The End of Knowing Receipt

• Author: Robert Chambers
• Position: Professor of Private Law, King's College London
• Pages: 1-32

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(2016) 2(1) CJCCL

e End of Knowing Receipt

Robert Chambers*

is article addresses the nature of liability for knowing receipt of assets transferred

in breach of trust, and argues that it is no dierent from liability for breach of tr ust.

It arises because the recipient has obtained assets that are held in trust and, after

becoming aware of the trust, has failed to perform the basic trust duties to preserve

the trust assets and transfer them to the proper trustees. It is not a form of restitution

of unjust or wrongful enrichment, so it should not matter whether the assets were

received for the recipient’s own benet.

* Professor of Private Law, King’s College London. is paper has a long

history. A shorter version was rst presented at the Higher Courts Judges

Conference in Napier, New Zealand in 2011, and then at the University

of Melbourne and University of Western Australia. e present version was

recently presented at the National University of Singapore. I am grateful

for the kind invitations to present this paper, the helpful comments

and questions received, and the delightful and memorable introduction

provided by Justice Sir Robert Chambers (1953-2013) when it was rst

presented.

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Chambers, e End of Knowing Receipt

I. I

II. B  T

III. S   K R’ D

IV. K  N

V.

BONA FIDE P

VI. I

VII. B R

VIII. C A

IX. U E

X. C T

XI. C

I. Introduction

The law regarding personal liability for knowing receipt of assets

transferred in breach of trust or duciary duty has received an

extraordinary amount of academic and judicial attention over the past

30 years.1 Yet despite this urry of attention (or perhaps because of it),

the law in this area remains in a muddled and unsatisfactory state. ere

are disagreements over the various elements of the cause of action, which

stem from a lack of consensus over the basic nature of the liability: is it a

form of restitution of benets received, compensation for losses caused,

or something else? Part of the problem is the language used in this area.

Words and phrases, such as “the rst limb of Barnes v Addy”, “liability to

account as a constructive trustee”, or even “knowing receipt” itself, tend

to obscure more than they reveal. While complex concepts do require

specialist terminology, it is possible to speak plainly in this area and reveal

more.

A frequently quoted statement of the essential elements of liability

1. e modern interest in the subject can be traced to a series of cases in the

1970s and 1980s in which assets were misappropriated from companies

by their directors or ocers, and perhaps the longest article ever published

in the Law Quarterly Review: Charles Harpum, “e Stranger as

Constructive Trustee” (1986) 102 Law Quarterly Review 114-62, 267-91.

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(2016) 2(1) CJCCL

for knowing receipt was by Lord Justice Homann in El Ajou v Dollar

Land Holdings:2

is is a claim to enforce a constructive trust on the basis of knowing receipt.

For this purpose the plainti must show, rst, a disposal of his assets in breach

of duciary duty; secondly, the benecial receipt by the defendant of assets

which are traceable as representing the assets of the plainti; and thirdly,

knowledge on the part of the defendant that the assets he received are traceable

to a breach of duciary duty.3

While succinct, each part of this statement raises questions about the

nature and ambit of knowing receipt. What does it mean to “enforce a

constructive trust on the basis of knowing receipt”? On what basis does

liability arise for “a disposal of [the plainti’s] assets in breach of duciary

duty” if those assets were not held in trust? Why is “benecial receipt by

the defendant” required? What degree of “knowledge on the part of the

defendant” will suce?

I must confess that I once believed, as did the late Professor Peter

Birks, that liability for knowing receipt was best understood as a form of

restitution of unjust enrichment. I was rst introduced to the subject as a

doctoral student at a seminar at All Souls College in 1992.4 Enthusiasm

for an explanation based on unjust enrichment was running high and

was persuasively promoted in the writing of Peter Birks and others at the

2. [1994] BCC 143 (CA (Civ)(Eng)).

3. Ibid at 154. Quoted in Bank of Credit and Commerce International

(Overseas) Ltd v Akindele, [2001] Ch 437 (CA (Civ)(Eng)) at para 34

[Akindele]; Caltong (Australia) Pty Ltd v Tong Tien See Construction Pte

Ltd, [2002] 3 SLR 241 (CA) at para 31; Ultraframe (UK) Ltd v Fielding,

[2005] EWHC 1638 (Ch) at para 1478 [Ultraframe]; First Energy Pte

Ltd v Creanovate Pte Ltd, [2006] SGHC 240 at para 53; Comboni v

Shankar’s Emporium (Pte) Ltd, [2007] SGHC 55 at para 49; Zambia v

Meer Care & Desai, [2007] EWHC 952 (Ch) at para 515; OJSC Oil Co

Yugraneft v Abramovich, [2008] EWHC 2613 (QB (Comm)) at para

248; Zage v Rasif, [2008] SGHC 244 at para 14; Arthur v A-G Turks &

Caicos Islands, [2012] UKPC 30 (T&C) at para 32 [Arthur]; Otkritie

International Investment Management Ltd v Urumov, [2014] EWHC 191

(QB (Comm)) at para 81.

4. See Peter Birks, ed, e Frontiers of Liability (Oxford: Oxford University

Press, 1994) Part I.