Litigator's View

On the face of things, recent judicial attempts to equate the basis for so-called knowing receipt cases with knowing assistance cases in the realm of constructive trusts have been rejected by the Court of Appeal's re-analysis in Bank of Credit and Commerce International (Overseas) Limited v Akindele.

The Court of Appeal agreed with trial judge Justice Carnwath's result and dismissed the liquidator's appeal.

The sole judgment was that of Lord Justice Nourse and through him the Court of Appeal agreed that there was no basis for invoking a claim in knowing assistance, in effect totally acquitting the defendant of dishonesty.

Lord Justice Nourse suggested that there were two questions – first, what was meant by knowledge in knowing receipt, and secondly, was it necessary in such a case for the recipient to act dishonestly. The court found that dishonesty is not and never has been a necessary ingredient of liability in knowing receipt.

The case law since the 1980s, both in England and in the Commonwealth, showed that constructive knowledge that the assets received related to a breach of trust was not enough.

The fivefold categorisation of knowledge as set out in Soci-‚t‚ G‚n‚rale v Baden Delvaux was regarded as being doubtful. The test was whether the recipient's state of knowledge was such as to make it unconscionable for him to retain the benefit of the receipt.

Quite where the boundaries of unconscionability overlap or fail to overlap with dishonesty is open to future debate. Clearly Lord Justice Nourse remained unimpressed by fault-based considerations.

There are two possible scenarios: gross stupidity in the face of what might otherwise be highly dubious circumstances in the wake of a breach of trust; or the problematic case of aggregating the knowledge of more than one party, especially in a commercial transaction where the behaviour of one could not be unconscionable.

David Marks is a member of 3/4 South Square.