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.

Citation
[1995] 2 AC 378
Court
Privy Council
Year
1995
Subject
Equity and Trusts
Topic
Tracing and third party liability

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.

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