Royal Brunei Airlines Sdn Bhd v Tan
A person who dishonestly assists in a breach of trust is liable for the loss, whether or not the trustee was dishonest.
Facts
Royal Brunei Airlines appointed a travel agency, Borneo Leisure Travel, as its agent for selling tickets. The agency held the money from ticket sales on trust for the airline, but, with the knowledge and assistance of its managing director and main shareholder, Mr Tan, it used the money for its own business purposes. The agency became insolvent, and the airline sued Mr Tan personally for dishonest assistance in the breach of trust.
Legal principle
The Privy Council held that Mr Tan was liable. Lord Nicholls said that a person who dishonestly assists a trustee to commit a breach of trust is liable to the beneficiary, and that it is not necessary for the trustee also to have been dishonest. Dishonesty means not acting as an honest person would in the circumstances, which is an objective standard, although the court will take into account what the person actually knew. Mr Tan had acted dishonestly by causing the agency to use the money for its own purposes, knowing that it was not entitled to do so.
Related cases on tracing and third party liability
- Agip (Africa) Ltd v Jackson [1991] Ch 547
- Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509
- Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37, [2006] 1 WLR 1476
- Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22
- BCCI (Overseas) Ltd v Akindele [2001] Ch 437
- Bishopsgate Investment Management Ltd v Homan [1995] Ch 211
- Devaynes v Noble (Clayton's Case) (1816) 1 Mer 572
- El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685
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