There are several ways in which the court may hold that delegates or agents owe duties directly to the unitholders.

In the first place, a custodian having the title of the unit trust property registered in its name is a trustee in equity. If it does not have any power to deal with the property or any other responsibility, it will be a bare trusteeof the property obliged to deal with it as the trustee or the manager may direct.

Secondly, delegates and agents of the trustee or the manager may also be liable as constructive trustees under the two categories of constructive trusteeships commonly labelled as ‘knowing receipt’ of, or dealing with, trust property and ‘knowing assistance’ in a dishonest or fraudulent design. These two categories are derived from the seminal decision of Lord Selborne in Barnes v. Addy and have received refinement in a large number of recent cases. For the present purpose, it suffices to quote the two paragraphs from article 38 of Underhill and Hayton:

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  1. a person, not being a trustee, becomes personally liable to account as a constructive trustee if he assists in a dishonest breach of trust or other fiduciary duty and has actual knowledge of such dishonest breach or has suspicions that there may be some such dishonest breach but wilfully shuts his eyes to the obvious (so having Nelsonian’ knowledge . . .) or wilfully or recklessly fails to make such inquiries as an honest and reasonable man would then make (so having ‘naughty’ knowledge) thereby exhibiting sufficient dishonesty on his part to justify the imposition of a secondary personal liability upon him as an accessory. Indeed, he will be liable if dishonestly assisting in an honest breach;
  2. a person, not being a trustee, becomes personally liable to account as a constructive trustee if he receives trust or other fiduciary property within the scope of his agency role and then deals with such property with such role with actual `Nelsonian’ or ‘naughty’ knowledge that he is acting inconsistently with the fiduciary relationship. It is immaterial that the breach of fiduciary duty for which the fiduciary is primarily liable is dishonest or not[.]

Broadly speaking, the ‘knowing assistance’ category is directed against unconscionable conduct of the constructive trustee and the ‘knowing receipt’ category is against any unconscionable enrichment. They are wide enough to apply to persons involved in any breach of trust on the part of the trustee and any breach of fiduciary duties on the part of the manager. An accessory liability attaches to a person who dishonestly procures or assists in a breach of fiduciary obligation. It is not necessary that in addition the fiduciary was acting dishonestly.” It is clear now that an accessory cannot be made liable except on the basis of his own dishonesty. Dishonesty on the part of the accessory requires the taking of a risk by the accessory to the prejudice of another’s rights, which risk is known to be one which there is no right to take.” Mere negligence on the accessory’s part does not suffice.”

A major worry for agents or delegates of the trustee or the manager, such as solicitors, accountants, stockbrokers, custodians, and valuers, is their knowledge of the capacity of the trustee or the manager. On the one hand, as agents or delegates, they are bound simply to follow the instructions of their principals. Indeed, it does not make any commercial sense for them to enquire into the propriety of each instruction.” On the other hand, knowledge plays an important part when the court has to decide whether two doctrines will apply to give unitholders remedies against them.

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Responsibilities of Delegates and Agents to Unitholders