Withers Worldwide

The opinion of the Privy Council in this case is important in the field of liability for dishonest assistance in a breach of trust or other fiduciary duty, for two reasons.

First, it ‘clarifies' what the Board said was an "element of ambiguity" in the speech of Lord Hutton (with which the majority agreed) in Twinsectra v Yardley [2002] 2 AC 164, and what Lord Hoffmann meant in the same case, when considering whether Lord Nicholls' test for dishonesty expressed in Royal Brunei v Tan [1995] 2 AC378 included a requirement to show that not only was the defendant's behaviour dishonest by the standards of right-thinking people, but also that he was conscious of this fact at the time when he acted. Contrary to the views of many legal practitioners, in Twinsectra Lord Hutton appeared to say that Lord Nicholls had intended to introduce a test of conscious dishonesty, and that the defendant must have known that his actions were dishonest (and that therefore some enquiry was necessary into the defendant's view about generally accepted standards of dishonesty). This apparent addition to the balance, in the test, between the objective standard (that of right-thinking people) and the subjective state of the defendant's mind (about the nature of the transaction in which he was participating), is now said to be a misunderstanding of what Lord Hutton meant, and that he meant only that the defendant's knowledge of the transaction had to be such as to render his participation contrary to normally accepted standards of honest conduct; it does "not require that the defendant had reflections about what those normally accepted standards were".

This ‘correction' of a widespread misunderstanding is said by some academic writers to bring what the majority of the House of Lords held in Twinsectra back to a position more in line with Lord Millett's (minority) view of the matter expressed in that case.

The Board (which included Lord Hoffmann) also took the opportunity to clarify Lord Hoffmann's statement in Twinsectra that a dishonest state of mind meant "consciousness that one is transgressing ordinary standards of honest behaviour". It says that this was intended to require "consciousness of those elements of the transaction which make the participation transgress ordinary standards of honest behaviour" - not to require the defendant to have thought about what those standards were.

The second important aspect is the Board's disapproval of Rimer J's view in the Brinks Mat case (Brinks Ltd v Abu-Saleh [1996] CLC 133) that a person cannot be liable for dishonest assistance in a breach of trust unless he knows of the existence of the trust or at least the facts giving rise to the trust. This opinion was inconsistent with that of Millett J in Agip (Africa) Ltd v Jackson [1990] Ch 265, who (in departing from Sachs LJ's previous view in Carl Zeiss Stiftung v Herbert Smith (No 2) [1969] 2 All ER 367) held that it was not necessary that the defendant should have been aware of the precise nature of the fraud or even the identity of the victim. Rimer J's view was preferred by Mance J in Gruppo Torras v Al-Sabah (No 5) [1999] CLC 1469 and was endorsed (obiter) by the Court of Appeal in that case ([2001] Lloyd's Rep Bank 36), though it did not receive universal approval.

The Privy Council appears to have reinstated the Millett approach, according to which a defendant will not be absolved from liability on the ground that he did not know the kind of fraudulent behaviour he was assisting in or who the victim was (or that he thought he was helping to defraud someone else).