Claiming Flashcards
Ultraframe v Fielding
B’s proprietary remedy does depend upon there being receipt and retention of their traceable proceeds by 3P.
Westdeutsche Landesbank v Islington LBC
There is a distinction in relation to proprietary claims between 3P volunteer without notice, and 3P volunteer with notice of the breach. If the 3P is innocent and does not have notice of the breach, then if the trust assets survive in the same form in his hands then he is under a simple restiutionary duty to return the assets.
However, where 3P has notice, then they are liable in KR as a constructive trustee - but also B has a proprietary claim to the assets.
Clark v Cutland
Even if B does NOT making a KR claim against 3P with notice of the breach, they can still make a separate proprietary claim against 3P for the property. This shows that proprietary claims are distinct from KR personal claims against 3P with notice of the breach.
Wright v Morgan
Where B’s money is used to buy a new asset by T, then Bs have two options:
1) They can adopt the transaction, provided all Bs consent to this - so the new asset becomes the trust property.
2) They can secure an equitable lien over the new asset as a security charge for the repayment of the misappropriated trust money.
Note that if one or more Bs consent, then they cannot adopt the transaction and can only secure a lien over the new asset for the repayment of the misappropriated trust money.
s.57 Trustee Act 1925
s.57(1) allows Bs to apply to court in order to authorise the adoption of a new asset as part of the trust property, where that the court feels expedient to do so - so e.g. if all Bs can’t consent due to one being a minor, then the Bs can apply to court to adopt the transaction, which the court may grant an order for.
Foskett v McKeown
Lord Millet restated the rule in Wright v Morgan that where T purchases a new asset, Bs can either trace into the new asset and adopt the transaction as part of the trust property, or secure an equitable lien for the repayment of the misappropriated trust property. If T does not repay the money, the court will order the sale of the asset and first repay Bs any money they are owed through T’s breach of trustee duty.
- Bs should adopt the transaction where the property has increased in value, as they can claim for the increased value too.
- But if the property decreases in value, B should get an equitable lien over the asset to secure the repayment, as otherwise they would be capped at whatever the decreased value of the property is.
Foskett v McKeown (Two Bs money -> new asset)
Where innocent trust money is mixed to buy a new asset, then Bs share the losses and gains pari passu - i.e. share the losses and gains proportionately. So both Bs can make a proprietary claim for a beneficial interest of the property proportionate to their contribution.
Foskett v McKeown (T’s and B’s money -> new asset)
T made 3/5 life insurance payments himself, and then used B’s money in unauthorised way to make the remaining 2/5 payments. Court held that B could trace their 2/5 contribution into the overall £1m payout, even though they only contributed about £40k - trace their assets into the new assets.
Bs could also make a personal claim for the £40k secured by an equitable lien in Foskett but this would obviously be less favourable since they can claim for the increase in profits with proprietary claim.
Paul Davies v Davies (AUSTRALIAN CASE)
Where T uses B’s money as an unauthorised down payment on a property and personally covenants to repay the rest/mortgage for the remaining money required, then B has a claim to the ENTIRE PROPERTY.
This claim is subject only to a counter-claim by T for any expenditures that T has incurred. So B can claim for the entire property if they want to, but have to repay B for the rest of the money if they also paid some of the purchase price after using B’s trust money as an unauthorised down payment.
Re Montagu’s ST
Where the traceable proceeds of B’s trust property is in the hands of an innocent 3P volunteer without notice of the breach of trust, then B can simply make a proprietary claim for the new asset - 3P is under a restitutionary duty to return the traceable assets.
Re Diplock (3P and B money used to buy new asset)
If a mixture of B’s money and 3P’s money is used to buy a new asset, then the proprietary claim depends on whether or not 3P volunteer acted in good or bad faith. If they acted in bad faith, then B gets priority in claiming their share FIRST in the new asset.
But if 3P was innocent and did not have notice, then they share losses and gains pari passu.
Boscawen v Bajwa
Where T uses trust money to pay off a secured debt over a property (e.g. T uses trust money to pay off a mortgage charge over their house), B can trace into this secured debt.
The legal remedy is subrogation - this is technically a legal fiction, whereby B simply steps into the position of the former creditor who T paid off using B’s trust money. Therefore, B has a mortgage charge over the property to secure the repayment of the misappropriated trust property.
Two requirements for subrogation:
1) Must be a SECURED debt - i.e. must be a security charge for the debt
2) The new mortgage must be under the same terms for B as it was for the original creditor - cannot be more favourable to B, since the mortgage charge is supposed to mirror the original mortgage charge
Re Diplock - Improvements to Land
Again, depends on whether 3P is an innocent volunteer without notice, or if 3P is a wrongdoer with notice of the breach. If 3P is innocent, then if the property value decreases, then B’s trust money is dissipated.
But if 3P’s land value increases due to the improvements made using B’s trust money, then the court will only award an equitable lien where it is FAIR to do so - was not fair in this case because it would prevent the charity from using money to help people etc.
By contrast, where 3P is a wrongdoer, then B can assert either proportionate ownership over the land, or they can claim an equitable lien over the land for the repayment of the misappropriated trust property.
Pilcher v Rawlins
Burden of proof is on the bona fide purchaser to show that they should be entitled to the bona fide purchaser defence. 3 elements:
1) Bona fide - D acted in good faith
2) Paid value
3) Without notice - no knowledge that there was a breach of trust.
For notice, the Baden scale of knowledge is used - if D had knowledge of the breach within any of the 5 stages of knowledge, then the bona fide purchaser defence does NOT apply.
Independent Trustee Services v GP Noble Trustees
Agreeing not to sue another party constitutes D giving value for the purposes of the bona fide purchaser defence. The case also demonstrates that providing value can be retrospectively retracted.
