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Do claims for knowing receipt fall within the scope of the Civil Liability (Contribution) Act 1978: i.e. will a contribution claim lie under the statute between a defaulting fiduciary and a knowing recipient of misdirected trust funds? If claims for knowing receipt belong to the law of unjust enrichment, then Royal Brompton NHS Trust v Hammond [2002] 1 WLR 1397 suggests that they do not fall within the scope of the 1978 Act, as Lord Steyn held there that restitutionary claims in UE do not count as claims in respect of 'damage' as required by s 6. Although Lord Steyn does not say so, this is borne out by Hansard, a study of which reveals that Parliament (following the Law Commission's recommendations) intended not to bring claims in 'quasi-contract' within the scope of the 1978 legislation.

One could get around this by saying that claims for knowing receipt are in fact wrong-based and not grounded in UE at all. However, in Charter plc v City Index Ltd [2006] EWHC 2508 (Ch), Morritt C more doubtfully holds that Lord Steyn's comments are obiter, and holds that even though claims in KR are 'restitutionary' they are also 'compensatory' in the sense that they are claims in respect of 'damage' as required by s 6.

In principle, allowing contribution claims between knowing recipients and other classes of defendant liable for breach of trust is obviously desirable, but I doubt whether it is open to the courts to do this by allowing claims under the 1978 Act, rather than by developing the common law (cf Niru (No 2)).

Morritt C also holds (rightly in my view) that as between a knowing recipient and a defaulting fiduciary, it will always be the recipient who should bear the burden of making good the beneficiaries' loss as he is the one who has personally benefited from the transaction.

CM

--
Charles Mitchell