D - Dishonest assistance
4/6/24
LARSSON v REVOLUT LTD [2024] EWHC 1287 (Ch)
The claimant was the victim of authorised push payment (APP) fraud by which he was induced by unknown fraudsters to pay funds from his UBS account to purchase non-existent shares. The payments were made to accounts opened in third party names with Revolut and then paid away. Claims against Revolut in contract and tort were struck out. Although the claimant also held an account with Revolut, there was no contractual basis for a duty of care owed by Revolut to him in relation to payments made by him from an account with another bank to an account with Revolut held by someone else [37]. Nor was there any duty of care in tort owed by Revolut to the claimant as a third party payer even if the claimant happened to be a customer of Revolut [49]. To impose such a duty would be a radical extension of a bank’s duties with significant consequences for banking law [58]. The fact that Revolut did block one payment made no difference [60]. A claim against Revolut for dishonestly assisting a breach of trust was not struck out. It was arguable that funds obtained by fraud were impressed with a trust. The claimant was, however, required to amend his claim to identify the individual within Revolut who he said had been dishonest [77].
4/10/23
HOTEL PORTFOLIO II LIMITED (IN LIQUIDATION) V RUHAN [2023] EWCA Civ 1120
A defaulting fiduciary can be liable to pay equitable compensation for loss suffered by the beneficiary or, at the beneficiary’s election, to provide an account of profits made in the same transaction. A person who dishonestly assists the defaulting fiduciary can be jointly and severally liable with the defaulting fiduciary to pay equitable compensation or to provide an account of any profits which the dishonest assistant personally made, but he is not liable to account for profits made by the defaulting fiduciary. So in a case where a company suffered no loss from a director’s breach of fiduciary duty, the company could seek from a nominee who dishonestly assisted the director, profits made by the nominee personally but not profits made by the director.
14/5/20
BARROWFEN PROPERTIES LTD v PATEL [2020] EWHC 1145 (Ch)
Summarises requirements for pleading fraud/dishonesty [7], dishonest assistance [8], deceit [9] and unlawful means conspiracy [10].
10/3/20
BILTA (UK) LTD v NATWEST MARKETS PLC [2020] EWHC 546 (Ch)
Contains useful summaries of the principles of dishonest assistance [159], fraudulent trading [175], vicarious liability for the acts of employees [193], attribution of knowledge to companies [217], and the test of dishonesty [225]. In the context of claims that traders participated in the commission of missing trader intra-community VAT fraud, in order to prove dishonesty the claimants had to show that the traders had a suspicion, based upon some identifiable matters, that the trading that they were doing was part of, or connected in some way, with VAT fraud [235]. On the facts, the test was satisfied and the defendants were liable for dishonest assistance and knowingly being a party to fraudulent trading by the claimant companies.
7/9/18
AUTOGAS (EUROPE) LTD v OCHOCKI [2018] EWHC 2345
Summarises principles for liability for dishonest assistance [11], including the test for a finding of dishonesty [13]. It is not necessary to plead dishonesty expressly; however, if it is not expressly pleaded, the court is not entitled to make a finding of fraud unless the primary facts pleaded are inconsistent with anything other than dishonesty [15]. Also considers the nature of a so-called VAT acquisition fraud [17].
26/7/18
CMOC SALES & MARKETING LTD v PERSONS UNKNOWN [2018] EWHC 2230 (Comm)
Considers the proof required in fraud claims where the defendants do not engage in the litigation process or appear at trial and service has been effected by alternative means including by Facebook Messenger and WhatsApp. A thief of stolen funds is to be treated as a fiduciary holding the funds on constructive trust [76]. Summarises requirements for claims of dishonest assistance [89] and unlawful means conspiracy [92]. Knowledge required to establish dishonest assistance and conspiracy does not require it to be shown that the defendant intended to injure an identified victim. It is sufficient if the defendant knows that there is a victim [117]. Also summarises requirements for claims of knowing receipt [128] and unjust enrichment [140]. Where there are direct and indirect recipients, there is only one true recipient for the purpose of an unjust enrichment claim and the claimant can elect which to pursue. Compound interest is available for proprietary claims and knowing receipt but not for dishonest assistance. Costs incurred in pursuing orders from courts abroad can be claimed as damages [172].
4/7/14
NOVOSHIP (UK) LTD v NIKITIN [2014] EWCA Civ 908
If an agent or employee receives a bribe which he then shares with another, he is in breach of his fiduciary duty in then negotiating other transactions with that other person for as long as he has not disclosed the matter to his principal [54]. A defendant found to have dishonestly assisted another’s breach of fiduciary duty in this way has the same responsibilities as an express trustee and can be ordered to provide an account of profits [92]. That is so even if the dishonest assistance does not involve the misapplication of trust property [93]. Although causation of loss is not required to be established when seeking an account of profits for breach of fiduciary duty, causation is required in a claim for an account of profits from a dishonest assistant who is not himself a fiduciary [107]. This requires more than “but for” causation [108]. Although the defendant had obtained the use of certain vessels by such dishonest assistance, the effective cause of his profit had been an unexpected change in the market [115], so causation was not made out in this respect. In addition, the remedy of an account against a dishonest assistant who is not a fiduciary is discretionary [119] and it would be disproportionate in relation to the defendant’s use of the vessels. The judge had been entitled to award interest on the judgment (expressed in US$) at 2.5% over 3 month $ LIBOR.
22/5/14
GOLDTRAIL TRAVEL LTD v AYDIN [2014] EWHC 1587 (Ch), [2015] 1 BCLC 89
The court found that a sole director/shareholder had misapplied assets of the company in breach of fiduciary duty. They director’s acts could not be regarded as ratified by the company because of the company’s insolvency at the time the wrongful transactions had taken place. The director’s fraud could not be attributed to the company which was the victim. Third parties involved in the transaction were liable for dishonest assistance even if they had not dealt with trust property. The third parties could not set-off against their liability sums owed to them by the company.
11/4/13
THOMPSON v NATIONWIDE BUILDING SOCIETY, Ch D
Where a mortgage fraud had been perpetrated by the applicant falsely claiming to be buying a property, the lender was entitled to trace part of the mortgage advance into the hands of the defendant who had temporarily loaned the balance of the supposed purchase price to the applicant and whose loan had been repaid. The court had been entitled to find that the defendant had dishonestly assisted the applicant and the defendant had not satisfied the court that the funds he received were not part of the claimant’s advance.
27/3/13
STOKORS SA v IG MARKETS LTD [2013] EWHC 631 (Comm)
Money held by a broker on trust to place investments on behalf of the claimants in products provided by the defendant had been wrongly used by the broker to invest in its own right as principal with the defendant. The defendant was not liable for dishonestly assisting the broker’s breach of trust. Its employees had not been dishonest. They had not suspected that the broker was putting client money at risk. On the basis of representations made by the broker, they honestly and reasonably believed that the broker had substantial collateral available and that its clients held other positions with other providers which the broker could set-off against deficits on its positions with the defendant.
15/3/13
TUTHILL v EQUINE FX LTD, QB (COMM)
A company had failed to provide foreign exchange to the claimant and was liable for breach of contract. The claimant’s funds could be shown to have been paid by the company to its director. But summary judgment would not be given against the director for dishonest assistance because for that purpose it had to be shown the funds were impressed with a trust. The fact that the money had been paid for a specific purpose was not enough.
7/3/13
IG INDEX PLC v COLLEY [2013] EWHC 478 (QB)
An employee of a spread-betting company was liable for breach of fiduciary duty and fraud for dishonestly manipulating the company’s trading prices to enable clients to place spread bets at artificially low prices so as to make unjustified profits. Certain of the clients were liable for dishonestly assisting him and for fraud. Fraudulent conduct does not necessarily require there to have been a misrepresentation. Here accounts were used by the clients as a vehicle for defrauding the company. The bets were also void by reason of a provision in the company’s terms allowing it to avoid bets for manifest error. An error resulting from fraud could be a manifest error.
11/2/13
JEREMY D STONE CONSULTANTS LTD v NATIONAL WESTMINSTER BANK PLC [2013] EWHC 208 (Ch)
A bank which had operated accounts for a company which had operated a fraudulent investment scheme, and the bank manager responsible for the company’s accounts, were not liable to investors for dishonest assistance as they had not been aware of the fraud, nor had they been party to a conspiracy to injure the investors. There was no claim for unjust enrichment against the bank because the bank had been liable to the company for the funds which it received for the company’s account. The bank had only acted in a ministerial capacity and would also have had a defence of change of position. Nor had the bank manager acted incompetently or assumed any responsibility for information he gave so as to give rise to a claim in negligence.
22/1/13
BANK OF SCOTLAND PLC v WATSON [2013] EWCA Civ 6
A defendant was refused permission to amend her defence to plead a counterclaim of dishonest assistance in breach of trust based on events which occurred more than 6 years previously. The proposed amendment included new claims which could not properly be regarded as arising out of substantially the same facts as the claim already made within CPR 17.4 and s 35 of the Limitation Act 1980. The court considered differences of judicial dicta as to what constitutes a new claim for this purpose. The fact that the defendant had previously brought a claim on similar grounds would not have made it an abuse of process to counterclaim in these proceedings because the earlier claim had been struck out without a decision on the merits.
2/11/12
MOSELEY v POPLEY [2012] EWHC 3902 (Ch)
The court refused to set aside the sale of a property which was not itself trust property, as a remedy for dishonest assistance.
3/4/12
CENTRAL BANK OF NIGERIA v WILLIAMS [2012] EWCA Civ 415
The respondent claimed that a solicitor, who had held money on trust for him in a client account, fraudulently paid the money to an account with the respondent bank which was liable as a constructive trustee for dishonest assistance. It was held that both the claim against the solicitor and the claim against the bank fell within s 21(1) Limitation Act 1980 as an action by a beneficiary under a trust in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy. Section 21 extends to claims against both the trustee and anyone who dishonestly assisted him in the fraud or fraudulent breach of trust. Such claims can therefore be brought outside the 6 year limitation period which would otherwise apply under s 21(3).
21/2/12
GRIMALDI v CHAMELEON MINING NL (NO. 2) [2012] FCAFC 6 (Fed Ct (Aus)
Considered claims against de facto director for breach of fiduciary duty and accepting secret commissions, and against third parties dealing with the company for knowing receipt and assistance.