AUSTRALIA Law and Practice Contributed by: Joachim Delaney and Ranjani Sundar, HFW
1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts It is well established in Australia that a third party can breach a trust either by “knowing receipt” or “knowing assistance” (Barnes v Addy (1874) 9 Ch App 244 ( “Barnes” )). When either is estab - lished, this will create a constructive trust in favour of the claimant (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 ( “Farah” ) Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41). Liability for knowing receipt is a category of constructive trusteeship which depends on the defendant having received and become charge - able with trust property, and having knowledge of the breach before parting with the property (Barnes, 251–252). Liability for knowing assistance is more compli - cated and, following the Australian High Court’s decision in Farah, can be imposed if one of the following categories of knowledge can be estab - lished: • actual knowledge; • wilfully shutting one’s eyes to the obvious; • wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; and • knowledge of circumstances which would indicate the facts to an honest and reason - able person. Further, the Farah decision has created uncer - tainty surrounding the requirement that the breach be one that amounts to “dishonest and fraudulent design” in the context of “knowing assistance” . Whereas the Western Australian Court of Appeal in Westpac Banking Corpora - tion v Bell Group Ltd (No 3) [2012] WASCA 157 ( “Bell” ) adopted a more relaxed test, the court in
are nonetheless persuasive and it is likely that the findings in the FHR case would apply equally in Australia. An example of the application of this principle is found in Twigg v Twigg (2022) 402 ALR 119 at 186; [2022] NSWCA 68 [184] where it was observed by Brereton JA (Bell CJ and Payne JA, agreeing) that “In my judgment, a claim for proprietary relief against an accessory is within the analogy: it is a claim for the accessory to account for the trust property it has received, by restoring it to the trust. As the Supreme Court of the United Kingdom has observed, ‘the expres - sion equitable accounting can encompass both proprietary and non-proprietary claims’. The defaulting party is ‘liable, at the option of the ces - tuis que trust, to account either for the value... or... for the thing itself...’ (emphasis added).” The causes of action available to claimants whose agent has received a bribe include: • “Mareva” or freezing orders, and proprietary injunctions to freeze the bribe/commission and their traceable proceeds; • false accounting offences that exist at both the Commonwealth level and state/territory level; • criminal actions for domestic bribery under Divisions 141 and 142 of the Criminal Code when Commonwealth public officials are involved, or under state and territory legisla - tion which makes it a crime to bribe public officials and private individuals; • criminal actions for bribery of foreign public officials under Section 70.2 of the Criminal Code; and • claims for breach of fiduciary duty where an agent is the fiduciary of the principal.
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