McMahon v Livingstone

In McMahon v Livingstone, the plaintiffs sought to recover funds from the defendants, who were accountants, for alleged breaches of fiduciary duty. The plaintiffs had entrusted money to the first defendant, an accountant, for investment purposes. This money was placed in an account operated by another set of accountants, the second and third defendants. The second and third defendants controlled a company which used the money for its own developments and lending, without clearly segregating the funds from its own assets. The plaintiffs argued that the moneys were held on trust for them, and the second and third defendants, along with the company, breached this trust by using the funds for unauthorised purposes and charging losses against the general account, thereby affecting the plaintiffs' interests.

The legal issues before the court included whether the moneys were held on trust, whether the second and third defendants and the company breached any fiduciary obligations, and what remedies, if any, were available to the plaintiffs. The court considered whether the plaintiffs were entitled to the return of the moneys or an order for the taking of accounts. It also examined whether the third defendant, who was a party to the account, could be held liable for the actions of the other defendants.

The court found that the moneys were indeed held on trust for the plaintiffs, separate from the general business of the second and third defendants and the company. It held that the second and third defendants, along with the company, breached their fiduciary duties by misapplying the trust funds. The court ruled that the third defendant, as a party to the account, could be held liable for the breach. Regarding remedies, the court determined that while the plaintiffs could not seek equitable compensation from the third defendant as their individual interests in the debt due had not been ascertained, they could pursue an account from the third defendant for the trust funds lost due to the breach. The court also found that the plaintiffs could claim the return of the trust funds or seek an order for the taking of accounts against the defendants.

The final orders of the court were that the third defendant was liable to account to the trustee in bankruptcy for the trust funds lost due to the breach. The individual plaintiffs were not entitled to equitable compensation from the third defendant, but they could seek the return of the trust funds or an order for the taking of accounts. The court directed the trustee in bankruptcy to take steps to recover the trust funds from the third defendant.