Tracing at common law and in equity

Proprietary Tracing
1. Advantages
  1. returns specific item/ identifiable product regardless of 3rd parties finances
  2. court can freeze assets of 3rd party to preserve benefit of true owner
  3. Gives true owner priority in insolvency (equity)
  4. claimant MAY keep benefit of increase in value/ interest
    1. Common law JONES (FC)& SONS V JONES
    2. Equity RE TILLEY'S WILLS TRUST
2. Criteria (common law)
  1. legal title
    1. MCC V LEHMAN BROTHERS
      1. Beneficiaries under trust cannot use
  2. specifically identifiable property at transactional link (clean substitution required)
    1. TAYLOR V PLUMER
  3. Must be no defence available
  4. Possible to trace into enhanced value of asset
    1. JONES(FC) & SONS V JONES
3. Criteria (equity)
  1. Fiduciary relationship
    1. SINCLAIR V BROUGHAM
    2. RE DIPLOCK
  2. must have equitable title
    1. ALUMINIUM INDUSTRIE VAASEN BV V ROMALPA
  3. Must be undissipated property
    1. cannot trace into overdrawn accounts or monies used to pay unsecured loans
      1. RE GOLDCORP EXCHANGE
      2. BISHOPSGATE INVESTMENT V HOMAN
    2. RE DIPLOCK
    3. eg credit card debt
    4. secured loan - trace monies into land which loan was secured on
      1. beneficiary in shoes of original lender
        has charge over land enforceable by sale of property
        BOCSAWEN V BAJWA
  4. Defences must not exist
  5. Mixed tangible property
    1. amalgam of properties generally treated as belonging to C
      1. LUPTON V WHITE
      2. property fungible C entitled to share proportionate to his contribution to it
    2. Mixing cash in a bank account
      1. lowest intermediate balance rule
        JAMES ROSCOE (BOLTON)LTD v WINDER
      2. Overddrawn bank account - money credited = dissipation of funds
        BISHOPSGATE INVESTMENT V HOMAN
      3. discredited swollen assets theory
    3. mixed monies & dishonest trustee/ beneficiary
      1. RE HALLETT'S ESTATE honest trustee principle
        treat trustee as spending his own money from fund first
        will not be applied to detriment of claimant/beneficiary RE OATWAY
        applied where balance of monies dissipated
      2. What can claimant recoup if assets are bought MIXED PART of MIXED FUND
        Where shares of parties contributed to fund insufficent to pay full price which tracing started against
        FOSKETT V McKEOWN
        LORD MILLET "trustee wrongfully uses trust money to provide part of cost of acquiring an asset- beneficiary entitled to claim proportionate share or for amount of the misappropriated funds
        beneficiary can elect a) charge for amount of trust fund used OR B) proportionate share
        innocent contributors must be treated equally , gains and losses borne by contributors rateably
    4. Mixed monies of TWO innocent parties
      1. innocent volunteer has proprietary liability
        innocent C's shre mixed fund in proportion to what they contributed neither C nor innocent volunteer have priority
        RE DIPLOCK
      2. if value of asset decreases, C and innocent volunteer share loss rateably
        RE TILLEYS WILL TRUST
    5. mixed monies of 2 innocent parties in a current Bank account
      1. only applies if mixing of monies of innocent volunteer and beneficiary or two innocent volunteers
        CLAYTON's CASE applies by way of modification
        Does not apply to mixed fund where contest between trustee and C beneficiary
        Exceptions
        where it would be impracticable
        where it would cause injustice to C
        where fund not genuinely mixed
        where shown that parties had contrary intention
        where clear conflict with presumed intention of parties
        Rule : First in First out
        ONLY current bank accounts
        applies regardless of who mixes monies
Personal Tracing
1. Criteria for Claim
  1. C must have legal title( absolute owner or trustee)
  2. Cannot trace past first innocent recipient
  3. D must not have not have defences
    1. Full consideration
      1. Change of position SCOTTISH EQUITABLE V DERBY, LIPKIN GORMAN V KARPNALE
        Estoppel by representation JORDEN V MONEY
        accompanied by representation by payer
        relied upon by D to his detriment
        reliance : SOUTH TYNESIDE BC V SVENSKA INTERNATIONAL PLC (not necessarily detrimental)
        Acted in good faith NIRU BATTERY MANUFACTURING COMPANY V MILESTONE TRADING LTD
      2. D paid in full/ given services to full value of what he recieved
    2. wrongdoer never has a defence
Tracing into Cash
1. Cheque withdrawl
2. common law
  1. Proprietary tracing at common law into UNMIXED bank account possible
    1. BANQUE BELGE POUR L'ETRANGER V HAMBRUCK
    2. Cheque withdrawl UNMIXED bank do not defeat claim
      1. BANK TEJERAT V HONG KONG AND SHANGHAI BANKING CORPORATION
    3. claim ends as soon as trust property mixed with his own
  2. personal tracing
    1. only have to prove property in hand of C
    2. mixing value = no consequence unless mixed before D recieves them
  3. not possible to trace C's monies that are mixed
    1. includes telegraphic transfer and other electronic means
      1. AGIP AFRICA LTD V JACKSON
      2. Notional mixing prevents tracing
Tracing in equity
1. remedies
  1. declaration of a charge on a mixed fund
    1. RE HALLETT
    2. Property bought from mixed fund/ proportionate share of asset or fund
      1. FOSKETT V McKEOWN
  2. Subrogation- beneficiaries money used to pay off D's debt
    1. debt no longer exists BUT new debt in beneficiaries favour for amount owed for debt
      1. secured against D's property
    2. BOCSAWEN V BAJWA
2. Defences to tracing in equity
  1. bona fide purchaser for value without notice of origins of stolen property
    1. PILCHER V RAWLINS
  2. COMMERCIAL SETTING bona fide purchaser without knowledge
    1. POLLY PECK V NADIR
    2. Consideration provided by D in return for stolen goods
    3. Goods/ services provided in return for monies recieved
      1. HEADSTART GLOBAL FUND LTD V CIRCO BANK NV & ORS
  3. INEQUITY MUST NOT RESULT FROM RELIEF
    1. He who comes to equity must do equity
      1. ALLAN V REA BROTHERS TRUSTEES LTD
    2. Used by innocent volunteer who would have proprietary liability
3. personal claim
  1. Wrongdoing trustee always has personal liability in breach of fiduciary duty

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Tracing at common law and in equity

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	Created by Lauren Kegg almost 11 years ago