Accessory liability (Personal claims against strangers -remedies against third parties)- FS

Question 1

Define Accessory Liability

Answer 1

Accessory liability arises when a third party dishonestly assists a trustee or fiduciary in committing a breach of trust or fiduciary duty, without receiving the trust property.

Question 2

What are the three key elements required to establish accessory liability?

Answer 2

1. There has been a breach of trust or fiduciary duty.
2. The third party (stranger to the trust) assisted in the breach.
3. The third party acted dishonestly.

Question 3

How does accessory liability differ from recipient liability?

Answer 3

• Accessory liability involves dishonest assistance in a breach, with no requirement to have received trust property.
• Recipient liability involves receipt of trust property, regardless of assistance.

Question 4

What is the legal test for dishonesty in accessory liability?

Answer 4

An objective standard: whether the third party’s conduct would be considered dishonest by the standards of a reasonable and honest person, considering the third party’s actual knowledge and circumstances at the time.

Question 5

Does a third party need to know they are assisting a breach of trust to be liable for accessory liability?

Answer 5

No. It is sufficient that the third party knew they were assisting an illegal or fraudulent scheme, even if they did not know it involved a trust.

Question 6

What type of remedy can beneficiaries seek from a dishonest accessory?

Answer 6

A personal remedy (monetary compensation) for the value of the misapplied trust property.

Question 7

Factors that suggest a third party may be liable as an accessory

Answer 7

• Actively assisted in the breach (positive act, not passive presence)
• Knew or strongly suspected wrongdoing
• Failed to act as a reasonable and honest person would
• Took steps that facilitated the misuse of trust assets

Question 8

In an SQE-style scenario, what makes a bank employee like Liam liable under accessory liability?

Answer 8

Liam knew Freya was a trustee, was suspicious of her motive, but still helped transfer trust funds into her personal account. His conduct would not be considered honest by a reasonable person in his position, making him liable under dishonest assistance.