Proprietary Remedies

Question 1

Trustee FC Jones and Sons v Jones

Answer 1

Proprietary claim
Where defendant receives an asset that the claimant has a proprietary interest in
Once proven by claimant, remedy then sought to enforce this proprietary right
Beneficiary’s claim based on a proprietary right, but remedy not necessarily proprietary – 2 types of remedy:
Proprietary: assertion of rights against a particular property (original or substitution) in defendant’s possession
Personal: for value of property received but not kept by defendant – a proprietary claim with a personal remedy

Question 2

Proprietary Remedy

Answer 2

Proprietary remedy
Asserting proprietary rights against property in possession of defendant
Two types:
Recover property in defendant’s possession
Recover value of property in defendant’s possession BUT claimant has security interest in the property
Advantages:
Where defendant insolvent, claimant will have priority over other unsecured creditors
Claimant also entitled to any increases in value of property but only if he/she has an equitable right and not a security interest

Question 3

Proprietary Claim

Answer 3

1) Proprietary Base - Claimant has an equitable interest in property, can be created by most trusts. Action can be brought by a principal against a fiduciary or a third party for misappropriation if principal transferred property to fiduciary
2) Tracing - Process of identification of property which claimant’s proprietary interest lies. Dependent upon attribution, not causation. Value of the property within other property. Must prove there was a fiduciary relationship.

Question 4

Constructive Trust

Answer 4

Property held on trust by defendant for claimant

If claimant has an equitable proprietary interest, defendant may be deemed to hold property on constructive trust and may be ordered by court to transfer all of the property to the claimant
If claimant has an equitable proprietary interest in a proportionate share of the property, a constructive trust may be declared – claimant then entitled to claim a proportionate share of mixture
Where claimant’s money mixed with that of a fiduciary, claimant can elect whether to claim a proportionate share of any assets purchased using it or seek a charge to recover value of misappropriated trust property (Foskett v McKeown [2001] 1 AC 102)
Where claimant’s money mixed with that of an innocent volunteer, both have an equitable interest in any assets purchased with money proportionate to their contribution – loss/increases in value shared equally

Question 5

Equitable charge/Lien

Answer 5

To secure repayment of amount owed to claimant by defendant, a charge on the property could be sought
Claimant then recovers value of property received as well as interest
Claimant has priority over any other unsecured creditors
Where claimant’s money used to acquire property, claimant can get a charge over all of it or a proportionate share (Foskett v McKeown [2001] 1 AC 102)
Where claimant’s money used to improve property, but not purchase it, property treated as charged with sum reflecting value of claimant’s contribution – applies whether defendant a fiduciary or an innocent volunteer, except where a charge is unfair on an innocent volunteer (Re Diplock’s Estate [1948] Ch 465)

Question 6

Subrogation

Answer 6

‘[A] transfer of rights from one person to another … by operation of law’
Subrogation allows claimant to rely on third party rights against the defendant – to stand in the third party’s shoes

Parties Intention irrelevant

Even if security discharged, claimant can still receive benefit of creditor’s security

Claimant intentionally lent money to discharge secured debt, claimant surrogated to discharge security only if intend to secure loan but security proved to be invalid

It can be excluded under contract

Question 7

Defences

Answer 7

Bona Fide Purchaser for Value -Defeats claimant’s equitable title absolutely and corrects any defects in `defendant’s good title
Burden of proof on defendant (balance of probability)
Some recipient in chain must be a bona fide purchaser – must have provided some value and must have acted in good faith i.e. no knowledge, whether actual or constructive, of claimant’s equitable proprietary interest etc

Change of Position - Restitution by defendant not required where defendant, in reliance on receipt of an enrichment, changed his/her position in good faith