//
you're reading...
Cases, constructive trusts, Trustees, Trusts

What a wicked web we weave

when first we practice to deceive. The case of Marr v Parkin demonstrates the need sometimes to differentiate between transaction risk and expectation and the rights that might flow from the latter.

The facts of the case are relatively straight-forward. Ms Marr’s home was subject to a mortgagee sale. She wished to retain the home and so the plan was made. Her friend Ms Guttenbeil would bid at the auction, Mr Parkin would pay the deposit and in due course Ms Marr would settle. Sadly Ms Marr could not arrange finance and Ms Guttenbeil in the invidious position of otherwise being required to settle the transaction nominated Mr Parkin to settle, which he did. Ms Marr protested and amongst other things argued that Mr Parkin settled with knowledge of a constructive trust in Ms Marr’s favour.

The High Court rejected Ms Marr’s claim that Mr Parkin received the property knowing it was subject to a constructive trust; or that Ms Marr’s agent, Ms Guttenbeil, had breached her fiduciary duty to Ms Marr when she assigned the right to purchase the property to Mr Parkin.

This decision was up-held by the Court of Appeal who also noted that even if not persuaded by the arguments, Ms Marr’s lack of clean hands; the Court of Appeal noting at [53] that “had we reached the stage of having to consider relief, we would have required considerable persuasion that Ms Marr’s conduct warranted equitable intervention. Ms Marr’s hands were far from clean.”

The main issue to determine of whether Mr Parkin was liable for knowingly receiving the property (knowing about Ms Marr’s alleged interest) hinged the Court of Appeal found on “an analysis of the nature and scope of the agency agreement between Ms Marr and Ms Guttenbeil.” This was because the agency agreement formed the foundation of any fiduciary duties Ms Guttenbeil owed Ms Marr.

The Court of Appeal found that while there was an agreement Ms Guttenbeil agreed to be Ms Marr’s agent on a limited basis. She agreed to attend the auction and bid for the property on Ms Marr’s behalf and if Ms Guttenbeil were successful she also agreed that she would enter into a sale and purchase agreement with the mortgagee.

However, when Ms Marr was unable to raise the purchase funds that changed matters. “Neither Ms Marr nor Ms Guttenbeil intended Ms Guttenbeil would have to settle the purchase of the property if Ms Marr were unable to raise the necessary funds.

“[46] The agency agreement between Ms Marr and Ms Guttenbeil remained in force for as long as it was feasible that Ms Marr would raise the funds required to settle the purchase of the property. The agency agreement, and Ms Guttenbeil’s fiduciary duty to Ms Marr, terminated when it became abundantly clear there was no realistic prospect Ms Marr would be able to raise the necessary funds.”

Both courts agreed that by 15 August 2013 “Ms Marr knew Ms Guttenbeil was very concerned about her exposure and that Ms Guttenbeil was looking for funds from other sources. Ms Marr was also aware from Mr Barton that Mr Parkin was preparing to purchase the property if Ms Marr was unable to find the funds to enable Ms Guttenbeil to settle as required on 15 August 2013.”

Once Ms Guttenbeil ceased to be Ms Marr’s agent she no longer owed any fiduciary duties to Ms Marr. Absent these duties there was nothing to attach a claim of knowing receipt to. That is “Absent any breach of fiduciary duty by Ms Guttenbeil, Mr Parkin could never be liable on the basis of knowing receipt.”

While knowing receipt can be a useful claim in the trust arsenal it cannot survive without a breach to attach itself to.

Extra learning

Knowing receipt

From [38] and [39] of the judgment in Marr v Parkin:

[38] Liability on the basis of “knowing receipt” and its related but distinct “knowing assistance” basis of liability can be traced to the judgment of Lord Selborne LC in Barnes v Addy.  Lord Selborne did not use the terms “knowing receipt” or “knowing assistance”. Those descriptions were first devised in 1966 by the editors of Snell’s Principles of Equity.  Brightman J adopted the terms in Karak Rubber Co Ltd v Burden (No 2) as an “admirable shorthand description of their different natures”.The terms “knowing receipt” and “knowing assistance” are now well entrenched in the lexicons of Judges, lawyers and academics. Despite being well-established there has been considerable academic and judicial debate about the conceptual basis of liability for knowing receipt.
[39] The most difficult challenge with the law of knowing receipt is establishing the degree of knowledge or notice required before the recipient of the property in question will be held accountable. Part of this challenge arises from the different approaches that have been taken to assessing the degree of knowledge or notice required to establish liability. According to one school of thought any one of the five categories of knowledge or notice set out in Baden v Sociéte Générale pour Favoriser le Développement du Commerce et del lʹIndustrie en France SA will suffice. Another school of thought focuses on whether the conscience of the recipient of the property in question is affected.

References

  • Marr v Parkin [2015] NZCA 371
  • Barnes v Addy (1874) 9 Ch App 244
  • Robert McGarry and PV Barker Snell’s Principles of Equity (26th ed, Sweet & Maxwell, London, 1966) at 202.
  • Karak Rubber Co Ltd v Burden (No 2) [1972] 1 All ER 1210 (Ch D) at 1235
  • Rohan Havelock “The Battle Over Knowing Receipt” (2015) 26 NZULR 587
  • Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de lʹIndustrie en France SA [1992] 4 All ER 161 (Ch D) at 235–243
  • Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] 2 All ER 961 (HL) at 987; Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 (CA) at 455; Worldtel NZ Ltd v Kim HC Auckland CIV-2009-404-1158, 30 September 2011 at [38]

Discussion

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: