The Nature of Knowing Receipt

When a trustee or fiduciary of the claimant beneficiary transfers money or property to the defendant recipient in breach of duty, the claimant may have an equitable proprietary claim to recover the traceable proceeds of the transfer in the estate of the defendant, and a personal claim for knowing receipt. It seems that the conditions for the equitable proprietary claim are well established: it subsists against any recipient who still has the property or its traceable proceeds unless he is “equity’s darling” – a bona fide purchaser for value of legal title without actual or constructive knowledge.1 But for many years there has been controversy over the “level of knowledge” necessary for personal liability in knowing receipt, i.e., whether it arises only when the defendant has actual knowledge of the breach of duty, or whether constructive knowledge will suffice. The Court of Appeal has recently held in BCCI v Akindele2 that the requirement is that “the recipient’s state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt”.3 This is unlikely to resolve the longstanding controversy.