STRANGERS RECIPIENT LIABILITY

Stranger who receives trust property in breach of the trust?

(A) Stranger was a volunteer.

It wouldn't make a difference if an unknown person acquired property as an

innocent volunteer and kept it in constructive trust, regardless of whether or
not the unknown person was already aware of the situation. The beneficiary's
equitable interest will be protected as a result of this action's consequences. It
is possible for the grantee to recover the property as well as any profits that are
associated with it. In the case of Westdeutsche Bank vs Islington LBC, Lord
Browne wilkinson said that even if the third party doesn't know that what he
got in his trust property, the recipient is still able to show that he owns that
property.
In the case of Re Diplock, the decision on the ownership rights of the
beneficiary was taken without taking into account the recipient's
responsibilities. Tracing rules are in place to protect the individual who is going
to benefit from a charitable contribution by making it easier to identify assets
that are already in the custody of a donor acting in good faith and the
reputation of the volunteer as an individual will not suffer as a direct result of
this. The issue was brought to everyone's attention in the case of Re Montagu's
Settlement Trusts by Megarry VC where he claimed that even if a volunteer
makes the mistake of receiving the property inadvertently and believes that he
is entitled to it, that person cannot be a buyer since they have not been given
appropriate notice. As a result, it is imperative that the item be handed back by
the volunteer. If the volunteer is no longer in possession of the property, the
only method for him to protect himself from legal responsibility is to act in the
capacity of a constructive trustee. Conversely, personal remedies might be
imposed on the trustee if he obtained the property without meeting the criteria
for the amount of misbehavior necessary to qualify as a constructive trustee.
This occurs when the trustee violates the rules for qualifying as a constructive
trustee. The huge gulf that exists between personal and proprietary remedies
that might be taken against strangers is best shown by the case of an
unwitting recipient of trust property.
Case 2:
If a stranger purchases trust property in good faith but is unaware that it is
held in trust, the purchaser will be given full title to the property, free and clear
of any interests of the beneficiaries. This is because the purchaser was
unaware that the property was held in trust. After the completion of the
transfer, the receiver will no longer have the right to make any claims about
the property. It is frequently unclear whether or not the individual who is
awarded the property will be held personally liable for any misdeeds. The
existence of some degree of guilt is essential, as stated by the courts, in order
to impose such obligation.
In the case of Re Diploc, the Court of Appeal came to the conclusion that a
charity might be held liable for accepting a gift from an estate even if the
charity was under the mistaken impression that the present was intended for
the charity. This course of action received a favorable vote from the House of
Lords.
There were attempts to do away with the rigorous method; consequently, the
Court of Appeal imposed a condition in Re Diplock to ensure that all possible
individual remedies had been exhausted before applying the severe approach to
charitable organizations. This was done to ensure that the rigorous method
would not be used unfairly against charitable organizations. Unless (the
beneficiary of trust property) lacks the requisite degree of comprehension, he is
not normally accountable to account as a trustee, as stated by Lord Browne-
Wilkinson in the case of Bank Vs Islington LBC.
A number of cases, such as BCCI Vs Akindele, Re Montagu's Settlement
Trusts, Lipkin Gorman Vs Karpnale Ltd, and Eagle trust PLC Vs SBC
Securities Ltd, have all found that the harsh responsibility that was put on the
receivers is unconstitutional. Another recent case that decided against the
application of strict responsibility was Box Vs Barclays. Lord Millet asserts in
Twinsectra that the recipient does not have any personal responsibility for the
error that was committed. Both the House of Lords and the Court of Appeal
made efforts, in the leading dictas that they issued, to shed light on the
situation; nevertheless, these efforts were impeded by opposing judgements,
obiter remarks, and counterproductive examples such as Re Diplock.
When it comes to individual responsibility, one of the most debatable topics is
the determination of the minimum level of wrongdoing that must occur before
blame may be assigned. The notification showing that the receiver obtained the
property innocently and without accumulating any equitable rights must be
clearly distinguished from the notification indicating the degree of guilt. This
distinction must be evident at all times.
In the first possible situation, the question of whether the buyer acquires title
to subject or free property is the most pressing problem. The second inquiry is
to determine whether or not the duties of trusteeship have been thrust onto an
individual against their will.
It is necessary for the purchaser to be informed of the trust in order for the
beneficiary's equitable interest to be preserved. In the notification, there should
also be a statement of the buyer's degree of knowledge and evidence that he
has completed the necessary research in order for him to be considered a
rational and sane businessperson (Millet J in Macmillan Inc v Bishopsgate
Investment Trust ltd).
The notification obligation is of the utmost significance to the buyer, as the
buyer is required to establish that there is no trust. In actual fact, the kinds of
questions that are asked will vary in content depending on the nature of the
property and the kind of transaction that is being conducted.
The decision in the case of Shares: Macmillan Inc. Vs Bishopsgate-Millet J
makes it abundantly clear that the requirement of conducting due diligence
that is imposed by the Real Estate Purchase Act does not extend to business
transactions where time constraints make conducting such investigation
impractical. If the unknown person had acquired trust property and was aware
of any of the five different forms of trust violations specified in Baden Delaux,
then the unknown person would be regarded a constructive trustee and would
be susceptible to responsibility.
In the case of El Ajou Vs Dollar Land Holdings, the judge ruling the case
determined that the buyer was at blame owing to the recklessness that they
shown. Both International Sales Ltd. Vs Marcus and Agip (Africa) Ltd. Vs
Jackson resulted in the solicitation of opinions that were very similar to one
another.
The Court of Appeal stated, in the case of Carl Zeiss Stiffung Vs Herbert Smith
& Co., that dishonesty is the most significant aspect to take into consideration.
In Baden, Sachs LJ restricted the scope of responsibility to to the first three
phases of consciousness. Megarry Jadrry used a strategy that was quite similar
to this one in another case that was connected to this one called Re Montagu's
Settlement Trusts. In Westdeutsche, Loed Browne Wilkinson made the
observation that the understanding of Baden as being comprised of only its
first three states was correct. In the case of Bank of America Vs Arnel, Aikens
J. utilized the position that Potter L.J. had presented in Twinsectra and applied
it to the dishonesty test.
Recent court decisions have added even more confusion to an issue that was
already fraught with it. In the case of BCCI Vs Akindele, the Lord Justice
Nourse stated that the person who is to get a benefit must be notified in such a
way that it would be unethical to hide it. The dishonesty test was upheld in
Royal Brunei despite the fact that many people were upset with this pick
according to Lord Nicholls. He was so predisposed to lying that when he looked
up the definition of dishonesty in a dictionary, he read "unconscionability" next
to it.
The confusion that existed prior to the publication of Lord Nicholls's
extrajudicial writings has not been eased by the fact that these writings have
been made public. He argued that the change of position argument is valid
despite the fact that one party may have been at fault. Critics made reference
to these concepts, but in a more roundabout manner. In the current state of
affairs, there is a significant amount of ambiguity on the aforementioned issue,
which has to be clarified by the House of Lords.

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