Conveyancer and Property Lawyer

Similar to the standard of breach of duty in tort, the objective standard of dishonesty does not take into account how much assistance the accessory offered; there will be liability in knowing assistance as long as the accessory can be shown to have assisted the breach of trust to some degree. But because of the subjective test, a defendant may escape liability if it can show that it did not think it was doing wrong or, as seems to be the case with Mr Leach, that the defendant hardly gave any active consideration to the moral issues at all and merely assumed that it was committing no wrong.

Mr Leach appeared to have taken a restrictive view of his professional responsibilities, thereby preventing him from making a moral assessment of facts of which he was fully aware (Baughen, 2002). If Lord Millett's purely objective test is adopted then a person will not escape liability (Richardson, 2002) However, many of the practical considerations remain unaltered by Twinsectra.

A claimant who can prove that the conduct would be regarded as dishonest by a reasonable and honest person has probably gone nine-tenths of the way towards proving that the defendant is likely to have recognised that such conduct was so regarded. Furthermore, the evidence available to prove the objective element of dishonesty is likely to be highly relevant to the subjective element of the combined test (Stafford, 2002). Due to the subjective element of the combined test, it is possible that a defendant may decline to give evidence in order to improve his prospects of success at trial.

The burden of proof may remain with the claimant, but, as the defendants in Agip (Africa) Ltd v Jackson [1991] Ch 547 found, silence need not disable the court from deciding the issue unfavourably. Stafford (2002) suggested that a possible procedural consequence of the decision in Twinsectra is its impact upon the prospect of a summary determination of the claim. In the context of accessory liability, Twinsectra introduced uncertainty and confusion over the state of mind of an accessory who assists in a breach of trust.

In effect, the decision has introduced the test of dishonesty appropriate for the purposes of criminal liability into civil liability (Panesar, 2003). Hence, this area of law is now more nebulous than before (Speirs, 2002). In support of Twinsectra is the case of Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2005] UKPC 37 which confirmed that the test in Twinsectra is the correct test, but clarified its application (Blair, 2005).

It is through the economic torts that the common law protects against the intentional violation of economic interests (Carty, 1988). The principle economic tort is interference with another's rights (the most well-known example of which is inducement to breach a contract); other economic torts include conspiracy, intimidation, and wrongful use of confidential information (Sales & Stilitz, 1999). Interference with a potential contract can be tortious on similar grounds under the tort of interference with trade by unlawful means (Baughen, 2002).

Interference with a subsisting contract is a tort defined in Winfield and Jolowicz on Tort as follows: "A commits a tort if, without lawful justification, he interferes with a contract between B and C, (1) by persuading B to break his contract with C, or (2) if by some unlawful act he directly or indirectly prevents B from performing his contract" (p. 621). In Twinsectra, Mr Leach could equally have been held liable for the tort of interference with a subsisting contract because he had requested Mr Sims to transfer funds which he must have known would have called for a breach of Mr Sims' undertaking to Twinsectra.

But in the absence of a trust or fiduciary relationship, a claim will have to be brought solely under one of the economic torts, which may result in the claimant recovering a lower amount (Baughen, 2002). In Indata v A. C. L. The Times 14 August 1997 CA the claimant received less recovery because the damages were assessed on the basis that what it had lost was the chance of obtaining the contract, which was a much lower sum than the profits made by the broker. Knowledge, intention and actual breach are vital ingredients to the tort of interference with contractual relations (Carty, 1988).

Baughen (2002) asserted that the economic torts require a degree of knowledge on the part of the defendant, similar to that required to establish liability for knowing assistance. In Swiss Bank Corp v Lloyd's Bank Ltd [1979] Ch 548 actual knowledge was held to be a key ingredient of the tort of interference with contractual relations. But as to knowledge, however, the defendant need not be familiar with all the details of the contract, for otherwise the tort would hardly ever be committed (Rogers, 2002).

In Emerald Construction Co Ltd v Lowthian [1996] 1 WLR 691 the defendants knew of the existence of the contract between the claimants and their co-contractors but they did not know its precise terms. The evidence showed that the defendants were determined to bring the contractual relationship to an end, regardless of whether it was done in breach or not, and the Court of Appeal held that this was sufficient to entitled the claimants to an interim injunction.

Where a defendant s familiar with the trade in question he may be taken to have knowledge of the existence of a contract even though he cannot identify the other contracting party and even though he may have no direct information about any particular contract at all, as was the case in Merkur Island Shipping Corporation v Laughton [1983] 2 AC 570, a case of direct interference with contract (Rogers, 2002).

If A has some knowledge of the relations between B and C but has an honest doubt whether there is a contract at all between B and C it has been held that this would provide a good defence (Smith v Morrison [1974] 1 WLR 659). But if the doubt is whether A's rights or C's under two inconsistent agreements should prevail and A chooses to adopt the course which may be seen as interfering with C's rights, A must show that he was advised and honestly believed that he was entitled to take that course (Rogers, 2002).

Weir (1997) argued that the House of Lords in Allen v Flood [1898] AC 1 HL had good reasons for insisting that liability in the economic torts should depend on the unlawfulness of the means used to inflict the harm, that the tort of procuring breach of contract recognised in Lumley v Gye is an example of an economic tort dependent on unlawful means, and that in all the economic torts that are dependent on unlawful means the requisite mental element is that the harm was deliberate (Bagshaw, 1998).

Andrews (2003) suggested that introducing a tort of interference with a fiduciary relationship would remove the uncertainty occasioned in interpreting the requirement of dishonesty, as dishonesty would not be required for the tort. Instead, liability would be incurred only when there has been an intentional interference causing a breach of fiduciary duty. Thus the requirement for dishonesty borrowed from criminal law would be replaced with the requirement of intention from the law of tort.

All that would be needed would be for the accessory to have knowledge that the consequences of his actions will result in a breach of trust. Rogers (2002) argues that there is no tort of inducing breach of trust because a person who procures such an act becomes himself, by the doctrines of equity, liable as a (constructive) trustee and that is sufficient to protect the beneficiary under the trust (Metall v Donaldson Lufkin & Jennette [1990] 1 QB 391).

Interestingly, in Donaldson Lufkin & Jennette the Court of Appeal refused to recognise the tort of assisting a breach of trust, largely due to lack of precedent. Lord Slade said "the principles of the law of trusts, in particular those expounded by Lord Selbourne L. C. in Barnes v Addy… are quite sufficient to deal with those persons who incite a breach of trust or wrongfully meddle with trust assets or interfere with the relationship of trustee and beneficiary" (at p. 481).

However, Andrews (1990) asserted that the absence of strong foundations for liability for dishonest assistance and the corrosion of the expression of the requirements of liability in Barnes v Addy, occasioned by cases such as Tan and Twinsectra make this rejection less convincing today that it may have been in 1990. It is worth noting that Lord Hoffmann (1994) had previously argued for the abolition of equitable rules in favour of the common law. He wanted the "removal of distinctions which bear no relationship to commercial realities and which can only be explained…

as consequences of the old division between law and equity" (p. 29). The Court of Appeal in Twinsectra had ruled out a tort of procuring a breach of contract, on the basis that equitable principles were adequate to deal with the problem (Yeo & Tjio, 2002) Baughen (2002) argued that "when criminal sanctions are in issue there are good policy reasons for retaining a more rigorous definition of dishonesty than is the case in civil proceedings where the issue is whether or not the defendant should compensate the claimant" (p.

56) Smith (1977) argues that recourse to the law of tort would introduce "undesirable uncertainty" into property law (p. 328). This is because interaction of the two bodies of law would generate uncertainty and many of the concepts of tort law, like unreasonableness and foreseeability, are inherently flexible and vague whereas property law, in particular, tends to utilise hard-edged concepts.

In conclusion, because of the House of Lords decision in Twinsectra, it is now much harder for a plaintiff to obtain recovery using the equity route. This is because the burden of proof lies on them to prove that the defendant was dishonest. Bearing in mind how difficult it can be to prove state of mind, the decision in Twinsectra is good news for any defendant accused of knowing assistance in a breach of trust, but bad news for anyone endeavouring to establish liability (Reed, 2002).

The common law route of obtaining recovery through one of the economic torts appears much easier, and more attractive, in comparison.


ANDREWS, G. (2003) 'The redundancy of dishonest assistance' Conveyancer and Property Lawyer Sept/Oct 398 BAGSHAW, R. (1998) 'Can the economic torts be unified? ' 18 Oxford Journal of Legal Studies 729 BAUGHEN, S. (2002) Professionals & Fiduciaries: Perils and Pitfalls, Gostick Hall Publications, Essex BLAIR, A. (2005) 'It's not all in the mind' 155 New Law Journal 1804