While there is no lack of literature on the liability of a stranger as constructive trustee, the question of the nature and extent of such liability where the stranger is an agent remains debatable and in need of closer examination. Every law student soon becomes familiar with such mammoth cases as Selangor United Rubber Estates Ltd. v. Cradock (No. 3) 1 and Karak Rubber Co. Ltd. v. Burden,2 in which banks through which trust funds passed were held responsible as constructive trustees for their loss on the ground of knowing assistance in a fraudulent design. However, not every student can satisfactorily explain why the banks were held liable for knowing assistance and not knowing receipt. The answer which has commended itself to Millett, J., and to the Court of Appeal in the recent case of Agip (Africa) Ltd. v. Jackson,2a is that agents who act merely as conduits through which trust funds pass3 can never be liable for knowing receipt but that it is otherwise where agents receive trust funds for their own benefit, as in Selangor v. Cradock (No. 3) and Karak v. Burden. The purpose of this article is to argue that the prevailing view is one of recent and novel introduction, and unsupported by the weight of authority, as well as not useful in that it adds far more complexity than is warranted by underlying policy demands.

The notion that agents who act merely in the course of their agency can never be liable for knowing receipt is implicity expressed in Karak v. Burden. Brightman, J., there says:4

“(1) a person [may be made] a constructive trustee because (although not nominated as a trustee) he has received trust property with actual or constructive notice that it is trust property transferred in breach of trust or because (not being a bona fide purchaser for value without notice) he acquires notice subsequent to such receipt and then deals with the property in a manner inconsistent with the trust, and