Dishonest Assistance and Knowing Receipt: The Case of David Rasif
In law, dishonest assistance and knowing receipt are causes of action available to a victim of a breach of trust or a breach of fiduciary relationship against the accessory third party.
When do trusts and fiduciary relationships arise
A trust arises when a trustee holds the legal title of property on trust for a beneficiary. For instance, lawyers often handle money on their client’s behalf. When the lawyer absconds with the money, this would constitute a breach of trust, amongst other crimes.
A fiduciary relationship arises when has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. More specifically, in most cases
- the fiduciary has power or discretion;
- the fiduciary can exercise that power or discretion unilaterally so as to affect the beneficiary’s legal or practical interests; and
- the beneficiary is particularly vulnerable or dependent upon the fiduciary.
Trustees and fiduciaries are not mutually exclusive – a trustee can also be a fiduciary. In the above example, when the lawyer absconds, since he is a fiduciary, he is said to have also committed a breach of fiduciary duty.
What is dishonest assistance
Dishonest assistance refers to assistance rendered by a third party to a wrongdoer who breaches a trust or fiduciary relationship.
Dishonesty can range from deceitful intention or knowledge, to wilful blindness. A failure to ask questions when suspicious circumstances arise may constitute wilful blindness. Carelessness and stupidity are generally not equated by the courts to dishonesty.
Assistance can include anything from actions to omissions – conduct which has made the fiduciary’s breach of duty easier than it would otherwise have been.
In an action for dishonest assistance, the victim sues the third party rendering the assistance to the primary wrongdoer.
What is knowing receipt
Knowing receipt refers to the receiving of assets by a third party who knows that the assets are ill-gotten property originating from a breach of trust or fiduciary duty. Specifically, to sustain an action for knowing receipt, the plaintiff must prove the following matters:
- the disposal of the plaintiff’s assets in breach of fiduciary duty or trust;
- the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and
- knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.
In an action for knowing receipt, the victim sues the third party who receives the assets in question as a result of the wrongdoing of the primary wrongdoer.
What are the remedies available to the victim
Rogues tend not to hang around after their crimes. Hence, victims often have no choice but to try to recover their property from the involved third party.
For an action of dishonest assistance, the court sometimes allow the victim to recover the value of the misused property or funds, or to order compensation to be paid by the third party.
Similarly, for an action of knowing receipt, it may be possible for the victim to recover the misused property or funds from the third party, or seek compensation in lieu.
A real life example – the case of David Rasif
The story of David Rasif is an outrageous tale of professional impropriety. A lawyer by profession, Rasif had just received a sum of almost $2 million from his clients for a property purchase transaction. This sum was later misappropriated by Rasif and used, inter alia, for the purchase of precious stones and jewellery from a jewellery retailer.
Subsequently, Rasif absconded, and with nowhere else to turn to, the victims sued the jewellery retailer for knowing receipt and dishonest assistance, in order to recover the monies Rasif paid for the jewellery.
The action for dishonest assistance would have succeeded if it could be proven that the circumstances of the jewellery purchase were so suspicious that the retailer’s staff ought to have asked questions to ascertain the source of Rasif’s money.
The action for knowing receipt would also have succeeded if it was found that the circumstances of the jewellery purchase provided sufficient knowledge to the retailer’s staff, such that it would be unconscionable for them to retain the jewellery purchase price. Industrial practice was found to be also a relevant factor to consider – the court found that it was not the practice of jewellers to conduct extensive checks on their potential customers for fear of turning them away.
Ultimately, the judge found that given the peculiarities of the case, except for a partial return of $270,000, the jewellery retailer could keep the rest of the money.
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