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SQE – Equity and Trust – Dishonest Assistance
Case Scenario
The trustees of the Hamilton Family Trust manage:
£5 million
for the benefit of several beneficiaries.
One trustee, Daniel, improperly transfers:
£800,000
from the trust into offshore accounts in breach of trust.
Daniel works closely with a solicitor, Sarah, who helps structure the transfers and conceal the movement of funds.
Sarah does not personally receive any trust money. However, she:
The court must determine:
Dishonest Assistance
Definition
Dishonest assistance arises where a third party dishonestly assists or procures a breach of trust or fiduciary duty.
Unlike knowing receipt:
Nature of the Remedy
Dishonest assistance gives rise to:
✅ a personal remedy
❌ not a proprietary remedy.
The dishonest assistant is personally liable to compensate the claimant for losses caused by the breach.
Important Principle
The dishonest assistant is:
not a constructive trustee.
Liability is fault-based rather than receipt-based.
Twinsectra Ltd v Yardley
Lord Millett explained:
dishonest assistance is fault-based, not receipt-based.
The claim focuses on:
Application to the Scenario
Sarah never personally received the £800,000.
However, she actively helped facilitate the breach by:
Elements of Dishonest Assistance
The claimant must generally prove:
1. Existence of a Trust or Fiduciary Duty
A trust relationship must exist.
2. Breach of Trust or Fiduciary Duty
The trustee must commit a breach.
3. Assistance by the Defendant
The third party must actively assist the breach.
4. Dishonesty
The assistance must be dishonest.
The Meaning of Dishonesty
Dishonesty has been heavily debated in equity.
Royal Brunei Airlines v Tan
Facts
A travel agency held airline ticket proceeds on trust for the airline.
The money was improperly used for business purposes.
Tan, the managing director, was sued for dishonest assistance.
Principle
Lord Nicholls held that dishonesty involved:
Objective Standard
The court asks:
Would ordinary honest people regard the conduct as dishonest?
Subjective Factors
The court may consider:
Twinsectra Ltd v Yardley
Lord Hutton described dishonesty as a:
“combined test”
involving objective and subjective elements.
The conduct had to be:
Barlow Clowes International Ltd v Eurotrust International Ltd
Lord Hoffmann clarified that:
Modern Position
Ivey v Genting Casinos (UK) Ltd
The Supreme Court confirmed:
✅ dishonesty is primarily objective.
The court assesses:
Application to the Scenario
Sarah is an experienced solicitor.
She:
State of Mind of Trustee Is Irrelevant
Dishonest assistance focuses on:
the third party’s dishonesty.
Important Principle From Tan
Lord Nicholls explained:
“What matters is the state of mind of the third party.”
Therefore:
Meaning of Assistance
Assistance requires:
✅ active participation
There must be:
Brown v Bennett
The court confirmed:
Example of Insufficient Assistance
Brinks Ltd v Abu-Saleh (No 1)
Facts
Mrs Elscombe accompanied her husband on trips transporting stolen money.
She suspected wrongdoing but merely accompanied him for holidays.
Decision
The court held:
❌ no dishonest assistance.
Why?
Because she did not actively participate in the laundering arrangement itself.
Mere association was insufficient.
Application to the Scenario
Sarah actively:
Therefore, the assistance element is likely satisfied.
Remedy
The beneficiaries may seek:
Personal Compensation
Suppose trust losses equal:
£500,000
Sarah may be personally liable to compensate the trust for losses caused by her dishonest assistance.
Important Distinction
Dishonest Assistant
Knowing Recipient
Why No Proprietary Remedy?
Because the dishonest assistant may never possess trust property.
Liability arises from:
Key SQE Principles
Dishonest assistance is:
The focus is on:
Conclusion
Dishonest assistance is an important equitable doctrine imposing personal liability on third parties who dishonestly participate in breaches of trust or fiduciary duty. Liability does not depend on receipt of trust property but on fault-based participation in wrongdoing. Modern courts apply an objective standard of dishonesty assessed in light of the defendant’s actual knowledge and circumstances. The doctrine plays a crucial role in ensuring fiduciary accountability and preventing third parties from facilitating breaches of trust.
Case Scenario
The trustees of the Hamilton Family Trust manage:
£5 million
for the benefit of several beneficiaries.
One trustee, Daniel, improperly transfers:
£800,000
from the trust into offshore accounts in breach of trust.
Daniel works closely with a solicitor, Sarah, who helps structure the transfers and conceal the movement of funds.
Sarah does not personally receive any trust money. However, she:
- prepares misleading documentation;
- assists in transferring the funds overseas;
- knows the transaction is suspicious;
- deliberately avoids asking further questions.
- £500,000 disappears permanently;
- the remaining funds become unrecoverable due to insolvency.
The court must determine:
- whether Sarah dishonestly assisted the breach of trust;
- whether dishonesty exists;
- whether her conduct amounts to “assistance”;
- and what remedies are available.
Dishonest Assistance
Definition
Dishonest assistance arises where a third party dishonestly assists or procures a breach of trust or fiduciary duty.
Unlike knowing receipt:
- the dishonest assistant does not need to receive trust property;
- liability arises because of participation in wrongdoing.
Nature of the Remedy
Dishonest assistance gives rise to:
✅ a personal remedy
❌ not a proprietary remedy.
The dishonest assistant is personally liable to compensate the claimant for losses caused by the breach.
Important Principle
The dishonest assistant is:
not a constructive trustee.
Liability is fault-based rather than receipt-based.
Twinsectra Ltd v Yardley
Lord Millett explained:
dishonest assistance is fault-based, not receipt-based.
The claim focuses on:
- wrongful participation;
- not receipt of trust property.
- compensation for wrongdoing;
- not restitution of property.
Application to the Scenario
Sarah never personally received the £800,000.
However, she actively helped facilitate the breach by:
- preparing misleading documents;
- helping conceal transfers;
- assisting movement of funds offshore.
Elements of Dishonest Assistance
The claimant must generally prove:
1. Existence of a Trust or Fiduciary Duty
A trust relationship must exist.
2. Breach of Trust or Fiduciary Duty
The trustee must commit a breach.
3. Assistance by the Defendant
The third party must actively assist the breach.
4. Dishonesty
The assistance must be dishonest.
The Meaning of Dishonesty
Dishonesty has been heavily debated in equity.
Royal Brunei Airlines v Tan
Facts
A travel agency held airline ticket proceeds on trust for the airline.
The money was improperly used for business purposes.
Tan, the managing director, was sued for dishonest assistance.
Principle
Lord Nicholls held that dishonesty involved:
- an objective standard;
- but assessed against the defendant’s actual knowledge and circumstances.
Objective Standard
The court asks:
Would ordinary honest people regard the conduct as dishonest?
Subjective Factors
The court may consider:
- defendant’s experience;
- intelligence;
- knowledge;
- professional background.
Twinsectra Ltd v Yardley
Lord Hutton described dishonesty as a:
“combined test”
involving objective and subjective elements.
The conduct had to be:
- dishonest by ordinary standards;
AND - appreciated as dishonest by the defendant.
Barlow Clowes International Ltd v Eurotrust International Ltd
Lord Hoffmann clarified that:
- the defendant need not consciously reflect on honesty standards;
- it is enough that participation was contrary to ordinary standards of honest conduct.
Modern Position
Ivey v Genting Casinos (UK) Ltd
The Supreme Court confirmed:
✅ dishonesty is primarily objective.
The court assesses:
- the defendant’s actual knowledge and circumstances;
- but not whether the defendant personally believed the conduct was dishonest.
Application to the Scenario
Sarah is an experienced solicitor.
She:
- understood the suspicious nature of the transfers;
- deliberately assisted concealment;
- ignored obvious warning signs.
State of Mind of Trustee Is Irrelevant
Dishonest assistance focuses on:
the third party’s dishonesty.
Important Principle From Tan
Lord Nicholls explained:
“What matters is the state of mind of the third party.”
Therefore:
- even if the trustee acted innocently,
- a third party may still be dishonest.
Meaning of Assistance
Assistance requires:
✅ active participation
There must be:
- helping;
- procuring;
- facilitating;
- or participating in the breach.
- the assistance;
- and the breach itself.
Brown v Bennett
The court confirmed:
- assistance must relate to the breach in question.
Example of Insufficient Assistance
Brinks Ltd v Abu-Saleh (No 1)
Facts
Mrs Elscombe accompanied her husband on trips transporting stolen money.
She suspected wrongdoing but merely accompanied him for holidays.
Decision
The court held:
❌ no dishonest assistance.
Why?
Because she did not actively participate in the laundering arrangement itself.
Mere association was insufficient.
Application to the Scenario
Sarah actively:
- prepared documents;
- organised transfers;
- facilitated concealment.
Therefore, the assistance element is likely satisfied.
Remedy
The beneficiaries may seek:
Personal Compensation
Suppose trust losses equal:
£500,000
Sarah may be personally liable to compensate the trust for losses caused by her dishonest assistance.
Important Distinction
Dishonest Assistant
- personal liability only.
Knowing Recipient
- personal liability;
- sometimes proprietary liability.
Why No Proprietary Remedy?
Because the dishonest assistant may never possess trust property.
Liability arises from:
- participation in wrongdoing;
- not ownership or receipt.
Key SQE Principles
Dishonest assistance is:
- fault-based;
- personal in nature;
- dependent on active assistance;
- dependent on objective dishonesty.
The focus is on:
- participation;
- conduct;
- and honesty standards.
Conclusion
Dishonest assistance is an important equitable doctrine imposing personal liability on third parties who dishonestly participate in breaches of trust or fiduciary duty. Liability does not depend on receipt of trust property but on fault-based participation in wrongdoing. Modern courts apply an objective standard of dishonesty assessed in light of the defendant’s actual knowledge and circumstances. The doctrine plays a crucial role in ensuring fiduciary accountability and preventing third parties from facilitating breaches of trust.
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