Untangling Dishonest Assistance And Knowing Receipt

• Published date: 03 March 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Criminal Law, Corporate and Company Law, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Campbells
• Author: Ms Natasha Partos

Despite the media portrayal of offshore jurisdictions, not all offshore companies are vehicles of fraud. However, there are undoubtedly cases where offshore companies are used to receive the proceeds of fraud. For liquidators assisting the victims of such frauds in recovering assets from offshore companies, the legal doctrines of Dishonest Assistance and Knowing Receipt provide an effective way of seeking redress.

On 27 January 2022 Lord Justice Newey handed down the Court of Appeal's decision in Byers v Saudi National Bank (previously Samba Financial Group) [2022] EWCA Civ 43 dismissing the Claimants' appeal and upholding Mr Justice Fancourt's decision in the High Court at first instance. Specifically, the Court of Appeal was asked to consider whether: (i) a claim for knowing receipt depends on a claimant maintaining a proprietary interest in the property in the hands of the defendant; and (ii) whether that interest existed on the facts of the case before it.

By way of brief background, dishonest assistance refers to a cause of action under which a third party becomes personally liable for procuring or assisting a breach of trust of one or more trustees. Liability arises where the third party defendant has acted dishonestly and provided assistance to a trustee to enable a breach of trust, although the breach of trust itself does not have to be fiduciary in nature. The assistance provided by the third party defendant must be more than minimal although the third party does not have to know that a fiduciary duty by the trustee existed. Furthermore, for accountability to be attributed to the third party defendant, the trustee does not have to have acted dishonestly for the cause of action to be made out. In this context the test of honesty is an objective test.

Conversely, knowing receipt is a separate equitable remedy which prevents a party from receiving and retaining property, for his or her benefit, to which he is not entitled, knowing that the transfer to him was of property which beneficially belonged to a third party/claimant. In order for this equitable cause of action to succeed, it is necessary for the defendant to have some degree of culpability. Therefore, for such a claim to succeed there must be a transfer of property amounting to a breach of fiduciary duty owed to the claimant where the defendant's state of knowledge makes it unconscionable for them to retain the property. However, and unlike a claim of dishonest assistance, the claimant does...