​Equity and Trust – Remedies Against Third Parties


Case Scenario


The trustees of the Morgan Family Trust hold £2 million for the benefit of several beneficiaries.


One trustee, Daniel, improperly transfers trust money in breach of trust to different third parties under various circumstances.


The beneficiaries want to know:

• whether they can recover the trust property itself;

• whether they can sue the third party personally;

• and what remedies are available.

The court must determine the liability of each type of third party.


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Types of Remedies


Proprietary Remedy


A proprietary remedy allows the claimant to recover:

• the actual property;

• substitute property;

• or traceable proceeds.

Examples include:

• tracing;

• constructive trusts;

• equitable liens.

The claimant asserts rights over the property itself.


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Personal Remedy


A personal remedy makes the defendant personally liable.


Examples include:

• equitable compensation;

• account of profits;

• dishonest assistance claims.

The claimant seeks money or compensation from the individual personally.


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1. Bona Fide Purchaser for Value


Definition


A bona fide purchaser for value is someone who:

• acquires property honestly;

• gives value for it;

• and has no notice of the breach of trust.

This person is often called:


“equity’s darling.”


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Available Remedies


Proprietary Remedy


❌ No.


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Personal Remedy


❌ No.


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Why?


Equity protects innocent purchasers who:

• acted honestly;

• paid value;

• had no knowledge of wrongdoing.

Once trust property reaches such a person, beneficiaries generally cannot recover the property.


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Example


Daniel wrongfully transfers trust shares worth:
£500,000


to Emma, who purchases them honestly for market value without knowing of the breach.


The beneficiaries cannot:

• recover the shares from Emma;

• or sue Emma personally.

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2. Innocent Volunteer


Definition


An innocent volunteer receives trust property:

• without paying value;

• but also without wrongdoing or knowledge.

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Available Remedies


Proprietary Remedy


✅ Yes (subject to equity).


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Personal Remedy


❌ No.


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Why?


Because the volunteer gave nothing in exchange, equity may require return of the property.


However, courts may refuse recovery where it would be inequitable.


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Example


Daniel gifts trust money worth:
£200,000


to his cousin Lucy.


Lucy had no knowledge of the breach and paid nothing.


The beneficiaries may trace and recover the property itself.


However, Lucy is usually not personally liable.


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3. Knowing Recipient


Definition


A knowing recipient receives trust property:

• for their own benefit;

• with knowledge that it was transferred in breach of trust.

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Available Remedies


Proprietary Remedy


✅ Yes.


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Personal Remedy


✅ Yes.


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Why?


The recipient knowingly benefited from trust property connected to wrongdoing.


Equity therefore allows:

• recovery of the property;

• and personal liability.

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Example


Daniel transfers:
£300,000


of trust money to Michael.


Michael knows the money was improperly taken from the trust.


Michael invests it and earns profits.


The beneficiaries may:

• trace the property;

• recover substitute assets;

• sue Michael personally;

• claim profits made.

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4. Dishonest Assistant


Definition


A dishonest assistant helps facilitate a breach of trust but does not necessarily receive the trust property personally.


Liability arises because of dishonest participation.


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Available Remedies


Proprietary Remedy


❌ No.


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Personal Remedy


✅ Yes.


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Why?


The dishonest assistant may never possess the trust property.


Therefore:

• no proprietary claim exists;

• but personal liability arises for dishonest assistance.

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Example


A solicitor knowingly helps Daniel transfer trust assets offshore to hide them from beneficiaries.


The solicitor never receives the money personally.


The beneficiaries may sue the solicitor personally for dishonest assistance.


However, they cannot trace property into the solicitor’s hands because none was received.


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Practical Comparison


Bona Fide Purchaser

• protected completely.

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Innocent Volunteer

• property recoverable;

• no personal liability.

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Knowing Recipient

• both proprietary and personal liability.

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Dishonest Assistant

• personal liability only.

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Solving the Case Scenario


Emma – Bona Fide Purchaser


Emma bought the shares honestly for value without notice.


The beneficiaries cannot recover against her.


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Lucy – Innocent Volunteer


Lucy received trust property as a gift.


The beneficiaries may recover the property itself but usually cannot sue her personally.


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Michael – Knowing Recipient


Michael knew about the breach.


The beneficiaries may:

• trace the assets;

• recover profits;

• and sue him personally.

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Solicitor – Dishonest Assistant


The solicitor dishonestly assisted the breach.


The beneficiaries may sue personally for compensation but cannot assert proprietary claims because the solicitor did not receive the property.


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Key SQE Principles


Third-party liability depends on:

• whether the person received trust property;

• whether value was given;

• whether the recipient acted honestly;

• whether knowledge or dishonesty existed.

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Core Distinction


Proprietary Claims


Focus on:

• recovery of property itself.

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Personal Claims


Focus on:

• personal liability for wrongdoing.

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Further Research


Statement 1


Further research should examine the theoretical justification for protecting bona fide purchasers for value in equity.


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Statement 2


Further research should analyse the evolving test for “knowledge” in knowing receipt claims.


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Statement 3


Further research should explore the relationship between dishonest assistance and accessory liability in modern fiduciary law.


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Statement 4


Further research should evaluate whether proprietary remedies provide unfair advantages over unsecured creditors in insolvency situations.


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Statement 5


Further research should analyse tracing principles and their interaction with modern banking and digital assets.


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Conclusion


Equity provides different remedies against third parties depending on their conduct, knowledge, and relationship to the trust property. Innocent purchasers for value receive strong protection, while knowing recipients and dishonest assistants may face serious equitable liability. The distinction between proprietary and personal remedies is central to understanding how beneficiaries recover trust assets and enforce fiduciary accountability in modern trust law.