Knowing Assistance

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  • Pleadings – knowing assistance – summary judgment – plaintiffs sought leave to file further amended statement of claim to add new allegations accessorial liability under second limb of Barnes v Addy – requirements of pleading accessorial liability ‘based on knowledge of an intentional and purposive fraud’ – s63 Civil Procedure Act 2010 (Vic) – held: Court found that plaintiffs’ failure to plead additional facts was based in lack of evidence for allegations – in absence of those facts case against second defendant could not succeed – claim against second defendant dismissed – Nicholson Street Pty Ltd & Ors v Letten & Anor (No 4) [2017] VSC 307
  • Pleading accessorial liability based on knowledge of an intentional and purposive fraud needs to have regard to the following passage of Stephen J in Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373 at 412:“If a defendant knows of facts which themselves would, to a reasonable man, tell of fraud or breach of trust the case may well be different, as it clearly will be if the defendant has consciously refrained from inquiry for fear lest he learn of fraud. But to go further is, I think, to disregard Equity’s concern for the state of conscience of the defendant.”
  • In Yeshiva Properties No.1 Pty Ltd v Joan Marshall  [2005] NSWCA 23, Bryson JA said (at [22]):“In the application of Stephen J’s test it is not necessary that the fraudulent scheme or purpose of the fiduciary or trustee should be fully known, or should be understood in any detail at all; the test is complied with if the known facts would communicate to a reasonable person a general understanding that there was a fraud, breach of trust or breach of fiduciary duty.”
  • In relation to claims arising under the first limb of Barnes v Addy, see Diamond Hill Mining Pty Ltd v Huang Jin Mining Pty Ltd & Ors [2011] VSC 288 at [93]-[94].
  • It has become common to describe the first limb of Barnes v Addy as involving “knowing receipt” and the second limb as involving “knowing assistance”.  See Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 236 ALR 209 at [112]. 
  • The rule in Barnes v Addy – money had and received – tracing – ‘Briginshaw standard’ – ‘knew or ought to have known’ – expert report setting out basis for conclusion first defendant had misappropriated $3,565,862.95 – held: Court satisfied first defendant had misappropriated $3,565,862.95 – plaintiff entitled to remedy to facilitate amount’s recovery – Court not satisfied second defendant had ‘knowledge or constructive knowledge’ of fraudulent payments’ receipt: Silversea Cruises Australia Pty Ltd v Mary Ann Abellanoza and Anor [2018] NSWSC 1565