Knowing Receipt in Chinese Trust Law

Article 22 of the Trust Law of the People's Republic of China (Chinese Trust Law) implements the knowing receipt rule, aiming to balance the interests between beneficiaries and third parties transacting with trustees. However, the knowledge requirement necessary to give rise to liability for the knowing receipt has never been thoroughly examined by scholars and practitioners since the introduction of the Chinese Trust Law in 2001. The ambiguities inherent in Article 22 have resulted in inconsistent interpretations of the knowing receipt rule, thereby raising questions about how this rule can align with the bona fide acquisition rule under Chinese property law. In light of this, this article analyses the 'knowledge' component in the knowing receipt rule with two aims. First, it identifies the uncertainties surrounding the interpretation of the 'knowledge' component. These uncertainties emphasise the challenges of implementing Article 22 and highlight potential conflicts that may arise between the application of the Chinese trust and property laws. Second, through an examination of the unconscionable receipt rule and equity's darling rule under English law, it underscores the reasons for Chinese law to draw insights from its English counterpart and proposes the lessons that could be incorporated into the future reform of Article 22.<br>