Ch 13 - Remedies Against Trustees - Proprietary Claims Flashcards

1
Q

What is the difference between a personal claim and a proprietary claim in trust law?

A

A personal claim seeks monetary compensation from the wrongdoing party, while a proprietary claim seeks the return of specific trust property or substitute property.

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2
Q

When can a trust make a proprietary claim against a trustee?

A

A proprietary claim can be made if the trust property still exists in its original form, or if the trustee has sold the property and purchased a new asset that can be traced back to the trust.

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3
Q

What are tracing rules in trust law?

A

Tracing rules are used to track the beneficiaries’ equitable interests into different forms of property, allowing the trust to assert a proprietary claim.

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4
Q

Why might a proprietary claim be more advantageous than a personal claim?

A

A proprietary claim can be pursued if the trustee is bankrupt and is not subject to statutory limitation periods (though it is subject to the equitable doctrine of laches).

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5
Q

What happens in Scenario 1, where the trustee misappropriates trust funds for personal expenses?

A

If the trustee spends trust property on personal items (e.g., credit card bills, holidays), no proprietary claim can be made because the trust property is dissipated.

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6
Q

What happens in Scenario 2, where the trustee still holds the original trust property?

A

If the trustee holds the original trust property, the trust can assert a proprietary claim to recover that property.

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7
Q

What happens in Scenario 3, where the trustee sells trust property and buys another asset?

A

If the trustee sells trust property and buys a new asset, the trust can assert a proprietary claim to recover the substitute property, especially if the new asset has increased in value.

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8
Q

What happens in Scenario 4, where the trustee mixes trust money with their own to buy an asset?

A

The beneficiary can assert a lien over the mixed asset for the amount the trust has lost, or claim a proportionate interest if the mixed asset has increased in value.

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9
Q

What happens in Scenario 5, where the trustee mixes trust money with their own in a bank account?

A

The trust can use tracing rules to determine which withdrawals were made with trust money and assert a proprietary claim accordingly.

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10
Q

What is the Re Hallett’s rule in tracing trust property?

A

The Re Hallett’s rule presumes the trustee spent their own money first, which is helpful when the trustee’s bank account still has a positive balance.

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11
Q

What is the Re Oatway rule in tracing trust property?

A

The Re Oatway rule gives the trust a first charge over the trustee’s bank account and any property purchased with trust money, prioritizing the trust’s claim over the trustee’s other assets.

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12
Q

What is the Clayton’s case rule in tracing mixed trust funds?

A

The Clayton’s case rule matches the first money in with the first money out, which can sometimes result in injustice depending on the order of withdrawals.

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13
Q

How can the courts depart from the Clayton’s case rule?

A

In cases where Clayton’s rule is impossible to apply, would result in injustice, or contradicts the party’s intentions, courts may depart from the rule, as seen in the Bado Ploughs and Vaughan case.

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