When does a holder of funds (to which another is entitled but who suffers a loss) become liable for knowing assistance? And what is the difference between knowing assistance and knowing receipt?
In Abou-Rahmah v. Abacha [2006] EWCA Civ 1492 as reported in 9 ITELR, a client unwittingly made payment into a Nigerian bank account through an English branch which funds were promptly removed from the bank by fraudsters who disappeared. The victim sought damages against the Nigerian bank by way of a proceeding commenced in England.
Having lost at trial, the Plaintiff appealed, arguing that the bank had “knowingly assisted” in the fraudster’s breach of trust. The Court of Appeal (Civil Division) dismissed the appeal and, in so doing, comprehensively reviewed the authorities.
In short, a finding that the bank had knowingly assisted in the breach of trust would require a dishonest state of mind such that the bank had knowledge that rendered its participation “contrary to normally acceptable standards of honest conduct.”
In contrast to knowing assistance, the elements of knowing receipt are as follows:
(a) The defendant received property subject to a trust in favour of the plaintiff
(b) The property was taken from the plaintiff in simple breach of trust;
(c) The defendant had knowledge of facts sufficient to put a reasonable person on notice or inquiry of the breach of trust; and
(d) The defendant applied the property for its own use and benefit.
In summary, there are three differences between knowing assistance and knowing receipt:
- knowing receipt requires only a simple breach of trust by the trustee, while knowing assistance requires a dishonest and fraudulent breach of trust.
- In the case of knowing receipt, the defendant’s constructive knowledge of breach of trust will suffice, while a form of actual knowledge is required for knowing assistance; and
- knowing receipt involves a defendant applying the property for its own use and benefit.
Thanks for reading,
David Smith