Soton Equity and Trusts - alastairhudson.com

MCP Pension Trustees Ltd v AON Pension Trustees Ltd [2010] EWCA Civ 377, [2011] 1 All
ER (Comm) 228, [14], per Elias LJ (following Montagu on “forgetting”)
Westdeutsche Landesbank v Islington [1996] AC 669, [1996] 2 All ER 961, 990, per Lord
Browne-Wilkinson:
“If X has the necessary degree of knowledge, X may himself become a constructive
trustee for B on the basis of knowing receipt. But unless he has the requisite degree
of knowledge he is not personally liable to account as trustee. Therefore, innocent
receipt of property by X subject to an existing equitable interest does not by itself
make X a trustee despite the severance of the legal and equitable titles”.
b).
What type of knowledge?
*Baden v. Societe Generale (1983) [1993] 1 W.L.R. 509 per Peter Gibson J, the five types of
knowledge:
(1) actual knowledge;
(2) wilfully shutting one’s eyes to the obvious;
(3) wilfully and recklessly failing to make inquiries which an honest person
would have made;
(4) knowledge of circumstances which would indicate the facts to an honest and
reasonable man;
(5) knowledge of circumstances which would put an honest and reasonable man on
inquiry.
(i) knowledge can be forgotten
**Re Montagu’s Settlements [1987] Ch 264 (only first three categories of knowledge; forgetfulness)
(ii) ought you to have been suspicious in the circumstances?
**Polly Peck v. Nadir [1992] 4 All ER 769, [1993] BCLC 187
(iii) account officers are not detectives
*Macmillan Inc. v. Bishopsgate Investment Trust [1995] 1 WLR 978, 1000, 1014; [1995] 3
All ER 747, 769, 783.
(iv) knowledge in complex fraud and money laundering cases
*El Ajou v. Dollar Land Holdings [1994] 2 All ER 685
c).
The new test of “unconscionable receipt”
*BCCI v Akindele [2000] 4 All ER 221, per Nourse LJ:
‘What then, in the context of knowing receipt, is the purpose to be served by a
categorisation of knowledge? It can only be to enable the court to determine
whether, in the words of Buckley LJ in Belmont Finance Corpn Ltd v Williams
Furniture Ltd (No 2) [1980] 1 All ER 393, 405], the recipient can "conscientiously
retain [the] funds against the company" or, in the words of Sir Robert Megarry V-C in
In re Montagu's Settlement Trusts [1987] Ch 264, 273, "[the recipient's] conscience
is sufficiently affected for it to be right to bind him by the obligations of a constructive
trustee". But, if that is the purpose, there is no need for categorisation. All that is
necessary is that the recipient's state of knowledge should be such as to make it
unconscionable for him to retain the benefit of the receipt.
For these reasons I have come to the view that, just as there is now a single test of
dishonesty for knowing assistance, so ought there to be a single test of knowledge
for knowing receipt. The recipient's state of knowledge must be such as to make it
unconscionable for him to retain the benefit of the receipt. A test in that form, though
it cannot, any more than any other, avoid difficulties of application, ought to avoid
those of definition and allocation to which the previous categorisations have led.
Moreover, it should better enable the courts to give commonsense decisions in the
commercial context in which claims in knowing receipt are now frequently made…’
*Criterion Properties plc v Stratford UK Properties LLC [2003] 2 BCLC 129, [38] (expresses
preference for flexibility of a test of conscionability)
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