knowledge into five types: actual knowledge; wilfully shutting one’s eyes to the obvious; wilfully & recklessly failing to make such inquiries as an honest & reasonable person would make; knowledge of circumstances which would indicate the facts to an honest & reasonable person; & knowledge of circumstances which would put an honest and reasonable person on inquiry.
CONSTRUCTIVE TRUSTS Circumstances Giving Rise to Constructive Trusts: (Continuation) (a) Traditional categories vi) Strangers b. Knowing assistance/dishonest assistance/accessory liability • Note : Based on the above case of Baden Delvaux , Peter Gibson concluded that the first three categories may be described as ‘actual knowledge’ and the last two as ‘constructive knowledge’. • The issue of knowledge required is still a disturbing issue as far as ‘knowing assistance’ by a stranger is concerned. For example, in the case of Agip ( Africa ) Ltd v Jackson  Ch 265. In this case, Agip’s payment orders to third parties were fraudulently altered by two Agip’s accountant and paid to B company solely owned by the defendants. It was held by Millet J that the defendants were liable for knowing assistance as they obviously know that the two were laundering money and were consciously helping the two to conceal fraud. At best, the defendants had been indifferent to it, which amounts to dishonesty. It is unfortunate that Fox LJ in the Court of Appeal appeared to have uncritically accepted all the five categories as set out in Barden Delvaux .
CONSTRUCTIVE TRUSTS Circumstances Giving Rise to Constructive Trusts: (Continuation) (a) Traditional categories vi) Strangers b. Knowing assistance/dishonest assistance/accessory liability • See also the case of Lipkin Gorman v Karpnale  4 All ER 331. In this case, the solicitor Cass, who has the authority from the firm to withdraw money from the bank, withdrew £200,000 and spent it on gambling at the Playboy’s Club. The firm’s action against the bank for knowing assistance failed on the ground that although the bank manager knew that Cass was a gambler & made no inquiry of the withdrawal. The Court of Appeal held that even if the bank had been negligent, constructive knowledge did not suffice for ‘knowing assistance’ liability. In the Court of Appeal May LJ expressed the view: “There is strong authority for the proposition that nothing less than knowledge, as defined in one of the first three categories stated by Peter Gibson J in the Baden Delvaux case, ...” The decision of the Court of Appeal would imply that actual knowledge is required. However, in the House of Lords the firm successfully recovered the money in an action at common law for money had and received.
CONSTRUCTIVE TRUSTS Circumstances Giving Rise to Constructive Trusts: (Continuation) (a) Traditional categories vi) Strangers b. Knowing assistance/dishonest assistance/accessory liability • It is important to note that in light of the Royal Brunei Airlines Sdn Bhd v Tan  3 WLR 64- it can now be conclusively stated that the
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- Fall '16
- Law, Wills and trusts, Trust law, Constructive Trust, CONSTRUCTIVE TRUSTS