Equitable remedies Flashcards
When would equitable remedies be available broadly speaking?
When damages are not adequate
What are the beneficiaries options when a trustee misapplies funds?
a) Sue for breach of trust
b) Sue third party who assisted breach
c) Claim against misapplied property/traceable proceeds
d) Sue third party who knowingly received traceable proceeds of breach
What are the benefits of equitable proprietary claims?
- Not effected by defendant’s bankruptcy/insolvency
- Capturing increase in value of traceable proceeds
- Can be maintained against innocent recipients of trust property
What is following?
same asset as it moves hand to hand
What is tracing?
new asset as substitute for old (‘series of direct substitutions’)
What is claiming?
assertion of personal/proprietary right re misapplied trust property or its traceable proceeds
What are the conditions required for following, tracing and claiming?
a) Claimant had a right of property recognised by equity in the asset
b) Asset was held by a person who was in a fiduciary relationship with Claimant
What can a beneficiary make a proprietary claim in respect of?
- Misapplied trust property
- Assets purchased exclusively with misapplied trust property
- Assets purchased with a mixed fund
What sort of claims could be made once an asset purcahsed with misapplied trust property has been indentified?
- beneficial ownership
- beneficial ownership of a share
- equitable lien
- subrogation
What is the principal defence to an equitable proprietary claim?
Bona fide purchaser for value without notice
What is the simple case where it is easy to identify traceable proceeds?
asset acquired exclusively with misapplied trust funds
Does tracing only apply to bank accounts?
also applies to physical mixtures of fungible goods
What is a wrongful mixture?
A mixed fund comprising misapplied trust money and the trustee’s own money
What is an innocent mixture?
A mixed fund comprising misapplied trust money and money derived from one or more innocent third parties
What is the basic rule for wrongful mixing?
where trustee withdraws from wrongful mixture, some of which is dissipated, beneficiary can treat dissipated funds as trustee’s won and identifiable funds as trust funds
What is the cherry picking rule for wrongful mixing?
- Where only dispute is beneficiary and trustee, beneficiary can attribute the most profitable applications of mixed fund to the trust money
- Otherwise basic rule applies
What is the general rule for innocent mixing where a trustee mixes different trust funds?
withdrawals are attributed rateably to contributors
What is the general rule for innocent mixing where an innocent party mixes funds?
proportion of original fund = proportion of what remains
What is the general rule where there are withdrawals from an innocent mixture in a current account (clayton’s case)
Sum first in is sum first out
When can clayton’s case be disapplied?
o Contrary to intentions of parties who contributed to mixture or
o Impracticable or
o Unfair
What are the two alternatives to clayton’s case?
- pari passu ex post facto method
- rolling charge method
What is the pari passu ex post facto method?
attribute withdrawals from the account fractionally to all contributors
What is the rolling charge method?
each individual withdrawal attributed fractionally to contributors immediately before withdrawal
What are the beneficiaries proprietary claim options where an asset is purchased exclusively with trust money?
- assert beneficial interest
- personal claim against trustee for breach and equitable lien on the asset
What are the beneficiaries proprietary claim options where an asset is purchased with trust money and the trustee’s own money?
- claim proportionate share
- lien on asset to secure personal claim for amount of misapplied money
What are the beneficiaries proprietary claim options where an asset is purchased with trust money and innocent third party money?
Only claim proportionate share
What are the beneficiaries proprietary claim options where an asset is purchased with trust money, trustee money and innocent third party money?
Only claim proportionate share
Where beneficiaries may only claim a proportionate share of assets representing traceable proceeds of trust fund, and the asset is deficient in value to satisfy the amount misapplied, what would be a better option than a proprietary claim?
Where trustee is solvent, sue for amount of misapplied funds
What is subrogation?
Where trust money dissipated by payment of secured debt, beneficiaries are subrogated to the rights of creditor
What is the defence to proprietary claims for misapplied trust funds?
Bona fide purchaser for value without notice.
