Knowing Receipt and Breach of Trust Essay

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The personal liability of third parties for having received or dealt with trust rights or their traceable substitutes which they received in breach of trust is known as recipient liability. Knowing receipt arises where the recipient has some degree of knowledge that the property was received in breach of the trust or following receipt acquired some degree of knowledge that the rights were trust rights and dealth with them as his/her own instead of returning them to the trust. In Re Montagu’s Settlement Trusts (1987) Megarry J held that in order to found a claim for knowing receipt, the defendant had to have actual knowledge that his receipt was in breach of trust or was ‘willfully blind’ shutting his eyes to the obvious; or willfully and…show more content…
While imperfect the Montagu test does give some guidance as to the requirements of knowledge. The court of appeal in Akindele briefly referred to a new approach to the personal liability of a recipient known as the unjust enrichment approach. This approach does not disregard the issue of dishonesty entirely, rather it restricts the issue of dishonesty to the application of the change of position defence in that only an innocent recipient can avail themselves of this defence . While the unjust enrichment approach clearly has its attractions. Most cases of recipient liability are not really two party situations where the value is transferred from the beneficiaries to the third party; they are three party situations the trustee who was a conceptual feature of the trust is interposed between the beneficiaries and the recipient. It is to be noted that in Re Montagu the recipient was a volunteer , that is, who gave no consideration for the transfer of title so he could not count as equity’s darling. In Akindele by contrast the defendant had given consideration under a valid contract for the assets he received. Should it be ‘unconscionable’ for a volunteer to retain the benefit of his receipt being one who paid nothing for what he received in breach of trust where as under a valid contract a defence of bona fide purchaser will always apply to commercial dealings. The law provides beneficiaries under a trust with better
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