Dishonesty, secret informants and the taxman

In his third article on recent cases on misfeasance, fraud and dishonesty, Sanjay Bhandari of Baker & McKenzie expands on last month’s coverage of the House of Lords ruling in Twinsectra Limited v Yardley [2002] 2 All ER 377 to consider the practical implications for liability for assisting a breach of trust and the meaning of “dishonesty”. He also looks at freezing orders, the protection of confidential sources and limitations on Inland Revenue powers to investigate tax evasion.

Sanjay Bhandari is a Senior Associate in the Dispute Resolution Department of Baker & McKenzie and is a member of the firm’s Commercial Fraud and Business Recovery Groups.

When is a third party liable for assisting a breach of trust? What is “dishonesty”?

For the traditionalists amongst you who still refer to a Mareva (rather than a freezing order) or an Anton Piller (rather than a search and seizure order), I advise you to look away now. Whilst the changes effected by the Woolf reforms to those twin pillars of a fraud lawyer’s armoury of remedies were largely cosmetic, the House of Lords has recently confirmed a more fundamental development of one of the twin equitable constructive trust claims upon which freezing orders are commonly based.