Proprietary claims

Question 1

A proprietary claim is only available if the trustee holds trust property or used an opportunity belonging to the trust. Which case?

Answer 1

Sinclair Investments

Question 2

If a trustee has made a simple exchange of trust property for an asset, which case says the trust can choose ownership of the asset or a lien?

Answer 2

Re Hallett

Question 3

Where a trustee has mixed trust funds with his own money then bought an asset, the trust can choose whether to claim a proportionate share of the asset or enforce a lien. Which case?

Answer 3

Foskett v McKeown

Question 4

Trustees are deemed to spend their own money first. Which case?

Answer 4

Re Hallett

Question 5

Trustees may spend trust money first. Which case?

Answer 5

Re Oatway

Question 6

If a trustee dissipates trust money, then pays in their own money, the trust cannot claim this. Which case?

Answer 6

Roscoe v Winder

Question 7

Where a trustee mixes trust funds together the FIFO rule applies. Which case?

Answer 7

Clayton’s case

Question 8

Where FIFO would result in an injustice, which case says in cases where a trustee has mixed trust funds together a proportionate share of the remainder should be taken?

Answer 8

Barlow Clowes

Question 9

Where a trustee mixes two trust funds together with his own money, how does equitable tracing operate?

Answer 9

Apply Re Hallet and Re Oatway to differentiate the Trustee’s own money from trust money. Apply Clayton’s case/Barlow Clowes to the balance.

Question 10

What are the six different claims that can be brought against third parties?

Answer 10

1. Personal, equitable action for constructive trusteeship on the grounds of accessory liability
2. Personal equitable claim for constructive trusteeship on the grounds of recipient liability.
3. Personal, equitable claim for constructive trusteeship on the grounds of intermeddling
4. Personal, common law claim for restitution on the grounds of unjust enrichment
5. Proprietary, equitable claim against a constructive trustee.
6. Proprietary, equitable claim against an innocent volunteeer.

Question 11

What are the three conditions needed for a personal, equitable action for constructive trusteeship on the grounds of accessory liability?

Answer 11

1. A breach of trust
2. Assisted by a third party
3. The third party is dishonest

Question 12

What does “dishonest” mean? Which case?

Answer 12

“Not acting as an honest person would in the circumstances” Royal Brunei v Tan

Question 13

What is the ruling in Twinsectra?

Answer 13

That the test for accessory liability has a subjective element. Lord Hoffman in the House of Lords.

Question 14

What is the ruling in Barlow Clowes?

Answer 14

Lord Hoffman in the Privy Council: no need to know behaviour was dishonest

Question 15

What is the ruling in Starglade? Which Court?

Answer 15

Objectivity is the correct test for dishonesty. Court of Appeal

Question 16

What is the ruling in Abu Saleh?

Answer 16

Objectivity is the correct test for dishonesty. Court of Appeal

Question 17

What are the three criteria necessary for a personal equitable claim for constructive trusteeship on the grounds of recipient liability?

Answer 17

1. Fiduciary transferred trust property in breach of trust
2. Stranger received trust property
3. Stranger had the requisite degree of knowledge that the transfer was in breach of trust

Question 18

What is the test for the “requisite degree of knowledge” for recipient liability? Which case?

Answer 18

“Such knowledge as would make retaining the property unconscionable” BCCI v Akindele

Question 19

What are the three criteria needed for a personal, common law claim for restitution on the grounds of unjust enrichment?

Answer 19

1. The Claimant is the legal owner
2. The Defendant has been unjustly enriched
3. There was no mixing prior to the receipt by the Defendant (as this is common law tracing)

Question 20

Which case provides a defence to claims in restitution? What is it?

Answer 20

Lipkin Gorman.

If the defendant:

1) Changed their position irretrievably on reliance of the funds
2) Changed their position with some exceptional spend on reliance of the funds

They may escape liability

Question 21

What is “intermeddling”? Which case?

Answer 21

Where someone acts as if though they were a trustee or beyond their scope as an agent (Mara v Browne)

Question 22

In proprietary claims, Claimants can choose to take a lien or a proportionate share over a defendant’s property. Which case?

Answer 22

Foskett v McKeown

Question 23

Trustees spend their own money first. Which case?

Answer 23

Re Hallett

Question 24

Trustees may spend the trust money first if it is equitable. which case?

Answer 24

Re Oatway

Question 25

Against innocent volunteers, equitable tracing will follow the FIFO rules. Which case?

Answer 25

Clayton’s case

Question 26

If FIFO is unjust the Court will use proportions to decide between trust money and the money of an innocent volunteer. Which case?

Answer 26

Barlow Clowes

Question 27

In which case was it found that in proprietary claims against an innocent volunteer there is a defence if an inequitable result would arise?

Answer 27

Re Diplock

Question 28

Ruth mixes £60,000 with £20,000 from her own bank account and gives £40,000 to Brendan. Can the trust make a claim in common law restitution against Brendan?

Answer 28

No- the common law claim breaks down because the money was mixed.

Question 29

Constructive notice may suffice for recipient liability.

Answer 29

Lord Brown-Wilkinson Westdeutsche Landesbank v

Islington London Borough Council.