Equity and Trusts: Barnes V Addy Second Limb

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Topics: Common law
Introduction

This paper examines the development and scope of accessory liability under the second limb of Barnes v Addy as it stands in both England and Australia. As to the law in England, the focus will be on the rearticulation of the principle of accessory liability under the second limb as stated in Royal Brunei Airlines Sdn Bhd v Tan. In particular, it will consider the extent to which the decision has reconciled inconsistencies in earlier authority and remedied those issues propounded to be inherent in the traditional formulation of the principle. At this stage, this traditional principle remains good law in Australia. However, as suggested in Farah Constructions Pty Ltd v Say-Dee Pty Ltd, there is potential for the English approach to be adopted in the Australian context. Such an adoption may be advisable in light of the judicial and extra-judicial commentary suggesting that the orthodox approach is in fact not properly aligned with equitable principles. The discussion of this possibility involves not only an assessment of the advantages and disadvantages of each approach, but also a determination as to the extent to which the separate application of each approach could result in a divergent outcome.

The development of the second limb of Barnes v Addy in Australia-
‘knowing assistance’
The classic authority on the circumstances in which third parties will be held accountable for their involvement in a breach of trust or fiduciary duty is the English case of Barnes v Addy. It was in this case that Lord Selbourne LC articulated the much cited and analysed statement of principle that has come to form the modern law:
...strangers are not to be made constructive trustees merely because they act as the agents of trustees…unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.
This statement has come to



Bibliography: Articles/Books/Reports Aitken, L, 'Unforgiven: Some thoughts on Farah Constructions Pty Ltd v Say-Dee Pty Ltd ' (2007) 29 Australian Bar Review 195 Andrews, G, ‘The redundancy of dishonest assistance’ (2003) 8 Conveyancing and Property Law Journal 1 Birks, P, ‘Misdirected funds: Restitution from the Recipient’ (1989) Lloyds Maritime & Commercial LQ 296 Chambers, R, 'Knowing Receipt: Frozen In Australia ' (2007) 2 Journal of Equity 40 Cope, M, 'A comparative evaluation of developments in equitable relief for breach of fiduciary duty and breach of trust ' [2006] QUT Law Journal 7 Cope, M, Equitable Obligations: Duties, Defences and Remedies (2008), Lawbook Co, Pyrmont. Harding, M & Malkin, I, ‘The High Court of Australia’s Obiter Dicta and Decision-Making in Lower Courts’ 34 Sydney Law Review 2 Kirby, M, 'Equity 's Australian Isolationism ' (2008) 8 Melbourne University Law Review 2 Kiri, N, ‘Recipient and accessory liability- where do we stand now?’ (2006) 21 Journal of International Banking Law and Regulation 11 Loughlan, P L, ‘Liability for Assistance in a Breach of Fiduciary Duty’ (1989) 9 Oxford Leg Studies 260 Mason, K, ‘President Mason’s Farewell Speech’ (2008) 82 Australian Law Journal 11 Ong, D, ‘The Knowledge or Role that makes a Person an Accessory under the Barnes v Addy Principle’ (2005) 17 Bond Law Review 6 Radan, P & Stewart, C, Principles of Australian Equity & Trusts, (2010), LexisNexis Australia, Chatswood Sullivan, G R, ‘Framing an Acceptable General Offence of Fraud’ (1989) 53 Journal of Criminal Law 92 Thomas, S B, ‘Knowing Receipt and Knowing Assistance: Where do we stand?’ (1997) 20 UNSW Law Journal 1 Thornton, R, ‘Dishonest Assistance: Guilty Conscience or Guilty Mind?’ [2002] 61 Cambridge Law Journal 3 Air Canada v M&L Travel Ltd (1993) 108 DLR (4th) 592 Attorney-General v Corporation of Leicester (1844) 7 Beav 176 ASIC v AS Nominees (1995) 133 ALR 1 Baden Delvaux & Lecuit v Societe Generale pour Favorisier le Developpment du Commerce et de l’Industrie en France SA [1992] 4 All ER 279 Barlow Clowes International Ltd v Eurotrust International Ltd [2006] 1 All ER 333 Barnes v Addy (1874) 9 Ch App 214 Beach Petroleum NL v Johnson (1993) 115 ALR 411 Belmont Finance Corporation Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Eagle Trust plc v SPC Securities Ltd [1992] 4 All ER 489 Eaves v Hickson (1861) 30 Beav 136 Equiticorp Finance Ltd v Bank of New Zealand (1993) 32 NSWLR 50 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Flyer v Flyer (1841) 3 Beav 141 Gertsch v Atsas(1999) 10 BPR 18,431 John Alexander 's Clubs Pty Ltd v White City Tennis Club Ltd; Walker Corp Pty Ltd vWhite City Tennis Club Ltd (2010) 241 CLR 1 Karak Rubber Co Ltd v Burden [1972] 1 All ER 1210

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