Meaning
Liability arises when a person receives property transferred in breach of trust or fiduciary duty with sufficient knowledge of the wrongdoing. Unlike those who assist in a breach, a party charged with knowing receipt actually takes possession of the trust assets. The recipient becomes liable to return the property or its value to the rightful owners.
Unconscionability Test
The recipient is held liable if their state of knowledge makes it wrong for them to retain the benefit. Knowledge of the breach must be sufficient to make the conduct of the recipient unconscionable in the eyes of the court. Proving knowing receipt requires showing that the defendant knew the assets were trust property.
Asset Recovery
This claim is often the primary route for recovering funds moved through complex corporate structures. If a subsidiary receives funds stolen from a parent company, the claimant uses knowing receipt to bypass the corporate veil. It provides a direct link between the loss and the current holder of the assets.
Defense Limits
A recipient can only defeat the claim by showing they were a bona fide purchaser for value without notice. If the property was received as a gift, the recipient has no defense once the breach is proven. The obligation to restore the fund remains personal even if the asset is later spent..
