Recovery of Property; tracing and following Flashcards
Following and Tracing
They are NOT remedies but rather are a process of discovery which then leads to an allocation of a sufficient and appropriate remedy.
Lord Millett identified tracing in Foskett.
However perhaps best summation of tracing = Shalson v Russo 2003, Rimmer J described tracing as ‘the process by which a claimant seeks to show that an interest he had in an asset has become represented by an interest in a different asset’.
Following and tracing
Once an equitable proprietary interest has been identified, the claimant will then need to show that this interest can be identified in the property that has been received by the defendant.
Following:
Foskett v McKeown and Others 2001
Following = process of identifying the same asset as it moves from person to person.
Foskett: following is the process of following the same asset as it moves from hand to hand.- if the claimants property had been lost or the property destroyed it can no longer be followed.
-where the claimants property is transferred directly to the defendant- following is the process.
Tracing:
Tracing = the process of identifying a new asset as the substitute for the old.
Foskett v McKeown:Where the original property cannot be followed, it is necessary for the claimant to show that the value of the property in which he or she originally had a proprietary interest can be identified in property that has been received by the defendant.
Foskett v McKeown
In reaching the conclusion that it was possible to trace into the death benefit, the majority identified 2 fundamental principles of tracing.
1) Attribution rather than causation
Tracing depends on attribution
2) Tracing value rather than identifying property
Tracing was not concerned with the identification of chains of property but instead focused on the identification of value within property.
Tracing at Common Law
Where the claimants proprietary base is a legal rather than an equitable, proprietary right.
Common law tending rules are logical but restrictive because the claimant will be able to identify the value of his or her property in the substitute for that property as long as the substitute has bit ve one mixed with other property so that it loses its identity.
Tracing into profits
Trustee of the property of FC Jones v Jones 1997
Court of Appeal held that the claimant can also trace at law into the profits that were made from the use of his or her property.
- Mr J transferred £11,700 in cheques from his potato growing firms bank account to Mrs Jones.
Firm went insolvent which vested the account into the trustee in bankruptcy.
-Mrs J bought potato futures and earned £50,760. This was put into an account - it was held that the trustee could recover everything because the profit derived from the original money without being mixed with any other money of the wife.
Tracing into mixed products
Taylor v Plumer 1815
Banque Belge v Hambrouck 1921
Agip (Africa) Ltd v Jackson 1991
Major limitation on tracing at common law is that it is not possible to trace into a mixed product, save where it is possible to sepearte the components of the product.
Where such mixing has occurred the claimants legal title to the property will be extinguished.
Tracing into and through a bank account.
Banque Belge v Hambrouck
D forged a number of cheques so that £6000 was debited from the account of his employer at the claimant bank and this sum was then credited to his own bank account.
-court of appeal held that the money in the account should be repaid as it had not been mixed
Necessity for a physical transfer of property
Agip (Africa) Ltd v Jackson 1990
Claimant bank had been defrauded of substantial sums of money by its chief accountant.
Case focused on a payment to a company that had credited it to this account- before payment was made the company had nothing credited to this account.
Once payment had been made, the balance was transferred to the D firm of accountants and then to another company and finally oversees to the fraudsters.
Claimant sought to recover the value of the money.
Failed at law because of mixing, as there had not been a physical transfer of property merely a stream of electrons.
Tracing in Equity
Re Hallett’s Estate 1880
Re Diplock 1948
Hallet:Main advantage of tracing in equity is that it not be defeated by the irretrievable mixing of property.
Diplock: difference in approach between common law tracing and tracing in equity is that equity is able to view property metaphysically as it assumes that even though property is mixed the claimants property will still exist albeit that it is not possible to say which bit is which.
Re Haslett’s Estate 1880-
Reason equity can trace mixed funds is because when the claimant has traced an equitable proprietary interest into a mixed fund, an equitable charge will be be place on the whole fund as security for the claim.
Consequently, equity shoes not specifically regard any particular part of the fund as actually belonging to the claimant but is prepared to assume that the claimant has an equitable interest in the mixture by means of a charge on the fund.
Tracing at law and the fiduciary relationship requirement.
Necessary to show that the property in which the claimant had an equitable proprietary interest passed to the D through the hands of a fiduciary in breach of duty. -there must have been an unauthorised disposition of property.
Re Diplock
Executors of Diplocks will distributed money amongst 139 different charities.
Validity of will was successfully challenged by the next of kin who sought to recover the money that had been paid to the charities.
Held that their equitable proprietary claim succeeded even though their money had been mixed in some cases with the money already in charity accounts.
It was held sufficient that there had been a fiduciary relationship between the next of kin and executors who had transferred the estate in breach of fiduciary duty.
Agip (Africa) Ltd v Jackson 1990
Millett J affirmed that in England, a fiduciary relationship is required to permit the assistance of Equity to be invoked (property must be passed through the prism of a fiduciary relationship), but he also accepted that this requirement has been widely condemned.
He is amongst those critics.
The fiduciary relationship requirement has been expressly rejected in New Zealand in Elders Pastoral Ltd v Bank of New Zealand 1989.
Tracing Unmixed funds in equity.
Re Hallett’s Estate 1880
Clearly possible to trace value in Equity into an unmixed fund.
Hallett: if a trustee wrongly uses trust money to pay the whole purchase price in respect of a particular asset, the beneficiary can trace into that account.
Tracing at equity into mixed funds
El Ajou v Dollar Land Holding 1993
Mixed fund= where money in which the claimant has an equitable proprietary interest has become mixed with somebody else’s money.
Millett J in El Ajou- equity allows tracing into and through a mixed fund.
-‘equity’s power to charge a mixed fund with the repayment of trust moneys enables the claimant to follow the money not because it is theirs, but because it is derived from a fund which is treated as if it were subject to a charge in their favour’.
Mixing with the fiduciary’s money
Lipton v White 1805
Where the fiduciary has mixed the claimant’s money with his or her own money, the onus is on the fiduciary to distinguish the separate assets; to the extent that they are unable to do so the assets will belong to the claimant.
-this is because where a fiduciary wrongly mixes his or her money with that of the claimant, the fiduciary has created an evidential difficulty as to what happened to the claimants money.
In such a case - evidential difficulty is resolved against the interests of the fiduciary, save where the fiduciary can show otherwise in the balance of probabilities. - Sinclair Investments Ltd v Versailles Trade Finance Ltd