Book contents
- Frontmatter
- Contents
- Preface
- Table of Cases
- Table of Statutes
- Abbreviations
- Part A Introduction
- Part B Equitable Remedies
- Part C Equity, Contract and Property
- Part D Equitable Obligations
- 10 Fiduciary Obligations
- 11 Participants in a Breach of Fiduciary Obligation
- 12 Breach of Confidence
- Part E Express Trusts
- Part F Performing the Trust
- Part G Breach of Trust
- Part H Non-Consensual Trusts
- Index
- References
11 - Participants in a Breach of Fiduciary Obligation
from Part D - Equitable Obligations
- Frontmatter
- Contents
- Preface
- Table of Cases
- Table of Statutes
- Abbreviations
- Part A Introduction
- Part B Equitable Remedies
- Part C Equity, Contract and Property
- Part D Equitable Obligations
- 10 Fiduciary Obligations
- 11 Participants in a Breach of Fiduciary Obligation
- 12 Breach of Confidence
- Part E Express Trusts
- Part F Performing the Trust
- Part G Breach of Trust
- Part H Non-Consensual Trusts
- Index
- References
Summary
Introduction
The fiduciary may not be the only person who is accountable for a breach of fiduciary obligation. Other parties may also be liable. Suppose a solicitor misappropriates client money and then pays it into his wife's bank account. The solicitor might also have been helped to commit the breach by an accountant who gave the solicitor access to the client account. Will these third parties – the wife and accountant – be liable in equity for their participation in the fiduciary's breach?
If the solicitor is solvent, the answer to this question may not matter much. The solicitor will be ordered to restore the money to the fund, together with compound interest to compensate for the loss of investment opportunity caused by the misappropriation. But if the solicitor is insolvent the client will look to other participants in the fraud with ‘deep pockets’ to recover her funds.
Potential liability for participating in a breach of fiduciary obligation is illustrated by the following example:
Solicitor S withdraws $10 000 of client C’s money from the client account in breach of duty. He is assisted by A, the firm’s accountant. S gives $10 000 to X, who spends $2000 on a family holiday and pays the remaining $8000 to Y. Y uses $4000 to buy a valuable painting and gives the balance of $4000 to Z, who pays it into his bank account. S is insolvent. Leaving aside the worthless claim against S, C has potential claims against A, X, Y and Z. C may be able to recover against them, either because equity regards them as wrongdoers too (which is discussed in this chapter), or because equity will allow C to trace and claim property from them (discussed in chapter 21).
These claims are both personal and proprietary. C can claim a constructive trust over Y’s painting as representing part of the stolen money. This is a proprietary claim. C can also claim the $4000 paid into Z’s bank account. This involves a tracing (or identification) exercise to identify the money in Z’s account. C can then elect to take the money from the account. On the other hand, C’s claims against A and X will be personal. A never received C’s money and X no longer has the money he received from S.
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- Equity and Trusts in Australia , pp. 173 - 188Publisher: Cambridge University PressPrint publication year: 2012