Equity and Trusts: Barnes V Addy Second Limb Essay

3471 Words Nov 2nd, 2012 14 Pages
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
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Conversely, other judges have found the judgement in Consul Development v DPC to be inconclusive, adopting a narrow interpretation of the judgement of Stephen J and restricting the requisite knowledge only to the first three categories of the Baden scale. This tendency toward a narrow approach increased following the decision in Royal Brunei Airlines Sdn Bhd v Tan (‘Royal Brunei’) as courts attempted to reconcile the UK and Australian lines of authority. However in other cases, such as Gertsch v Atsas it was held that that the acceptance of the first four Baden categories was synonymous with accepting a standard of honesty.
Given the discordant state of the Australian authorities, the High Court took the opportunity in Farah Constructions Pty Ltd v Say-Dee Pty Ltd, (‘Farah Constructions’) to clarify the Australian position on knowing assistance. Their Honours declared, in obiter, that Australian courts should continue to follow the decision in Consul Development v DPC, thereby continuing to see as necessary the requirement of a dishonest design on the part of the fiduciary, and subscribing to the proposition that where the third party’s knowledge falls within the first four categories of the Baden scale it will answer the requirement of knowledge under the second limb of Barnes v Addy. In what has been referred to as a “profound shift in the rules of judicial engagement”
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