Remedies for Dishonest Assistance
| Author | Charles Mitchell,Steven B. Elliott |
| DOI | http://doi.org/10.1111/j.1468-2230.2004.06701002.x |
| Date | 01 January 2004 |
| Published date | 01 January 2004 |
Remedies for Dishonest Assistance
Steven B. Elliott
n
and Charles Mitchell
nn
The paper considers the nature of claims against dishonest assistants and the various money
remedies those claims may evoke. Dishonest assistance is a form of civil secondary l iability
wherebythe assistant is held jointly and severally liable along with the trustee whose misconduct
he assisted.This is the se nse inwhich dishonest assistants are said to be accountable as constructive
trustees. In order to understand remedies available against dishonest assistants it is accordingly
necessary to understand the corresponding remedies against defaulting trustees and what it
means for them to be accountable.The paper examines the two di¡erent types of compensation
that may be awarded against defaulting trusteessubstitutive and reparativeand observes that
the same two types of compensation may be given against dishonest assistants in appropriate
cases. It also explores the circumstances in which trustees and dishonest assistants should be
accountablefor pro¢ts and whether they should ever be liable to pay exemplarydamages. A strict
application of the theory of civil secondary liability produces controversial results in connection
with these latter remedies.
Dishonest assistance in a breach of trust or ¢duciary duty gives rise to a claim
sounding in equity. The ingredients of this claim have been extensively discussed
over the past twenty years, but many of these discussions have been preoccupied
with identifying the degree of fault required for liability, and comparativelylittle
attention hasbeen paid to two other important questions. The ¢rst question asks:
what is the nature of a claim in dishonest assistance? The second question asks:
what remedies are awarded to successfulclaimants? The questions are connected
because theprincipal remediesto which a successful claimantis entitled are shaped
by the nature of his claim.
In the discussion whichfollows, we shall note that a dishonest assistantis com-
monly ¢xedwith joint and several liability withthe ¢duciary whose misconduct
he has assisted.
1
We shall explain that the reason for this is that liabilityfor dishon-
est assistance is a civil secondary liability, analogous to the criminal secondary
liability of those who assist in the commission of acrime.We shall argue that this
characterization of liability for dishonest assistance is signi¢cant for several
reasons: it explains why a dishonest assistant might be liable to compensate a
claimant even though his actions have not caused the claimant a loss; it explains
why a dishonest assistant might be liable to pay a claimant the amount of gains
realized by the wrongdoing ¢duciary even though the dishonest assistant has not
shared in these; it explains why dishonest assistants are said to be accountable in
equity as though they were trustees; and it explains why the principal liabilities
n
Barrister, One Essex Court,Lo ndon.
nn
Reader in Law, King’s CollegeLo ndon.
1 Many dishonest assistance claims are made against defendants who have assisted trustees to breach
their duties, but many are also made against defendants who have assisted breaches of duty by
other types of ¢duciary.When referring to a primary wrongdoer whose breach of duty has been
assisted by a defendant we shall generally use the term‘¢duciary’; this should be taken to include
trustees and other types of ¢duciary.
rThe Modern LawReview Limited 2004
Published by BlackwellPublishing, 9600 Garsington Road,Oxford OX4 2DQ,UK and 350 Main Street, Malden, MA 02148, USA
(2004) 67(1) MLR 16^47
incurred by dishonest assistants duplicate the liabilities of the ¢duciaries whose
breaches of duty they have assisted ^ in other words, it explains whya dishonest
assistant is commonly ordered to pay an amount thatis calculated by quantifying
the liability of the wrongdoing ¢duciary.
This analysis will lead us to conclude that one cannot understand the rules
which shape the principal liabilities incurred bydishonest assistants unless one ¢rst
also understands the rules which determine liability for breach of trust and ¢du-
ciary duty. Unfortunately, however, the present authorities on this point are con-
fused, and the law is in need of restating.We shall therefore explain the nature of
the money awards that can bemade against wrongdoing¢duciaries atsome length
before turning to the moneyawards that can be made against dishonest assistants.
THE NATURE OF DISHONEST ASSISTANCE
Civil secondary liability
In RoyalBruneiAirlinesSdnBhdvTa n , Lord Nicholls said that‘accessoryliability y
attaches to a person who dishonestly procures or assists in a breach of trust or
¢duciaryobligation’, and he considered thatthe underlying rationale of this liabi-
lity is ‘the same’ as the underlying rationale of liability for inducing a breach of
contract.
2
These dicta suggest that his Lordship’s understanding of liability for
dishonest assistance corresponds to Philip Sales’ understanding of the liability
which he described as‘civil secondary liability’ in his ground-breakingarticle on
the subject,
3
and whichwas subsequently investigated at greaterlength by David
Cooper in his doctoral thesis on the same topic.
4
In Sales’ and Cooper’s view, civil secondary liability resembles the criminal
secondary liability of those who aid, abet, counsel, or procure a crime.
5
They
argue that both types of liability are derivative and duplicative, in the sense that
the defendant’s liabilityderives from, and duplicates, the liability of the primary
wrongdoer in whose acts he has participated, either by inducing the primary
wrongdoer to commit them, or byconspiring with him to commit them, or by
assisting in theircommission.Thus, in Cooper’s words,‘a secondary party is liable,
albeit secondarily, for the same wrong as the primary wrongdoer, and so the
liability of each should be joint and equal’.
6
Sales and Cooperboth also argue thatl iability of this kind does not depend on
proof of a direct causal link between the defendant’s actions or omissions and a
claimant’s loss, because, in Cooper’s words, the defendant’s:
complicity in the wrong of the primary wrongdoer creates a nexus of a di¡erent
and derivative kind. That ‘‘complicity nexus’’ acts - both i n our common under-
2[1995]2AC378(PC)385.
3 P. Sale s,‘TheTortof Conspiracy and Civil Secondary Liability’ [19 90]CLJ 491. LordNicholls was
familiar with Sales’ article,which he cited in h is speech at[1995] 2 AC 389.
4 D.J. Cooper, Secondary Liability for CivilWrongs (PhD thesis University of Cambridge1996).
5 This is the language of theAccessories and Abettors Act1861, s 8.
6 Above n 4,153.
Elliott and Mitchell
17rThe Modern LawReview Limited 2004
standing of responsibility and in the courts’ imposition of secondary liability - as an
alternative to causation.
7
Cooper adds that ‘causation is not entirely irrelevant to secondary liability y
[because] the acts of secondary participation must in some way contribute to the
primary wrong’.
8
Hence,he considers that civil secondaryliability to compensate
a claimant for loss does not depend on proof of a direct causal link between a
defendant’s actions and the claimant’s loss, but rather depends on proof of a (fairly
attenuated) causal link between the defendant’s actions and the primary wrong,
and proof of a (stronger) causal link between the primary wrong and the
claimant’s loss.
The strength of this model is that it explains why a defendant who participates
in a civil wrong in an accessorial capacity can be liable for loss sustained by the
victim even though the common law regards the cause of the loss as having been
the pr imary wrongdoer’s actions, and even though th e common law i s ‘mould ed
on the philosophyof autonomy’,
9
and so would not normally regard the primary
wrongdoer’s actions as having been caused by the actions of the secondary
participant. It must be recognized, however, that this represents a departure from
the approach that is usually taken by the English law of civil wrongs to causation
and fault.
10
Indeed, it is precisely because they have worries on this score that the
English courtshave held that civil secondaryliability cannotbe i ncurred bythose
who assist the commission of a tort,
11
even on the limited basis that such liability
can be incurredonly by those whose state of mind renders their participation in a
primary breach of duty su⁄ciently blameworthy to merit such extraordinary
treatment.
12
In equity, however, the position is di¡erent.
13
At the time when Sales and
Cooper wrote, the relevant English authoritieswere perhaps rather equivocal on
7 Above n 4, 3, following Sales, aboven 3,509^510.
8 Above n 4,4.
9 G.W|ll iams,‘Complicity, Purpose, and the DraftCode’ [1990] CrimLR 4, 6,n 3, quoted in Cooper,
ibid. See also H.L. A. Hart and A. M. Honore
Ł,Causation in the Law (Oxford:Clarendon Press, 2nd
ed,1985)385:‘the accessory [to a crime] canbe found guilty without it being shown thathis assis -
tance was the‘‘cause’’ of the principal’s act yin any sense of ‘‘cause’’.’
10 Hart and Honore
Ł,ibid,186, observing that i n tort law liability for ‘inducing wrongful acts’ is not
negativedby the factors that negativeliability for causing harm through one’s own wrongful act.
11 The PrivyCou ncil’s decision in the RoyalBrunei case raised hopes in some quarters that the English
courts might be poised to recognize ‘a general principle of secondary liability,for assisting or pro-
curing the breach ofa nylegal or equitableduty’: C. Harpum, ‘Accessory Liability for Procuringor
Assisting a Breach of Trust’(1995) 111 LQR 545,546. However, the courts were notpersuaded that
it would be desirable to develop the law in this way: Credit Lyonnais Bank Nederland NV vExport
CreditsGuaranteeDept [1998]1 Lloyd’s Rep19 (CA); [2000] 1AC 486 (HL), applaudedby H. Carty,
‘Joint Tortfeasance and Assistance Liability’ (1999) 19 LS 489; cf T.Weir, EconomicTorts (Oxford:
Clarendon Press,1997) 31n 31.
12 It might be argued in this connection that the majority of the House of Lords went too far when
they raised the standard of fault for dishonest assistance in a breach of trust to self-conscious
dishonesty inTwinsectra Ltd vYar d le y [2002] UKHL 12, [2002] 2 AC164 (HL).
13 Carty, above n 11, argues at 511^513 that the reason why equity’s approach di¡ers from the
approachtaken at common law is that trust bene¢ciaries andothers who are owed ¢duciary duties
are peculiarlyvul nerableto abuses of power.Others would disagree that the disparity between the
two systems can be justi¢ed on this basis: cf P. Birks,‘Equity in the Modern Law: An Exercise in
Taxonomy’(1996) 26 UWALR1,48^49.
Remedies for Dishonest Assistance
18 rThe Modern LawReview Limited 2004
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