Accessory Liability for Breach of Trust
| Published date | 01 May 1996 |
| Date | 01 May 1996 |
| DOI | http://doi.org/10.1111/j.1468-2230.1996.tb02090.x |
CASES
Accessory Liability for Breach of Trust
Ahn
Berg*
In
Royal Brunei Airlines
v
Tan,’
the Privy Council introduced a new test, replacing
Lord Selborne’s formulation in
Barnes
v
A&fy,2
of the liability of an accessory to a
breach of trust, that is,
a
person other than a co-trustee who assists trustees to
commit a breach of trust, but without himself receiving any of the trust’s
asset^.^
The implications of
Royal Brunei Airlines
extend beyond the ordinary family
settlement. For example, the case is relevant to dealings by unit trusts and pension
funds4 and, it is suggested, to a case in which a senior officer of a bank is dealing
on a scale which it is obvious to his transaction counterparties is wholly
inconsistent with his fiduciary duties.
Although the judgment has
been
widely welcomed,5 this Comment will argue
that its basis in previous case law is unsound, that the judgment contains
inconsistencies on the key issue of whether knowledge of the breach of trust is a
necessary condition of
an
accessory’s liability, and that the Privy Council’s
preservation of a separate head of equitable liability for assisting a breach of trust
is illogical and anomalous. Far from being a ‘welcome development of the law of
obligations,’6 the decision has blocked the formation of a unified system of
liability for interference with legal rights and has unnecessarily aggravated the
private international law problems where
an
accessory to a breach of trust is
domiciled abroad.
The
facts
The essential facts were these. Royal Brunei Airlines had appointed a company
called
BLT
to act as its general agent for the sale of passenger and cargo
*Solicitor, Watson, Farley and Williams.
Adaped from
a
talk given at
a
seminar organised by the Irish Centre for Commercial Law Studies,
University College, Dublin.
1
[
19951
2
AC
378.
2
(1874)
LR
9
Ch App
244,
251.
3
Lord Nicholls emphasised the distinction between liability for ‘accessory liability’ and ‘liability for
knowing receipt’ or,
as
he termed it, ‘recipient liability,’ and emphasised that the Privy Council’s
advice was confined to the former. However, there seems to be no reason why, in respect of
a
particular transaction,
a
person should not
be
liable both
as
a
recipient for the payment which he
received from the trust and
as
an accessory for the (much larger)
loss
suffered by the trust
as
a
result
of
the transaction.
4
In
a
comparable situation regarding the powers of
a
company, the bank would
be
protected by
s
35
of
the Companies Act
1985.
Although unit trusts and pension funds
are
important users of the derivatives
markets, the Financial Law Panel’s May
1995
Discussion Paper about the legal obligations of banks to
customers with reference to transactions in derivatives contains nothing about liability for assisting
a
breach of trust.
5
Notably by Harpum
(1995)
111
LQR
545;
Stevens
(1995)
RLR
105;
(1995)
16
The Company
Luwyer8.
More to the point, however, are Birks’ reservations:
(1996)
LMCLQ
1.
6
Harpum
(1995)
111
LQR
545.
443
8
The Modem Law Review Limited
1996
(MLR
59:3,
May). Published by Blackwell Publishers,
108
Cowley Road, Oxford
OX4
IJF
and
238
Main
Street,
Cambridge, MA
02142,
USA.
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