Lord Nicholls of Birkenhead J:

The proper role of equity in commercial transactions is a topical question.

Increasingly, plaintiffs have recourse to equity for an effective remedy when the person in default, typically a company, is insolvent.

They seek to fasten fiduciary obligations directly onto the company's officers or agents or advisers, or to have them held personally liable for assisting the company in breaches of trust or fiduciary obligations.

This is such a case.

An insolvent travel agent company owed money to an airline.

The airline seeks a remedy against the travel agent's principal director and shareholder.

Its claim is based on the much-quoted dictum of Lord Selborne LC, sitting in the Court of Appeal in Chancery, in Barnes v. Addy [1874] LR 9 Ch. App. 244 at pp. 251-252:

But ... strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions perhaps of which a Court of equity may disapprove, 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.

The second limb is concerned with what, for want of a better compendious description, can be called the liability of an accessory to a trustee's breach of trust.

Liability as an accessory is not dependent upon receipt of trust property.

It arises even though no trust property has reached the hands of the accessory.

It is a form of secondary liability in the sense that it only arises where there has been a breach of trust.

In the present case, the plaintiff relies on the accessory limb.

The particular point in issue from the expression 'a dishonest and fraudulent design on the part of the trustees'.

The Proceedings

The essential facts are these.

In 1986, Royal Brunei Airlines Sdn. Bhd. ('the airline') appointed Borneo Leisure Travel Sdn. Bhd. ('BLT') to act, in various places in Sabah and Sarawak, as its general travel agent for the sale of passenger and cargo transportation.

The terms of the appointment were set out in a written agreement of 1 April 1986. BLT was required to account to the airline for all amounts received from sales of tickets.

For its services it was to be paid sales commission.

The agreement was expressed to be subject to the regulations of the International Air Transport Association, one of which provided:

All moneys collected by the agent for transportation and ancillary services sold under this agreement, including applicable commissions which the agent is entitled to claim thereunder, shall be the property of the carrier and shall be held by the agent in trust for the carrier or on behalf of the carrier until satisfactorily accounted for to the carrier and settlement made ... Unless otherwise instructed

by the carrier the agent shall be entitled to deduct from remittances the applicable commission to which it is entitled hereunder.

It was common ground that the effect of this provision was to constitute BLT a trustee for the airline of the money it received from the sale of passenger and cargo trans