Dishonest assistance: the trustee's honesty is irrelevant (Royal Brunei Airlines v Tan)
Celia Osei, a trustee, honestly but wrongly believed that the trust deed allowed her to lend £150,000 of trust money to a property developer. She asked her accountant, Darius Webb, to arrange the transfer. Darius knew the loan was plainly outside the trustee's powers and knew that Celia mistakenly thought otherwise, but he said nothing and arranged the transfer. He received none of the trust money. The developer became insolvent and the money was lost. The beneficiaries sue Darius.
Which of the following best describes Darius's liability?
Choose one answer to see the reasoning.
Worked answer
Correct answer E: He is liable as a dishonest assistant to make good the loss, because he dishonestly assisted the breach; Celia's honesty is irrelevant.
THE RULE TO REMEMBER
A person who dishonestly assists in a breach of trust is liable for the loss, whether or not the trustee was dishonest; dishonesty is judged objectively (Royal Brunei v Tan).
Dishonest assistance: the trustee's honesty is irrelevant (Royal Brunei Airlines v Tan)
In Royal Brunei Airlines v Tan the Privy Council held that dishonesty is both a necessary and a sufficient ingredient of accessory liability. A person who dishonestly procures or assists in a breach of trust is liable to make good the resulting loss, and it is not necessary that the trustee was also acting dishonestly. Lord Nicholls gave the example of a solicitor who knows that a trustee is mistakenly making a payment in plain breach of trust and dishonestly leaves him under that misapprehension. Dishonesty here means not acting as an honest person would in the circumstances. That is an objective standard, assessed in the light of what the defendant actually knew. Darius knew the loan was outside the trustee's powers and knew Celia was mistaken, yet he arranged the transfer without telling her. An honest person would not do that. He is liable for the £150,000 loss even though he received nothing.
Why A is wrong: Royal Brunei rejected any requirement that the trustee be dishonest; what matters is the accessory's state of mind.
Why B is wrong: Receipt is required for knowing receipt, not for accessory liability, which does not depend on receiving trust property.
Why C is wrong: Negligence is not enough; dishonesty is the touchstone of accessory liability.
Why D is wrong: The standard of honesty is objective; individuals cannot set their own standards.
A little more practice done.
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