A concise, accurate and detailed essay plan describing the standard for liability of third party accessories to breaches of trust. Analysed and criticised using established and heavy-weight academics to support the argument. Achieved a first class in the final exam.
‘The test for establishing accessory liability of third parties presents a nightmare for first instance
judges.’ Discuss.
1. Introduction
Confusion has long surrounded the test for establishing liability of third parties in instances of
accessory liability
The current law identifies dishonesty as the touchstone of liability (HL in Twinsectra v Yardley)
Whether ‘dishonesty’ is subject to an objective or subjective standard is central to the debate on
this topic
The Privy Council decision in Royal Brunei Airlines v Tan (1995) seems to provide some clarity, but
any apparent progress was unravelled by the House of Lords’ decision in Twinsectra
This essay analyses the law before Tan, and the subsequent attempts at clarification presents a
nightmare for first instance judges
2. Before Tan
Owing to Lord Selborne’s seminal speech in Barnes v Addy, the touchstone of accessory liability
before Tan was originally underpinned by ‘knowledge’
However, unclear whether ‘actual knowledge’ or ‘constructive knowledge’ of breach was necessary
At the heart of this ‘to-ing and fro-ing’ was a Baden 5-point scale; a tool for judges to use to
establish the required level of knowledge
The Baden scale was widely criticised for lacking clarity and for not being comprehensive
o Norman - the boundaries between the categories were imprecise & the judicial demarcation
line between AK and CK could not always be drawn with certainty
o E.g. the language of points 1-3 suggest examination of D’s state of mind (actual knowledge),
whereas 4 & 5 examine the state of mind of a reasonable person (constructive knowledge)
Consequently, Lord Nicholls’ in Tan drastically reformulated the touchstone of liability to instead
become dishonesty
3. Royal Brunei Airlines v Tan (PC)
Lord Nicholls’ creation of a standard of fault in Tan, based on dishonesty rather than knowledge,
was widely commended by academics e.g. Harpum and Nolan.
The Baden scale was to be forgotten (although some judges still find the scale helpful)
The new test meant that people who dishonestly assisted because they knew of the breach or
deliberately ignored the breach (Nelsonian blindness) were liable & those who didn’t know
anything were not liable as they previously would have been
Therefore, to ascertain dishonesty, the court should look to what the defendant actually knows
o Raises the threshold for liability & removes CK off the Baden scale
Lord Nicholls claimed that the test was purely objective, although his formulation retains some
subjective elements in that honesty concerns conduct in the light of what a person actually knew at
the time
However, honesty is not an optional scale according to individual moral standards
He confirmed the test is objective based on the reasonable man
o Rejected the Ghosh test, which included both objective and subjective elements.
Whilst Nicholls should be commended for introducing a seemingly straightforward test of
dishonesty, ending the AK/CK conundrum, it does remove knowledge from the equation all
together
NB: Tan was a PC decision and therefore not authoritative
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