From: Lucas Clover Alcolea
<lucas.cloveralcolea@otago.ac.nz>
Sent: Thursday 15 August 2024
23:10
To: obligations@uwo.ca
Subject: Dishonest
assistance/knowing receipt against a creditor?
Hi all,
I ve been
puzzling over a scenario in my head, mainly as a result of reading Byers v
Saudi National Bank and Brazil v Durant, and was wondering if anyone
had any thoughts on it.
Are there
any cases where beneficiaries have sought to bring dishonest assistance or
knowing receipt claims against a creditor who has been wrongfully paid, in
satisfaction of a debt, by an embezzling trustee with misappropriated trust
funds? In particular, imagine that no discrete asset has been acquired, and
there isn t a co-ordinated scheme , but rather the debtor s overdraft at a
bank has merely been paid off, but the bank has some sort of constructive
knowledge of dodgy dealings. I m not sure we could engage in backward tracing
(to the extent we believe that is permissible, if at all) in that scenario, but
could some sort of personal claim not be brought against the bank? If Byers is
right then a knowing receipt claim would fall as the equitable proprietary
interest would be destroyed by payment into a debt, unless we say that the
dishonesty exception the court hints at could be engaged by merely
constructive knowledge (but where no discrete asset has been acquired, I m
still not sure how one would trace, even backwards, here so presumably we d be
looking at a knowing receipt claim).
Alternatively,
imagine that Trustee A has a gambling debt to B, who threatens to break their
legs unless they repay the debt, A says they can only do so with trust funds as
their personal funds are exhausted, but B nevertheless insists on payment in
satisfaction of the debt (assume also that the debt is a valid one). If we
can t trace the funds, because B is merely an intermediary for C nefarious
criminal organisation so transfers the funds and we can t find them, surely the
beneficiaries of the trust administered by A could bring a claim against B in
dishonest assistance and/or knowing receipt?
The
scenario is entirely hypothetical, but it seems to me that if we allow tracing
into/through debts, then we must also allow at least the possibility of claims
in knowing receipt and/or dishonest assistance against a creditor (who has
accepted payment of misappropriated trust funds in satisfaction of a debt owed
by the trustee to them) in similar circumstances as we do for ordinary non-debt
claims (for example where the assets have been dissipated/tracing isn t viable
for whatever reason and the beneficiaries are best bringing a personal claim).
Alternatively, of course, we might just say backwards tracing is wrong in the
first place (which I don t necessarily disagree with, but doesn t help with how
the law actually is).
All the
best,
Lucas
|
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Dr Lucas Clover-Alcolea |
