6 Participatory Liability for Breach of Trust or Fiduciary Duty PAULINE RIDGE I. Introduction Confusion surrounds the equitable liability of a third party to a trust or fiduciary relationship who participates in a breach of the trust or fiduciary duty, but without necessarily receiving trust property. 1 Compounding this confusion is the absence of consensus in courts that share a common Chancery law heri- tage. Notably, the English courts, including the Privy Council within that term, and the High Court of Australia take quite different approaches to the liability, although drawing upon the same nineteenth century trust law precedents. The Canadian common law is different again, although reliant upon the same cases. 2 Until recently, the jurisdictional differences were excused on the basis that the Australian and Canadian courts had not yet had the opportunity to consider the Privy Council’s rationalisation of this form of equitable participatory liability in Royal Brunei Airlines Sdn Bhd v Tan (Royal Brunei) in 1995. 3 This still may be so with respect to the Canadian law, which will not be considered further in this chapter, but it seems clear now that the Australian law is set on a different path. 4 The English approach is one of broad principle. In Royal Brunei, Lord Nicholls gathered together the nineteenth century trust law precedents and reformulated them as a loss based ‘accessory’ liability that attaches to a third party, D, who procures or assists in any breach of trust by the fiduciary, F. 5 From the twentieth century trust law precedents he identified a requirement of ‘dishonesty’ on the 1 This chapter does not deal directly with recipient liability, that is, liability based upon D’s receipt of trust property in breach of the trust. 2 Air Canada v M & L Travel Ltd [1993] 3 SCR 787 (SCC). See generally D Waters, M Gillen and L Smith, Waters’ Law of Trusts in Canada, 3rd edn (Toronto, Thomson Carswell, 2005). 3 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC). 4 New Zealand law is not considered in this chapter. Royal Brunei’s dishonesty test has been adopted in that country: US International Marketing Ltd v National Bank of New Zealand [2003] NZCA 295, [2004] 1 NZLR 589. 5 The liability was formulated in terms of trusts; its application to fiduciaries generally is discussed below.