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(ii) Action for Unconscionable Receipt

The equitable action for unconscionable receipt, sometimes known as ‘knowing receipt’,[1] can be considered to be the equitable equivalent of the Common Law claim for money had and received. Both claims are dependent on proof that the defendant had received property in which the claimant had a proprietary interest; either a legal interest for the action for money had and received, or an equitable interest for the action for unconscionable receipt. A further similarity between the two claims is that they will both succeed as long as it can be shown that the defendant received the property without it being necessary to show that the defendant had retained the property. Further, the remedy that is awarded for both types of claim is a personal restitutionary remedy, since it is assessed by reference to the value of the property that the defendant received at the time of its receipt. Despite these similarities between the two claims, there is one fundamental difference between them: whereas liability in the action for money had and received is strict, liability for the action for unconscionable receipt depends on proof that the defendant was at fault in some way. The degree of fault which must be proved is a matter of particular controversy, especially as to whether fault is to be assessed subjectively (with regard to the defendant’s thought processes) or objectively (with regard to the standard of the reasonable person). But the reason why fault must be established is also a controversial matter which requires careful consideration.

Liability for unconscionable receipt is sometimes described as secondary liability,[2] since it is assumed that the defendant’s liability depends on there having been a breach of trust or fiduciary duty. This is not correct. Secondary liability requires proof that the accessory has caused, assisted or encouraged the breach of trust or fiduciary duty. That does not need to be proved to establish liability for unconscionable receipt, especially because such liability arises after the relevant breach and sometimes after a number of transfers of property between different parties. Such a remote recipient cannot be considered to have assisted, encouraged or caused the breach of trust or fiduciary duty.

(1) Conditions of Liability

In order to establish liability for unconscionable receipt, the following conditions need to be met.

(a) Receipt of Property

The defendant must have received property in which the claimant has an equitable proprietary interest. This is established by applying the equitable following and tracing rules.[3] Property includes chattels and money but not contractual rights arising under an executory contract.92 Although it has sometimes been suggested that the receipt of confidential information might be regarded as the receipt of property,93 the preferable view is that information cannot be characterized as property for these purposes.94

Whether the defendant has received property may sometimes raise difficult questions. So, for example, in Trustor v AB Smallbone (No 2)95 it was held that, where property has been received by a company, its receipt cannot be attributed to an individual who controls the company because of the fundamental doctrine that a company has a separate corporate personality from its directors and shareholders. But receipt by a company may be attributed to the controller of it where the recipient company was acting as agent for the controller or where the veil of incorporation can be pierced, such as where the company has been used as an artificial device to conceal the true facts. Where the veil cannot be pierced then, although receipt-based liability cannot be imposed on the controller, the company can be liable for unconscionable receipt in its own right,96 although it will be necessary to attribute the relevant fault to the company from the fault of the person who is the directing mind and will of the company.

(b) Breach of Trust or Fiduciary Duty

It is a condition of liability for unconscionable receipt that there has been a breach of trust97 or fiduciary duty. Where property has been transferred in breach of trust, the claimant will have a prior equitable proprietary interest which can be vindicated. It has been recognized that the action is also available where property has been transferred in breach of fiduciary duty.98 But, for such a claim to be treated as grounded on the vindication of property rights, it would be necessary to establish that the claimant had a proprietary interest in the property which was transferred in breach of fiduciary duty. Following the recognition by the Supreme Court that property received in breach of fiduciary duty by the fiduciary will be held on constructive trust for the principal,99 it will be much easier to establish this equitable proprietary interest.

The nature of the breach of trust or fiduciary duty is irrelevant. In particular, it need not be a fraudulent breach.100 The receipt of property by the defendant must have been a direct consequence of the relevant breach of trust or fiduciary duty. This was recognized in Brown v Bennett,101 in which receivers of a company that had gone into administrative receivership sold the business to the defendant. Some of the former shareholders and directors of the company, to whom the receivers had assigned their causes of action, sued the defendant for unconscionable receipt of the company’s assets knowing that the directors of the company had breached their fiduciary duty. It was held that the receipt of the company’s assets was not a direct consequence of the breach of fiduciary duty, because the assets had been purchased from independent sellers, namely the receivers. The effect of this decision is that, if the receipt of property arises from a separate legitimate transaction, the defendant cannot be liable for the receipt, regardless of the state of his or

Criterion Properties Ltd v Stratford UK Properties Ltd [2004] UKHL 28, [2004] 1 WLR 1846, [27] (Lord Scott).

  • 93 Satnam Investments Ltd v Dunlop Heywood [1999] 3 All ER 652.
  • 94 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22, [118]—[119]. See also OBG Ltd v Allan

[2007] UKHL 21, [2008] AC 1, [275] (Lord Walker). 95 [2001] 1 WLR 1177.

  • 96 Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638, [2006] FSR 16, [1576] (Lewison J).
  • 97 Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908, [2015] 2 WLR 526, [89].
  • 98 Arthur v Attorney-General of the Turks and Caicos Islands [2012] UKPC 30, [31].
  • 99 FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] AC 250. See p 512, above.
  • 100 Agip (Africa) Ltd v Jackson [1990] Ch 265, 292 (Millett J). 101 [1999] 1 BCLC 649.

her knowledge of the background to the transfer. This was illustrated by an example suggested by Morritt LJ in Brown v Bennett.[4] A mansion house is vested in trustees, who, in breach of trust, let it fall into disrepair over a number of years. The trustees are replaced and the new trustees decide to sell the property to a neighbour, who has seen the property fall into disrepair. The purchase of the property by the neighbour would not render him liable for unconscionable receipt, even though he was well aware of the trustees’ breach of trust, because, assuming that the transaction was at a proper price, the breach of duty did not cause the neighbour to acquire the land; this arose from a separate, valid transaction which consequently broke the chain of causation.

But this emphasis on the receipt being a direct result of the breach appears inconsistent with the prime requirement of the claim that it is enough that the value of the claimant’s property can be traced to the defendant’s receipt, even if the property has passed through various hands and has been substituted on the way. A better explanation for the result in Brown v Bennett, and for Morritt LJ’s hypothetical example, is that the defendant was a bona fide purchaser for value, which will defeat the claimant’s equitable proprietary interest, or, alternatively, that the vendors of the property were not acting in breach of trust in selling the property. This is a preferable way of denying liability than by reference to unnecessary concepts of causation.

(c) Beneficial Receipt

The property must be received by the defendant for his or her own use and benefit,[5] rather than ministerially. This means that, if the property is received by the defendant merely as agent for another, the defendant cannot be liable for unconscionable receipt, unless the defendant subsequently misappropriates the property for his or her own use, since then the defendant will be benefiting from the property. Where the defendant has received the property ministerially, he or she might still be liable for dishonest

assistance.[6]

The requirement of beneficial receipt for the receipt-based claim is significant. For example, where money is transferred to a bank in breach of trust, the bank cannot be liable for unconscionable receipt, even though its employees might know of the breach of trust, because it will not have received the money for itself, but ministerially for its customer. That, at least, is the orthodox view. An exception has been recognized where the money was paid into an overdrawn account, which has the effect of discharging a debt owed by the customer to the bank, so that then the bank will have received the money beneficially rather than ministerially.[7] But surely all money that is paid to a bank is received by it beneficially rather than ministerially, because the relationship between bank and customer is one of debtor and creditor, so the bank receives the money for itself and is liable only to pay to the customer the amount that has been received, rather than the actual money that has been transferred?[8] In other words, payment to a bank simply creates a debt owed to the customer and the bank is free to do what it wants with the money that was transferred to it. In Uzinterimpex JSC v Standard Bank plc[9] the Court of Appeal confirmed the general principle that receipt-based liability turns on the defendant receiving property for his or her own use and benefit, but Moore-Bick LJ did suggest obiter that, since a bank has the benefit of its customers’ money until it is called upon to repay, it should follow that a bank could be liable for unconscionable receipt when money is credited to a customer’s bank account. Consequently, the ambit of liability for unconscionable receipt would be much more significant, although it must not be forgotten that the defendant recipient cannot be liable for receiving property transferred in breach of trust or fiduciary duty unless it is at fault as regards the receipt.

(d) Fault

The defendant must have been at fault either when he or she received the property in breach of trust or fiduciary duty or, if the receipt was innocent, the defendant was at fault subsequently whilst still in receipt of the property.

It has been a matter of controversy for some time as to what should be the appropriate level of fault for equitable receipt-based liability. Many cases have held that an objective test of fault applies, sometimes described as ‘constructive knowledge’, so that it is sufficient that the defendant had failed to make such inquiries as a reasonable person would have made as to whether property had been transferred in breach of trust or breach of fiduciary duty.108 Other cases have held that a subjective test applies, so it must be established that the defendant actually knew or suspected that the property had been received in breach of trust or fiduciary duty.109

The applicable level of fault was considered by the Court of Appeal in Bank of Credit and Commerce International (Overseas) Ltd v Akindele,1 0 in which it was held that the appropriate test is one of unconscionability as regards the retention of the benefit of the property received.111 In Akindele employees of a company breached their fiduciary duty by procuring the company to enter into an artificial investment agreement with the defendant, the effect of which was that the defendant invested US$10 million and subsequently received a payment of nearly US$17 million from the company. The claimants, who were the company’s liquidators, sued the defendant for knowing receipt of the money on the ground that he had received the money knowing of the employees’ breach of fiduciary duty. The Court of Appeal held that it was not necessary to show that the defendant had acted dishonestly to be liable for a receipt-based claim, because the receipt might be passive and dishonesty was considered only to relate to actions.112 Rather, the key test was whether the defendant’s knowledge of the circumstances relating to the breach of trust or fiduciary duty made it unconscionable for the defendant to retain the benefit of the property that had been received. This could be established if the defendant actually knew of the circumstances in which the money was transferred; constructive knowledge would not be sufficient. On the facts, there was insufficient evidence that the defendant knew enough to make retention of the value of the money received unconscionable. He was unaware of any facts that questioned the propriety of the loan transaction, despite the very high rate of interest (which he assumed was because he was [10] [11] [12] [13] [14]

considered to be a high-worth customer). Unconscionability could not be established from the defendant’s suspicions about the general reputation of the company; any suspicion had to relate to the particular transaction. Consequently, he was not liable to account for the value of the profit that he had received.

The House of Lords was presented with the opportunity to clarify the appropriate test of fault in Criterion Properties plc v Stratford UK Properties LLC.[15] This case concerned a ‘poison pill’ agreement whereby the managing director and another director of Criterion signed an agreement, purportedly on behalf of Criterion, with the defendant Oaktree, which gave Oaktree the contractual right to be bought out of a partnership with Criterion on favourable terms if another party were to gain control of Criterion or if its chairman or managing director were to cease to be involved in the management of the company. The managing director of Criterion was dismissed and Oaktree sought to exercise its option to be bought out. However, Criterion sought to set the agreement aside on the ground that it was unauthorized. The Court of Appeal[16] held that, although the directors of Criterion might have lacked authority to make the agreement, whether Oaktree could enforce the agreement turned on whether it was unconscionable for Oaktree to hold Criterion to the agreement, a matter that needed to be considered at trial. A variety of factors and considerations were identified to determine such unconscionability, including the fault of both parties to the agreement, the defendant’s knowledge of the circumstances constituting the breach of duty, whether the parties had obtained legal advice, and the actions and knowledge of the parties in the context of the commercial relationship as a whole. It appears from this that ‘unconscionable’ is given a subjective interpretation, but also that relative fault and factual context are significant.

The decision went on appeal to the House of Lords,[17] where the court was given the opportunity to clarify what ‘unconscionability’ means for these purposes. But the court concluded that the unconscionability test was not relevant to the case, since no property had been received by the defendant pursuant to the agreement. It was held that the only issue to resolve was whether there was a valid poison pill agreement, which turned on whether the directors of Criterion were authorized to sign the agreement on behalf of the company.[18] [19] Since this matter had not yet been determined, it was directed to go to trial.

Crucially, the House of Lords rejected the approach adopted by the Court of Appeal in Bank of Credit and Commerce International (Overseas) Ltd v Akindele,117 which was also considered to have turned on the question of authority to enter into the loan agreement rather than unconscionability. As Lord Nicholls said:[20]

If a company (A) enters into an agreement with B under which B acquires benefits from A, A’s ability to recover these benefits from B depends essentially on whether the agreement is binding on A. If the directors of A were acting for an improper purpose when they entered into the agreement, A’s ability to have the agreement set aside depends upon the application of familiar principles of agency and company law. If, applying these principles, the agreement is found to be valid and is therefore not set aside, questions of ‘knowing receipt’ by B do not arise. So far as B is concerned there can be no question of A’s assets having been misapplied. B acquired the assets from A, the legal and beneficial owner of the assets, under a valid agreement made between him and A.

So the primary issue in cases such as Criterion and Akindele concerns the validity of the agreement, determined with reference to the principles of agency and corporate law. If the agreement is valid, then any property acquired by B would have been acquired legitimately and there would not have been any misapplication of A’s assets. It is only if the underlying agreement is invalid that the receipt-based claim could arise.

Unconscionability has also proved significant in determining whether the defence of change of position to claims in unjust enrichment can be established.119 That defence is not available if the defendant has acted in bad faith, which has been equated with unconscionability. In that context, unconscionability has been interpreted as including dishonesty, a failure to act in a commercially acceptable way,120 and wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make,121 but not negligence.122 That unconscionability for the receipt-based claim and for change of position should be interpreted in the same way was recognized by the Court of Appeal in Abou-Rahmah v Abacha,123 in which it was held that general suspicions on the part of the defendant about the nature of the trustee’s or fiduciary’s conduct is not sufficient to constitute unconscionability; the defendant must be suspicious about the particular transaction involving the transfer of property.124 In Armstrong DLW GmbH v Winnington Networks Ltd125 Stephen Morris QC held that unconscionability for the purposes of a claim in unconscionable receipt encompassed both subjective awareness by the defendant of possible impropriety and also where, on the facts actually known to the defendant, a reasonable person would have appreciated that the transfer was in breach of trust or would have made such inquiries or sought advice which would have revealed the probability of breach of trust. In Arthur v Attorney-General of the Turks and Caicos Islands126 Sir Terence Etherton described knowing receipt as ‘involving unconscionable conduct amounting to equitable fraud. It is a classic example of lack of bona fides’. But this confirms the ambiguity of unconscionability, since equitable fraud and absence of good faith can incorporate objective notions of fault.

Lord Millett in Dubai Aluminium Co Ltd v Salaam127 concluded that liability is founded on proof of dishonesty and described it as involving dishonest receipt. Lord Neuberger also emphasized in Williams v Central Bank of Nigeria128 that the liability of the recipient is founded on dishonesty. In fact, despite the rejection of dishonesty in Akindele, this is the preferable way of analysing fault for this claim. The relevant fault should be considered to involve conduct which is objectively assessed in the light of the defendant’s own knowledge or suspicion of the facts. It is the defendant’s receipt of the property in such circumstances which should be considered to render that receipt unconscionable. This interpretation of fault for the receipt-based claim is consistent [21] [22] [23] [24] [25] [26] [27]

therefore with the interpretation of dishonesty for purposes of the action for dishonest assistance, which is assessed by reference to an objective standard albeit in the light of the defendant’s knowledge or suspicions of the facts.[28] It follows that, for the receipt-based claim, the defendant’s behaviour is unconscionable (or dishonest) when he or she should have made restitution of the value of the property received in the light of the facts involving breach of trust or fiduciary duty which the defendant knew or suspected.

(2) The Remedies for Unconscionable Receipt

Once these conditions have been satisfied the defendant will be held liable to the claimant as a constructive trustee.[29] This form of liability has now been convincingly rejected as fictional and unnecessary.[30] As Millett LJ said in Paragon Finance plc v DB Thakerar and Co:[31] ‘the expressions “constructive trust” and “constructive trustee” are misleading for there is no trust and usually no possibility of a proprietary remedy; they are nothing more than a formula for equitable relief’.

The liability of the defendant is a personal one to restore the value of the property received rather than to restore property itself.[32] This is a gain-based remedy.[33] The inappropriateness of the proprietary language of the constructive trust is emphasized by the fact that, if the defendant has received and retained property in which the claimant has an equitable proprietary interest, the claimant will be able to bring a proprietary claim to vindicate his or her property rights and recover the property which has been retained. The true function of the action for unconscionable receipt is that it provides for a remedy where there are no longer rights in specific property to be vindicated and, although that remedy uses the language of accounting as if the defendant was a constructive trustee, the defendant is simply liable to account for the value of the property received without needing to identify any trusteeship.

The analogy with constructive trusteeship might, however, have some lingering relevance when determining at what time the property should be valued. If the action for unconscionable receipt is considered to be the equitable counterpart of the Common Law action for money had and received,[34] the remedy should be assessed at the point of receipt. The traditional language of accountability as a constructive trustee might, however, suggest that the defendant recipient should be liable for all benefits received, so any increase in the value of the property should be taken into account and the remedy should be assessed at the time of judgment, which is consistent with the equitable practice relating to the taking of an account.[35] [36] Indeed, in Crown Dilmun v Sutton137 Peter Smith J held that a defendant who had unconscionably received property in breach of fiduciary duty was liable to account for all of the profits that it had received or would subsequently make. The only restriction was that the account would have to be taken before the end of the six-year limitation period after the claimant first became aware of its claim.[37] [38] Further, the judge recognized that, in taking the account, the defendant might be awarded a personal allowance to reflect his or her own contribution to making the profit, although such an allowance might be denied by virtue of the defendant’s conduct.1 9 Since the defendant’s receipt will already have been shown to have been unconscionable in order for the defendant to be held liable, this will probably prevent the defendant from obtaining the personal allowance.

Exceptionally, there may be circumstances under which the gain to the defendant is smaller than the value of the loss suffered by the claimant. In such a situation, the claimant can elect for the remedy of equitable compensation rather than the value of the defendant’s gain.[39] It is possible for a defendant who has discharged liability for unconscionable receipt to seek contribution from any other party who was jointly liable for the same ‘damage’, including a defendant who is liable for the tort of negligence, on the basis that both claims can be construed as involving restoring to the claimant value lost.[40]

(3) The Future of the Action for Unconscionable Receipt

The real problem with the action for unconscionable receipt is that liability involves both restitution for wrongdoing, because of the need to establish that the defendant was at fault, and restitution founded on the vindication of proprietary rights, which depends on the defendant having received property in which the claimant had an equitable proprietary interest. The need to establish fault has been criticized, most notably by Lord Nicholls of Birkenhead writing extra-judicially.[41] According to Lord Nicholls it would be more appropriate to distinguish between two distinct forms of liability. The first would be grounded on the commission of a wrong, for which fault would be required in the form of dishonesty, in the objective sense that the defendant’s conduct would be characterized by an honest person as dishonest, and for which the defence of change of position would not be applicable because a dishonest defendant would have acted in bad faith. The second would be receipt-based and would be founded on the vindication of equitable property rights; it would be the exact counterpart of the Common Law action for money had and received. Where the defendant had received, but no longer retains, property in which the claimant had an equitable proprietary right, then the fact that the defendant has interfered with the claimant’s equitable proprietary rights means that it is appropriate that the defendant’s liability should be strict, subject to the defences of change of position and bona fide purchase.

Such a strict liability personal claim is already recognized at Law in the form of the action for money had and received and also in Equity in the context of the administration of estates.[42] But, as a matter of policy and principle, should Equity develop such a strict liability personal claim where the defendant has received property in which the claimant had an equitable interest and which would be the mirror-image of the Common Law claim? The imposition of strict liability might be justified both at Law and in Equity because, where a defendant has received property in which the claimant has a proprietary interest, the strength of that proprietary interest requires the defendant to make restitution of its value regardless of the defendant’s fault and even though the defendant has not retained the property. The quid pro quo for recognizing a strict liability claim should be that the defendant is able to rely on the defence of change of position. This is what happened in Lipkin Gorman (a firm) v Karpnale Ltd144 at Common Law and there is no reason why the same should not be true in Equity. But is it appropriate to require Equity to develop a new cause of action simply to reflect what occurs at Law? Smith[43] [44] has argued that this is not appropriate, because equitable proprietary rights are not protected in the same way as legal ones. For example, equitable proprietary rights are not defeated by the bona fide purchase defence[45] and beneficiaries with equitable proprietary rights do not have direct claims in the torts of conversion[46] or negligence.[47] Legal and equitable proprietary rights are different, and cannot be assimilated. Gardner[48] has defended the need to establish fault before personal liability is imposed in Equity on third-party recipients on the ground that receipt-based liability derives from the failure to preserve trust property and, for such liability to arise, the recipient must have been aware of the need to preserve the property, hence the need to prove unconscionability.

The distinct approach to personal liability in Equity can also be justified for policy reasons. It is simply not appropriate for third party recipients of property in which the claimant has an equitable proprietary interest to be held strictly liable for the value of the property received, because equitable interests tend to be hidden. It is only where the third-party recipient knew, or suspected, that there might be such interests in the property received that it is appropriate to hold the third party personally liable.[49] If such strict liability was recognized in Equity, it would place unacceptable burdens on third-party recipients, such as banks, which had no reason to suspect that the claimant might have a proprietary interest in the property received. Whilst it is true that the imposition of such liability would require there to be generous defences of bona fide purchase for value and change of position, this would still place an onerous burden on an innocent recipient to establish the defences.[50]

In Australia, the recognition of a strict liability receipt-based claim has been rejected as a ‘grave error’, primarily on the ground that it is unjust to impose such liability on the defendant who has no idea that he or she has received property in breach of trust or fiduciary duty.[51] As the law stands in England, the strict liability receipt-based claim is not recognized in Equity,[52] [53] although certain senior members of the judiciary have contemplated the introduction of such a claim. For example, in Dubai Aluminium Co Ltd v Salaam154 Lord Millett supported the recognition of a strict liability claim in Equity. He described the action for unconscionable receipt as involving concurrent liability. One claim was fault-based and required proof of the defendant’s unconscionable conduct. For this type of claim, the receipt of property is incidental; it is the defendant’s fault that grounds liability. Here, the claim is founded on the defendant’s wrongdoing. The other claim is receipt-based and does not require proof of fault. Here, the claim is founded on the vindication of property rights. This is broadly consistent with the extra-judicial analysis of Lord Nicholls.1

Further, in a significant dictum in Criterion Properties pic v Stratford UK Properties LLC,[54] [55] Lord Nicholls himself appeared to recognize a general strict liability claim in Equity founded on receipt-based liability. In considering the nature of the liability that would arise if an agreement under which party B acquired benefits from party A were set aside, he said:[56]

If, however, the agreement is set aside, B will be accountable for any benefits he may have received from A under the agreement. A will have a proprietary claim, if B still has the assets. Additionally, and irrespective of whether B still has the assets in question, A will have a personal claim against B for unjust enrichment, subject always to a defence of change of position. B’s personal accountability will not be dependent upon proof of fault or ‘unconscionable’ conduct on his part. B’s accountability, in this regard, will be strict.

But this strict liability claim in unjust enrichment does not replace the claim in unconscionable receipt. Lord Nicholls was considering a simple case in which property is transferred by one party to another pursuant to a transaction that was void for want of authority. In such a case, the claimant can recover the value of the property transferred to the defendant by virtue of the defendant’s unjust enrichment. The value of the property will be the enrichment. This will have been obtained directly at the expense of the claimant and one of the recognized grounds of restitution can be established, namely that there had been a total failure of basis by virtue of the invalidity of the underlying transaction. In fact, a claim in unjust enrichment succeeded in this way in Westdeutsche Landesbank Girozen- trale v Islington LBC[57] as regards payments made to a bank under a contract that was void. There is nothing unusual about such a claim, but this is not the usual scenario of the claim in unconscionable receipt. That claim is relevant where property in which the claimant has an equitable proprietary interest is misappropriated by a trustee or fiduciary and it is then received by the defendant and dissipated. It is unlikely that the claimant will be able to sue the defendant in unjust enrichment, because the enrichment is not direct and the claimant will have been enriched at the expense of the trustee or the fiduciary.[58] Further, there may be difficulties in identifying a recognized ground ofrestitution to show that the third party’s enrichment is unjust.160 That is why the claimant needs to rely on his or her equitable proprietary interest to establish a claim against the defendant. Lord Nicholls’ dictum in Criterion Properties is concerned with a two-party situation, in which a claim in unjust enrichment is available because the enrichment was direct and the ground of restitution is founded on failure of basis. Unconscionable receipt is available in a three-party situation, involving typically the beneficiary, the trustee, and a third party, and the law of unjust enrichment is not engaged.

We are left with a scenario in which Equity continues to recognize a receipt-based personal claim that requires proof of fault, regardless of the demands from senior members of the judiciary and many commentators that a strict liability claim should be recognized. The main reason for recognizing such a claim is because of the perceived need to assimilate the rules, in this context at least, between what happens at Common Law and what happens in Equity. But the equitable rules and their contexts are different. Recognition of a strict liability claim in Equity can be criticized for policy reasons as well. Further, even if a strict liability claim was introduced in Equity, it would not change the law dramatically. Any strict liability claim would be subject to the defence of change of position. That defence will be defeated if the defendant has acted in bad faith and recent cases on the defence of change of position have relied on the notion of unconscionability to determine whether or not the defendant can be considered to have acted in bad faith.[59] [60] [61] It follows that, even if the receipt-based claim becomes one of strict liability, the question of unconscionability cannot be avoided. The only difference between a strict liability claim and a fault-based claim would turn on who bears the burden of proof. As the law stands, the claimant must prove that the defendant’s receipt was unconscionable. If a strict liability claim was introduced, the burden would shift to the defendant to prove that his or her receipt and subsequent conduct was not unconscionable. Since it is difficult to justify shifting the burden of disproof on to the defendant, the preferable view is that a strict liability receipt-based claim should not be recognized in Equity.

  • [1] This language is still used. See, for example, Williams v Central Bank of Nigeria [2014] UKSC 10, [2014]AC 1189, [35] (Lord Sumption).
  • [2] Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908, [2015] 2 WLR 526, [68].
  • [3] Boscawen v Bajwa [1996] 1 WLR 328, 334 (Millett LJ).
  • [4] Ibid, 655.
  • [5] Agip (Africa) Ltd v Jackson [1990] Ch 265, affirmed [1991] Ch 547 (CA); Trustor AB v Smallbone (No 2)[2001] 1 WLR 1177.
  • [6] See p 521, above. 105 Agip (Africa) Ltd v Jackson [1990] Ch 265, 292 (Millett J).
  • [7] 106 S Gleeson, ‘The Involuntary Launderer: The Banker’s Liability for Deposits of the Proceeds of Crime’ in
  • [8] PBH Birks (ed), Laundering and Tracing (Oxford: Oxford University Press, 1995), 126-7; M Bryan, ‘Recover
  • [9] ing Misdirected Money from Banks: Ministerial Receipt at Law and in Equity’ in F Rose (ed), Restitution andBanking Law (Oxford: Mansfield Press, 1998), 182. 107 [2008] EWCA Civ 819.
  • [10] See, for example, Karak Rubber Co Ltd v Burden (No 2) [1972] 1 WLR 602, 632 (Brightman J); BelmontFinance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393, 405 (Buckley LJ) and 412 (Goff LJ);Rolled Steel Products (Holdings) Ltd v British Steel Corp [1986] Ch 246, 306 (Browne-Wilkinson LJ); Agip(Africa) Ltd v Jackson [1990] Ch 265, 291 (Millett J); Houghton v Fayers [2000] 1 BCLC 511, 516 (Nourse LJ).
  • [11] Re Montagu’s Settlement Trust [1987] Ch 264; Eagle Trust plc v SBC Securities Ltd [1993] 1 WLR 484,503 (Vinelott J); Cowan de Groot Property Ltd v Eagle Trust plc [1992] 4 All ER 700; Eagle Trust plc v SBCSecurities Ltd (No 2) [1996] 1 BCLC 121; Hillsdown Holdings plc v Pensions Ombudsman [1997] 1 All ER 862.
  • [12] [2001] Ch 437. See also Arthur v Attorney-General of the Turks and Caicos Islands [2012] UKPC 30.
  • [13] Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437, 455 (Nourse LJ).See R Havelock, ‘The Transformation of Knowing Receipt’ [2014] RLR 1.
  • [14] Unlike the action for dishonestly assisting a breach of trust or breach of fiduciary duty. See p 521, above.
  • [15] [2004] UKHL 28, [2004] 1 WLR 1846.
  • [16] Criterion Properties plc v Stratford UK Properties LLC [2002] EWCA Civ 1783, [2003] 1 WLR 2108.
  • [17] Criterion Properties plc v Stratford UK Properties LLC [2004] UKHL 28, [2004] 1 WLR 1846.
  • [18] Although it was acknowledged that the defendant’s knowledge of the circumstances was relevant whenconsidering whether there was apparent authority to sign: [2004] 1 WLR 1846, [30] (Lord Scott).
  • [19] [2001] Ch 437.
  • [20] Criterion Properties plc v Stratford UK Properties LLC [2004] UKHL 28, [2004] 1 WLR 1846, [4].
  • [21] See Chapter 25.
  • [22] Niru Battery Manufacturing Co v Milestone Trading Ltd [2002] EWHC 1425 (Comm), [2002] 2 All ER(Comm) 705, 741. This was endorsed in the Court of Appeal: [2003] EWCA 1446 (Civ); Abou-Rahmah vAbacha [2006] EWCA Civ 1492, [2007] 1 All ER (Comm) 827.
  • [23] Papamichael v National Westminster Bank [2003] Lloyd’s Rep 341, 369 (Judge Chambers QC).
  • [24] Maersk Air Ltd v Expeditors International (UK) Ltd [2003] 1 Lloyd’s Rep 491, 499.
  • [25] [2006] EWCA Civ 1492, [2007] 1 All ER (Comm) 827.
  • [26] Criticized by J Lee, ‘Changing Position on Change of Position’ [2007] RLR 135, 139.
  • [27] [2012] EWHC 10 (Ch), [2013] Ch 156, [132]. 126 [2012] UKPC 30, [4]. 127 [2002] UKHL 48, [2003] 2 AC 366, 391. 128 [2014] UKSC 10, [2014] AC 1189, [64]. See also Vestergaard Frandsen v Bestnet Europe Ltd [2013]UKSC 31, [2013] 1 WLR 1556, [42] (Lord Neuberger). Lord Sumption in Williams did, however, assert thatliability does not require proof of dishonesty: [35]. Although he did not explain what he meant by dishonestyfor these purposes, he appeared to relate it to fraudulent conduct in the sense of subjective awareness of thebreach of trust or fiduciary duty.
  • [28] See p 523, above.
  • [29] See Gwembe Valley Development Co Ltd v Koshy [2003] EWCA Civ 1048, [2004] 1 BCLC 131, [88].
  • [30] Paragon Finance plc v DB Thakerar and Co [1999] 1 All ER 400, 408 (Millett LJ). See also Williams vCentral Bank of Nigeria [2014] UKSC 10, [2014] AC 1189.
  • [31] Paragon Finance plc v DB Thakerar and Co [1999] 1 All ER 400; Dubai Aluminium Co Ltd v Salaam[2002] UKHL 48, [2003] 2 AC 366, 404 (Lord Millett).
  • [32] Paragon Finance plc v DB Thakerar and Co [1999] 1 All ER400,408 (Millett LJ); Crown Dilmun v Sutton[2004] EWHC 52, [2004] 1 BCLC 468, [204] (Peter Smith J).
  • [33] Royal Brunei Airlines v Tan [1995] 2 AC 378, 386; Twinsectra v Yardley [2002] UKHL 12, [2002] 2 AC164, 194 (Lord Millett).
  • [34] See further p 652, below. 136 See p 506, above.
  • [35] 137 [2004] EWHC 52, [2004] 1 BCLC 468, [27]. See also City Index Ltd v Gawler [2007] EWCA Civ 1382,
  • [36] [2008] Ch 313, [64] (Arden LJ); Ultraframe v Fielding [2005] EWHC 1638, [2006] FSR 16, [1577] (Lewison J).
  • [37] Crown Dilmun v Sutton [2004] EWHC 52, [2004] 1 BCLC 468, [30]. 139 See p 507, above.
  • [38] 140 See City Index Ltd v Gawler [2007] EWCA Civ 1382, [2008] Ch 313, [64] (Arden LJ).
  • [39] 141 Ibid, See p 250, above.
  • [40] 142 D Nicholls, ‘Knowing Receipt: The Need for a New Landmark’ in W Cornish, R Nolan, J O’Sullivan, and
  • [41] G Virgo (eds), Restitution: Past, Present and Future (Oxford: Hart Publishing, 1998), 231. See also Twinsectra v
  • [42] Yardley [2002] UKHL 12, [2002] 2 AC 164, 194 (Lord Millett) and Dubai Aluminium Co Ltd v Salaam [2002]UKHL 48, [2003] 2 AC 366, 391 (Lord Millett); Lord Millett, ‘Proprietary Restitution’, 311; Lord Walker,‘Dishonesty and Unconscionable Conduct in Commercial Life—Some Reflections on Accessory Liability andKnowing Receipt’ (2005) 27 Sydney LR 187. 143 See p 645, above.
  • [43] [1991] 2 AC 548.
  • [44] LD Smith, ‘Unjust Enrichment, Property and the Structure of Trusts’ (2000) 116 LQR 412.
  • [45] See p 657, below.
  • [46] MCC Proceeds Inc v Lehman Brothers International (Europe) Ltd [1998] 4 All ER 675.
  • [47] Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785, 812 (Lord Brandon).
  • [48] S Gardner, ‘Moment of Truth for Knowing Receipt’ (2009) 125 LQR 20, 23.
  • [49] See Sheehan, ‘Disentangling Equitable Personal Liability for Receipt and Assistance’; K Low, ‘RecipientLiability in Equity: Resisting the Siren’s Lure’ [2008] RLR 96.
  • [50] J Dietrich and P Ridge, ‘The Receipt of What? Questions Concerning Third Party Recipient Liability inEquity and Unjust Enrichment’ (2007) 31 MULR 47.
  • [51] Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 292, [155].
  • [52] Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437.
  • [53] [2002] UKHL 48, [2003] 2 AC 366, 391. See also Twinsectra v Yardley [2002] UKHL 12, [2002] 2 AC164, 194 (Lord Millett).
  • [54] Lord Nicholls, ‘Knowing Receipt’, 231. 2 [2004] UKHL 28, [2004] 1 WLR 1846.
  • [55] 157 Ibid, [4]. 4 [1996] AC 669. See p 372, above.
  • [56] 159 See M Bryan, ‘The Liability of the Recipient: Restitution at Common Law or Wrongdoing in Equity?’ in
  • [57] S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney: Lawbook Co, 2005), 339.
  • [58] 160 Save if ‘ignorance’ is recognized as a ground of restitution. See Chapter 8.
  • [59] See p 650, above and, further, p 691, below. 162 [1999] 1 AC 221.
  • [60] 163 Although the remedy was awarded in that case to reverse the defendant’s unjust enrichment, rather than tovindicate the claimant’s proprietary rights. See p 637, above. See also Cheltenham and Gloucester plc v Appleyard
  • [61] [2004] EWCA Civ 291, [36] (Neuberger LJ); Filby v Mortgage Express (No 2) Ltd [2004] EWCA Civ 759.
 
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