What is the test for knowing assistance of a fraudulent trust?

Alberta, Canada


The following excerpt is from Associated Investors of Canada Ltd. (Re), 1996 CanLII 10541 (AB QB):

The origin of the concept of knowing assistance of a fraudulent trust appears to have its origin in the case of Barnes v. Addy (1874), 9 Ch. App. 244. At page 251: Those who create a trust clothe the trustee with legal powers and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustees to the injury of the cestui que trust. But on the other hand strangers are not to be made constructive trustees … unless those agents receive and become chargeable with some part of the trust property or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.

I take this latter statement which I have underlined to be the source of this principle. This case was followed in Canada by decisions which include MacDonald v. Hauer (1976), 1976 CanLII 959 (SK CA), 72 D.L.R. (3d) 110 (Sask. C.A.).

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