Dishonest assistance

Dishonest assistance, or knowing assistance, is a type of third party liability under English trust law. It is usually seen as one of two liabilities established in Barnes v Addy, the other one being knowing receipt. To be liable for dishonest assistance, there must be a breach of trust or fiduciary duty by someone other than the defendant, the defendant must have helped that person in the breach, and the defendant must have a dishonest state of mind. The liability itself is well established, but the mental element of dishonesty is subject to considerable controversy which sprang from the House of Lords case Twinsectra Ltd v Yardley.

It is a common belief that dishonest or knowing assistance originates from Lord Selbourne's judgment in Barnes v Addy:

[S]trangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions, … unless those agents received and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.

As can be seen, the judgment laid down two heads of liability: one based on receipt of trust property (knowing receipt) and the other on assisting with knowledge in a dishonest and fraudulent design (knowing assistance).

Lord Selbourne's statement has been heavily criticized, particularly on the requirement that the defaulting fiduciary / trustee has to be dishonest or fraudulent. A commentator noted that Fyler v Fyler and AG v The Corporation of Leicester, two decisions on knowing assistance in the 1840s which predated Barnes v Addy, did not mention the moral quality of the breach induced or assisted at all.

Another debate was regarding the type of knowledge that would suffice to impose liability. Peter Gibson J in Baden v Société Générale identified 5 categories of knowledge which was subject to much debate and led the courts into "tortuous convolutions".

The prevalent view is that liability for dishonest assistance is secondary. Therefore, the liability of the assistant is premised on that of the defaulting fiduciary / trustee and he/she will be jointly and severally liable with the fiduciary / trustee whom he/she assisted. However, Charles Mitchell recognized possible difficulties with this categorization: firstly, secondary liability means that the dishonest assistant will be liable for the disgorgement gains of the defaulting fiduciary / trustee, while the fiduciary / trustee will not be liable for secret profits of the dishonest assistant; secondly, the assessment of exemplary damages against the dishonest assistant will be based on that of the fiduciary / trustee which can be undesirable.

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