Property Law - Following and Tracing Flashcards
Who noted Turner v Jacob is probably closer to what Oatway decided?
H&M
What did Conaglen say of backwards tracing?
It is a matter of legal policy on whether to allow backwards tracing
What case showed court recognising tracing is the court ‘making a policy judgment’ of whether one asset represents or is substituted for another?
Federal Republic of Brazil v Durant International
What is often unclear in cases of mixed substitution?
Evidence of where the money has gone or come from
What is the lowest intermediate balance rule?
If evidence clearly shows only £200 in the account could belong to B, this is all B can claim.
What does a claim depend on?
C’s right to the original asset
Relfo v Varsani general
Money laundering, one transaction
What case conflicts with Foskett on backwards tracing and how?
Re Tilley’s WT - intention not needed
What can a B do if there is a mixed substitution?
Trace into and claim proportion of traced asset, or lien to secure a personal claim against T
C is entitled ALMOST as of right to an interim freezing injunction to preverse claimed asset until trial outcome
UCB Home Loans v Grace
Relfo v Varsani required what for backwards tracing?
Prior arrangement that trust fund would be used to repay, and was so used
How did Lionel Smith view backwards tracing?
Should be allowed - look at what made release of debt caused by initial borrowing possible, such that if money is borrowed to buy a car, and X can only repay the debt through money from B, money from B explains X’s ownership
If T mixed his own money with trust money, who has priority?
B
What judge in what case called Clayton the exception, not the rule?
LJ Cooke in Russell-Cooke Trust v Prentis
Sinclair Investments v VTF
Once trust money falls into a ‘black hole’, such that it is impossible to trace due to complex transactions, T bears the burden of showing money is not part of the trust fund
What is following?
Identifying the same asset from hand-to-hand
UCB Home Loans v Grace
C is entitled ALMOST as of right to an interim freezing injunction to preverse claimed asset until trial outcome
Barlow Clowes v Vaughan general
Ponzy scheme
Why did Clayton not apply in Barlow Clowes v Vaughan?
Investor intention clearly to share in profits and losses
What did the Vice-Chancellor say in Foskett v McKeown in the CoA?
Important D made the first payment, giving his children a vested interest and meaning B could only claim for misappropriated funds
What did Conaglen highlight as a reason not to allow backwards tracing?
Unsecured creditors are already in a precarious position compared to the far better protected position of Bs
Turner v Jacob judgment
If there is money left, B must start from the money
If T gives money to a BFP, who has priority?
BFP - claim extinguished
LJ Woolf in Barlow Clowes on Clayton
Only use if it does ‘broad justice’
What kind of remedies are falsifying and surcharging?
Personal
What judge in what case suggested Clayton does not apply if ‘inconvenient’?
Lord Greene in Re Diplock
What jurisdiction was Federal Republic of Brazil v Durant?
CoA of New Jersey
Who noted they couldn’t overrule Clayton, but could displace it with a counterweight, and in what case?
LJ Dillon in Barlow Clowes
Space Investments v Canadian Imperial Bank general
Swollen assets theory
What other method could be used for bank accounts than pari passu or Clayton?
Rolling charge
Lord B-W in Foskett
Windfall is permitted because enforcement of property rights, not to reverse UE
Beaver skins, mistress
Jones v De Marchant
Who outlined the ‘black hole’ theory in Sinclair Investments v VTF?
Lord neuberger
What did Lord Steyn say in Foskett of the equitable/legal distinction of tracing?
Process of identification is ‘genuinely neutral as to the right exigible’
What two judges were in the minority in Foskett?
Steyn and Hope
What was the split in the HoL in Foskett?
3:2
What case applies if there is evidential certainty in a tracing claim?
Roscoe v Winder
Turner v Jacob
Balance
What do L&O note about Turner v Jacob?
Probably closer to what Oatway decided
Foskett v McKeown general
Portugal development, insurance policy
Evidential uncertainty in tracing is resolved how?
Against the wrongdoer
What case showed the courts accepting rolling charge is probably the fairest method for bank accounts?
Charity Commission v Framjee
From what case and judge does the swollen assets theory come?
Space Investments v Canadian Imperial Bank, Lord Templeman OBITER
What did Hobhouse LJ say in Foskett in the CoA?
Payment of 4th and 5th made no difference
Jones v De Marchant judgment
Required to account to his wife for the 18 beaver skins
What are the three rules (cases) in the case of mixed substitution with evidential uncertainty?
Re Hallett’s Estate; Re Oatway; Shalson v Russo
Why can’t money in a bank account be followed?
It is not physical money, but a debt
Foskett v McKeown on backwards tracing, and what judge?
Scott VC said only allowed if C can prove T intention at time of borrowing was to repay with trust money
Roscoe v Winder
Lowest intermediate balance
In what case did the CoA reject Clayton for mixed substitution and evidential uncertainty?
Re Hallett’s Estate
Re Hallett’s Estate general
Mix, dissipation, balance
Re Hallett’s Estate judgment
Presume T spent his money first because presumption of honesty
Why do L&O prefer Shalson?
For Rimer J’s view of the merits
What types of substitutions can there be in a tracing claim?
Mixed and clean
What judge in Bishopsgate said no to backwards tracing because fallacious?
LJ Leggatt
Who criticised Millett’s reference to ‘tracing the value’ in Foskett and why?
If understood to mean market value, it is nonsense to say you are tracing the value because it may not be the same
Who called Clayton’s case ‘capricious, arbitrary and apposite’, and in what case?
LJ Leggatt in Barlow Clowes
Foskett v McKeown judgment
B’s payments were swapped for ‘shares’ in policy - proportional share of pay-out with children
What case shows an exception to the specification doctrine?
Jones v De Marchant
Clayton’s Case
First in first out rule
What case explained why the money is considered dissipated upon paying into an overdrawn account?
Rea v Russell
Why did LJ Leggett say no to backwards tracing?
Fallacious
If both sources in a mixed substitution are innocent, who has priority?
Pari passu
When can there not be a lien in the case of mixed substitution?
If there are innocent competing contributors
What case suggests a similar theory to swollen assets but ISN’T?
Sinclair Investments v VTF
What two cases stand in conflict under evidential uncertainty for mixed substitution in tracing?
Turner v Jacob and Shalson v Russo
Russell-Cooke Trust v Prentis
LJ Cooke called Clayton the exception, not the rule
How did they reason the allowance of backwards tracing in Federal Republic of Brazil v Durant?
If not allowed because of transaction order, would allow camouflage of interconnected transactions to obscure true purpose and effect
what did Millett say of pro rata in a mixed substitution case?
It is the ‘best that the wrongdoer and his donees can hope for’
Lord Hope in Foskett
Contributions made a difference by reducing costs to insurer, but no difference to rights exercisable by children
What is the general rule for dissipation?
If money is used to pay an unsecured debt or pay into an overdrawn account, the money has dissipated and end of tracing
What did the CoA require in SFO v Lexi Holdings?
Equitable charge to attach to traceable proceeds
Lord Steyn in Foskett
Contributions made no difference, so not pro rata
Relfo v Varsani judgment
Looked at surrounding circumstances to find many transactions were actually one
What two subsequent cases tried to limit the effect of Clayton?
The Mecca and Re Sherry
SFO v Lexi Holdings
Rejected obiter in Space Investments
What is a mixed substitution?
New asset acquired with a mixture of misapplied trust property and T’s own property
Charity Commission v Framjee
Rolling charge probably the fairest method, but never applied in English law. Open to adopt it, but used pari passu
Who said to only use Clayton if it does ‘broad justice’?
LJ Woolf in Barlow Clowes
How do H&M try to explain Millett’s use of the term value in Foskett?
Connotes the potential for exchange inherent in an assignable right
How do L&O argue Templeman’s swollen assets theory is wrong?
Misread Jessel MR’s judgment in Re Hallett’s that when trust funds are mixed ‘the whole will be treated as trust property’ - only meant to concern particular account
What two cases rejected the rolling charge method?
Barlow Clowes v Vaughan; Russell-Cooke Trust v Prentis
What two cases suggest courts are more willing to allow backwards tracing in recent years?
Relfo v Varsani; Federal Republic of Brazil v Durant
What judge in Shalson v Russo said no to backwards tracing?
LJ Rimer
What judge failed to bring clarity to the law by his judgment in Bishopsgate v Homan?
LJ Henry
Millett in Foskett
No equitable/legal distinction in tracing, rejected confinement to a lien and pro rata
What judge in Bishopsgate v Homan allowed backwards tracing?
LJ Dillon
What case is an example of money used to pay into an overdrawn account?
Bishopsgate v Homan
What judge in Foskett rejected legal/equitable distinction in tracing
Millett
What case showed the courts open to adopting rolling charge method?
Charity Commission v Framjee
What does T have against a bank for the money in his account?
A chose in action
What is a non-fungible mixture?
Mixture is specific so you can tell what happened to the original property
What is the swollen assets theory?
B can trace into all assets T has when T wrongfully takes money for himself, subjecting all his assets to a charge
What is a clean substitution for tracing?
One asset is swapped directly for misapplied trust property
Who said following and tracing are ‘exercises in locating assets which are taken to represent the trust asset’?
Lord Millett in Foskett v McKeown
What is the rolling charge method?
Look at each transaction to determine what happens to each investor at each point
If one source in a fungible mixture is a wrongdoer, and some is given away, what happens?
B has priority
Why did Millett say pro rata distribution?
Later events cannot determine ownership of a policy
Why did Barlow Clowes and Russell Cooke reject rolling charge?
Prohibitive costs and complications
what judge rejected confinement to a lien in mixed substitution cases, and in what case??
Millett in Foskett
Rea v Russell
NZ CoA show how there is no new asset when paying into an overdrawn account, so no proprietary representation
From what jurisdiction is the rolling charge method?
America
What are following and tracing?
Evidentiary processes
Re Oatway judgment
Assume T preserve B’s assets first so can claim investment
Jones v De Marchant general
Beaver skins, mistress
What did Millett say of CoA argument in Foskett?
‘Capricious and unacceptable’
Re Oatway general
Mix investment, dissipation
Foskett v McKeown, per Lord Millett on following and tracing
They are ‘exercises in locating assets which are taken to represent the trust asset’
If 3rd is a volunteer without notice (but not BFP), and doesn’t mix, who has priority?
B
If two innocent sources contribute to a fungible mixture, and some is given away, what happens?
Both share proportional to their shares
What do H&M say of the reference to ‘value’ by Millett in Foskett?
‘Misguided and distracing’
Shalson v Russo general
Cherry pick
What case shows an example of money used to pay an unsecured debt?
Re Diplock
Clayton only applies to current accounts, not saving
The Mecca
What two types of mixtures may there be in a following process?
Fungible and non-fungible mixtures
what three judges were in the majority in Foskett?
Hoffmann, Millett and Lord B-W
What did L&O say of the court response to Clayton?
Courts are swift to find impracticality or injustice so it doesn’t have to be applied
What judge in Foskett highlighted how the windfall is permitted because it is the enforcement of property rights, not to reverse UE
Lord B-W
How is Space Investments inconsistent with Roscoe?
Presumption should only be made against wrongdoer when there is evidential uncertainty
What are two exceptions to the general rule on dissipation?
If debt is secured by a charge over D’s property, or if D borrows money to buy an asset, and trust money is used to repay the creditor
If T gives money to 3rd with notice, and 3rd mixes, who has priority?
B
Re Sherry
If money is paid on the same day, deal with it as though done at the same time, NOT Clayton
What judge in Re Tilley’s WT said intention is irrelevant for backwards tracing?
Ingoed-Thomas J
Federal Republic of Brazil v Durant International on tracing
Jersey CoA recognised it is the court ‘making a policy judgment’ of whether one asset represents or is substituted for another
Who said pro rata in a mixed substitution case is the ‘best that the wrongdoer and his donees can hope for’?
Millett in Foskett
What was the view taken in Federal Republic of Brazil v Durant?
Look at overall transaction for coordinated scheme
In what circumstances was LJ Dillon willing to allow backwards tracing in Bishopsgate v Homan?
Inference or intention to repay debt with trust money
What did Lord Greene say of Clayton’s Case in Re Ziplock?
Bank accounts are complicated so the rule is useful, based on ‘presumed intention’ and if inconvenient, pari passu
What is the rule in Clayton’s Case?
First in first out - first lot of money attributed to first transaction out, ad infinitum
What judge in Re Hallett’s Estate suggested B is confined to a lien when substitution is mixed?
Jessel MR
If money is paid on the same day, deal with it as though done at the same time, NOT Clayton
Re Sherry
With what case is Space Investments v Canadian Imperial Bank inconsistent?
Roscoe
When would tracing/following be preferred to a personal claim?
If T is bankrupt, to establish a proprietary interest and gain priority
Lord Hoffmann in Foskett
Agreed with Millett (but not on unit)
What is the starting point for bank accounts?
Clayton’s case
What is tracing?
Identifying the new asset swapped for the original asset, identifying the value of the old one in the new asset
What two reasons are there for not following Turner v Jacob and preferring Shalson v Russo?
Shalson not cited to Patten in Turner; wrongdoer shouldn’t take advantage of his own wrongdoing
Who gave the priority rules in a tracing claim, and in what case?
Lord Greene MR in Re Diplock
The Mecca
Clayton only applies to current accounts, not saving
What is a fungible mixture?
Mixture compose of mutually interchangeable units, so it doesn’t matter what part of the mass you are talking about
Shalson v Russo judgment
B can ‘cherry pick’ between Hallett and Oatway if balance and investment
In what three situations is B’s asset considered destroyed in a non-fungible mixture?
Physically attached to dominant, such that it would be disproportionately expensive to separate the two, a fixture with the same effect or combined to create a new product under ‘specification’ doctrine
If 3rd is a volunteer without notice (but not BFP), and does mix, who has priority?
Pari passu
