Equity and Trusts - Proprietary Claims Against Trustees

Question 1

What should be considered when deciding whether a proprietary claim is appropriate against a trustee?

Answer 1

1- Hands: is the property in the hands of the defendant? No property = no proprietary claim
2- Bankrupt: If the defendant is bankrupt a personal claim is pointless. A proprietary claim is given priority over other unsecured creditors
3- Limitation period exceeded? If the breach was over 6 years ago, a personal claim would be barred but a proprietary claim would not be
4- Value increased? Proprietary claims are better where the value of the property has increased
5- Death- If the defendant has died, a proprietary claim can be brought against his estate

Question 2

What is the appropriate remedy where the trustee holds the original trust property?

Answer 2

FOLLOW the original property (make a proprietary claim)

Question 3

What is the appropriate remedy where there has been a clean substitution of trust property for an asset?

Answer 3

Re Hallett:
1- Claim ownership of the new asset
2- Claim an equitable lien over the new asset

Question 4

What is the appropriate remedy where there has been a mixed asset purchase (part own money, part trust money)?

Answer 4

Foskett v McKeown:
1- Claim proportionate share of the asset (If increased in value)
2- Enforce a lien against the asset (if decreased in value)

Question 5

What is the appropriate remedy where the trustee has mixed trust funds with their own bank account and used part of this money to make a purchase (Mixed bank account)?

Answer 5

1- Re Hallett: Spent own money first; or (if inequitable)

2- Re Oatway: Spent trust money first

Question 6

If the trust money has been dissipated, can the claimant claim money paid in later by the defendant?

Answer 6

No - Roscoe v Winder

Question 7

If an asset purchased using a mixed bank account has increased in value, can the beneficiaries claim any increase in value?

Answer 7

Yes- Foskett v McKeown

Question 8

What is the appropriate remedy where the trustee has mixed two trust funds together?

Answer 8

Clayton’s case: FIFO, Unless (Barlow Clowes):
1- Would result in INJUSTICE
2- Is IMPRACTICAL/ difficult/ expensive to determine order of payments
3- Is contrary to parties’ INTENTIONS

Question 9

If FOFO does not apply, how will the account balance be divided?

Answer 9

In proportion to original contributions (Barlow Clowes)

Question 10

What is the appropriate remedy where the trustee mixes two trust funds together with his own money?

Answer 10

1- Apply Re Hallett and Re Oatway to withdrawals

2- Apply Clayton’s case to the balance