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Necessary Ingredients for Ascribing Accessory Liability to Third Parties for Dishonest Assistance

 

Cyprus: Necessary Ingredients for Ascribing Accessory Liability to Third Parties for Dishonest Assistance

 

The main authority on the subject of dishonest assistance is the case of Royal Brunei Airlines v Tan [1995] 2 AC 378 according to which a person who dishonestly procures or assists in a breach of trust or fiduciary obligation is liable in equity to make good for the resulting loss.

 

Recently, the English Court of Appeal in the case of Group Seven Limited & Ors v Notable Services LLP & Ors [2019] EWCA Civ 614 set out the current law in relation to dishonest assistance as being the following:

 

‘’[…]in order to find a person liable for dishonest assistance of a breach of trust, it is necessary to establish that:

 

(a) there was a trust in existence at the material time;

(b) the trustee committed a breach of that trust;

(c) the defendant assisted the trustee to commit that breach of trust; and

(d) the defendant's assistance was dishonest.

 

It is also agreed that the same principles apply, mutatis mutandis, to a claim for dishonest assistance of a breach of the fiduciary duties which are owed to a company by its director in relation to dealings with the company's assets.’’

 

Even though one of the requirements is the existence of a trust, some case law has extended this principle to cover other fiduciary relationships. For example, the case of Selangor United Rubber Estates v Craddock (No 3) [1968] 2 All ER 1073, has extended it to cover the relationship between a director and his company.

 

According to Royal Brunei Airlines v Tan [1995] 2 AC 378, the issue of ‘dishonesty’ is examined by applying the objective standards of ordinary decent people. Nevertheless, as it was stated by inter alia the Supreme Court in Ivey v Genting Casinos UK Ltd [2017] UKSC 67, the Court will have to first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. Furthermore, the Court will have to consider the personal attributes of the third party, such as his experience and intelligence, and the reason why he acted as he did.

 

Knowledge of a fact can be imputed to a person so as to amount to ‘actual knowledge’ even if he turns a ‘’blind eye’’ to it or if he ‘’deliberately abstains from enquiry in order to avoid certain knowledge of what he already suspects to be the case’’ (see Group Seven Limited & Ors v Notable Services LLP & Ors [2019] EWCA Civ 614).

 

Even though most of the above English cases have yet to be cited by Cypriot Courts, the Cypriot Courts follow closely the approach of the English Courts regarding the application of the doctrines of equity and inter alia the abovementioned cases would be treated by Cypriot Courts as persuasive authorities on the subject of dishonest assistance.

 

 

 

 

 

For further information on this topic please contact

Mr. Kyriakos Pittas( kpittas@pittaslegal.com ) at SOTERIS PITTAS & CO LLC,

by telephone (+357 25 028460) or by fax (+357 25 028461)

 

 

The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.

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