Knowing receipt
Encyclopedia
Knowing receipt, or unconscionable receipt in more recent times, is a type of third party liability under trust law
. To be liable for knowing receipt, the plaintiff must show, first, a disposal of his trust assets in breach of fiduciary duty; second, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and third, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.
-based liability (as opposed to accessory liability).
The degree of knowledge required has been a controversial issue and there are numerous lines of authority on it. For example in some cases it was held that Baden category 1 to 3 knowledge, i.e. dishonesty
is needed, or in some cases it was held that all 5 categories would suffice, i.e. either dishonesty or negligence
.
In Belmont Finance Corp Ltd v Williams Furniture (No 2) it was held thatfraud/dishonesty not required, i.e. negligence
would suffice. In El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, it was held that constructive knowledge was sufficient; Though in Polly Peck Int’l plc v Nadir (No 2) [1992] 4 All ER 769, Scott LJ agreed that courts are always reluctant to extend constructive notice doctrine to circumstances when money is paid in ordinary course of business.
At last, in BCCI (Overseas) Ltd v Akindele [2001] Ch 437, it was held that the degree of knowledge for for knowing receipt is knowledge that makes it unconscionable for recipient to retain benefit of receipt. It was also held that the five categories of knowledge in Baden is not useful.
Trust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...
. To be liable for knowing receipt, the plaintiff must show, first, a disposal of his trust assets in breach of fiduciary duty; second, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and third, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.
Underlying principle
The underlying principle of knowing receipt is beneficial receipt of D is unjust enrichment at the expense of the rightful owner. In Royal Brunei Airlines Sdn Bhd v Tan, knowing receipt is characterized as restitutionRestitution
The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. Obligations to make restitution and obligations to pay compensation are each a type of legal response to events in the real world. When a court...
-based liability (as opposed to accessory liability).
Degree of knowledge required
Under knowing receipt, the onus is on the claimant beneficiary to establish recipient’s knowledge.The degree of knowledge required has been a controversial issue and there are numerous lines of authority on it. For example in some cases it was held that Baden category 1 to 3 knowledge, i.e. dishonesty
Dishonesty
Dishonesty is a word which, in common usage, may be defined as the act or to act without honesty. It is used to describe a lack of probity, cheating, lying or being deliberately deceptive or a lack in integrity, knavishness, perfidiosity, corruption or treacherousness...
is needed, or in some cases it was held that all 5 categories would suffice, i.e. either dishonesty or negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
.
In Belmont Finance Corp Ltd v Williams Furniture (No 2) it was held thatfraud/dishonesty not required, i.e. negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
would suffice. In El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, it was held that constructive knowledge was sufficient; Though in Polly Peck Int’l plc v Nadir (No 2) [1992] 4 All ER 769, Scott LJ agreed that courts are always reluctant to extend constructive notice doctrine to circumstances when money is paid in ordinary course of business.
At last, in BCCI (Overseas) Ltd v Akindele [2001] Ch 437, it was held that the degree of knowledge for for knowing receipt is knowledge that makes it unconscionable for recipient to retain benefit of receipt. It was also held that the five categories of knowledge in Baden is not useful.