Fitzalan-Howard (Norfolk) & Anor v Hibbert

Dishonest assistance ordinarily requires positive assistance in a breach of trust or fiduciary duty. Dishonesty is assessed objectively, but in the light of what the defendant actually knew at the time. Carelessness, inaction and failure to anticipate another person’s financial difficulty do not ordinarily satisfy the test. A person who has no responsibility for processing a mistaken payment, no personal interest in retaining it and no relevant intervention will not generally be liable merely because repayment was not secured before the recipient’s insolvency. The question whether a mistaken payment gives rise to a constructive trust remains distinct and need not be decided where the dishonest assistance claim fails.

The claimants mistakenly paid £235,670.67 into a bank account operated by Erinaceous Consultancy Services Limited, trading as Monaghans, although the money was due to T.G. Beighton Limited. The defendant, a former director of the relevant companies, was negotiating to acquire the Monaghans business and had been copied into an email identifying the payment as erroneous.

The payment was subsequently taken by the bank in exercise of set-off rights when companies in the Erinaceous group entered administration. The claimants alleged that the defendant had dishonestly assisted a breach of trust or fiduciary duty and had himself owed them a fiduciary duty. The central issue was whether his conduct, principally his failure to procure repayment, amounted to dishonest assistance.

1. The claim was dismissed. Judgment was entered for the defendant.
2. Dishonest assistance requires positive assistance, involving deliberate intervention, intentional intrusion or interference with the trustee’s proper performance. The applicable test is whether the defendant acted dishonestly, meaning that he failed to act as an honest person would in the circumstances. The standard is objective, but the assessment must take account of what the defendant actually knew at the time. Carelessness is not dishonesty: [1995] 2 AC 378.
3. The defendant had no responsibility for processing repayments from the centrally administered bank account. He was not a signatory and could not arrange payments. The mistaken payment was irrelevant to the proposed acquisition of the business, gave him no personal financial interest and occupied no significant place in his thinking. His failure to take steps to secure repayment was therefore not positive assistance and did not fall within hailing distance of dishonest assistance.
4. The court did not need to decide whether the mistaken payment created a trust in favour of the payer or when any such trust would arise. The authorities disclosed uncertainty on those questions, including Chase Manhattan Bank v Israel-British Bank [1981] Ch 105, Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, London Allied Holdings Limited v Lee [2007] EWHC 2061 (Ch) and Papamichael v National Westminster Bank [2003] EWHC 164 (Comm).
5. There was no basis for imposing a personal fiduciary duty on the defendant to protect the claimants’ interests.