held H knew or suspected the money was being misappropriated and did not act honestly, making him a dishonest assister.
Hoffmann LJ (who had agreed with the majority in Twinsectra) held that the test was obviously objective. Here, the court attempted to argue that Twinsectra had simply been misinterpreted (untrue).
In Ivey v Genting, I was a professional gambler who used an edge sorting technique to identify cards in a game of Baccarat. I won £7.7m, but G refused to pay. G stated that I was ‘cheating’ under the Gambling Act 2005.
The SC held that there was implied term that a gambler wouldn’t cheat (dishonesty). The court stated that the objective test for dishonesty applies in all cases (both civil and criminal); dishonesty is satisfied when an ordinary, reasonable person would consider an act or omission dishonest.
Remedies:
Compensation for losses.
Account of profits (when there is a sufficient direct causal connection between the assistance and the gains, at the court’s discretion). [3]
Resources:
References:
[1] EG: Eaves v Hickson (1861) 30 Beav 136 [2] Royal Brunei Airlines Sdn Bhd v Tan [1995] UKPC 4 [3] EG: Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908
Cases Mentioned:
Royal Brunei Airlines Sdn Bhd v Tan [1995] UKPC 4
Twinsectra Ltd v Yardley [2002] UKHL 12
Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37
Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67
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