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Constructive knowledge is not enough hereApplication:As sole directors of the company, the defendants knew all the corporate files, and knew the company was operating in breach of trust. They assisted in that breach and are liableHarris v Leikin Group Inc. (2011, ONCA)Ratio on Knowing Assistance:The constituent elements of the tort of knowing assistance in breach of fiduciary duty are:1.There must be a fiduciary duty2.The fiduciary must have breached that duty fraudulently and dishonestly3.The stranger must have actual knowledge of the fiduciary relationship and the breach4.The stranger must have participated in or assisted the fiduciary in this dishonest conductNote the diference between knowing assistance and knowing receiptReceipt doesn’t ask whether the third party behaved wrongly, just that the third party has the assetsAssistance is completely diferent, the transaction itself has to be fraudulent, and the knowledge takes that into accountREVIEW OF PRACTICE EXAMQuestion 1: The Drumpf Legacy (60 marks) In July 2013, the Law Alumni Association of Trump University (TU) in Manitoba launched a fund-raising campaign by sending the following letter to all members of the association, which by definition included all graduates of the Law Faculty's JD (or LLB) program, but not graduates from the law school's LLM program:
We are marking the 50th anniversary of the Association by creating a fund to be held in trust by the President and Secretary of the Association for the time being. They have been instructed “to pay so much of the fund as they see fit” to any one or more of the following persons: any Manitoba lawyer; any relative of a deceased Manitoba lawyer; any employee or former employee of a Manitoba lawyer. Payments will be made “at the sole and absolute discretion of the President and Secretary”. Donald Drumpf is a graduate of the law faculty's LLB program and, as such, received one of the Association's letters. As a loyal alumnus, he sent the Association a cheque for $1,000 in August, 2013. The Association raised money for the fund from numerous sources, including known contributors (both members of the Association, and non-members); unknown contributors; the profits from a series of concerts; and the profits from a raffle. The Association has a complete list of all those who bought raffle tickets, but has no records of who attended the concerts. About a year later, in August, 2014, Drumpf watched a video on YouTube on the law of trusts to brush up on his knowledge of the subject. Drumpf had never become a lawyer following law school, but instead became a businessman, followed by a political career as a member of parliament in the Canadian government. Based on what he understood from the video (becausehe remembered very little from his study of trusts during law school), Drumpf drew up, dated and signed the following document: “I, D. Drumpf, hereby declare that from this date forward, I hold all the shares that I now own in Miss Universe Enterprises on trust to apply the income and capital: