Remedies Against Trustees - PROPRIETARY Flashcards
What are proprietary claims?
Beneficiaries are entitled to call for property BACK, if the trsutees have taken ownership over trust property.
How can you use the proprietary claim if the trust property has changed forms?
Using tracing rules - equity deploys tracing rules to trace the beneficiaries equitable interest into new forms of property.
What is dissipated?
When the trustee sends the trust property in such a way that there is no physical asset to trace it to- such as credit card bills, holiday, etc. no value in proprietary claim.
When may a proprietary claim be useful?
If trustee is insolvent and personal claim cannot be used.
Trustee may have used trust property to buy themselves something that beneficiary considers attractive, and can therefore asset a claim over this. .
Trustees wrongdoing may have happened some time ago, and personal claims are barred 6 years from breach.
What happens with a proprietary claim if the trustee STILL HOLDS trust property?
No tracing is required, still in identifiable form. Can recover property.
What happens in proprietary claim if trustee helps SUBSTITUTE PROPERTY?
Will enable beneficiary to recover this asset, clean substitution.
Swap from original property to the new asset.
Belongs to the trust.
Can take substitute property, or can sue trustee for compensation for the loss to the trust and take charge (equitable lien) over the property for the amount that the trust has lost.
What is an equitable lien?
Take a charge over prperty, for the amount that the trust has lost.
Use this when the substitute property has decreased in value.
What happens with proprietary claim when the trustee mixes trusts property with OTHER property?
Different tracing rules needed.
Mixed asset/mixed trusts/multiple withdrawals.
What happens when the trustee mixes an asset?
If the trustee wrongly uses trust money to provide part of the cost of acquiring an asset. Mixed asset.
Beneficiary can:
Claiming proportionate interest in the mixed asset (if increases in value)
Sue trustee for compensation for loss and take charge (equitable lien) (used if mixed asset has decreased in value)
What happens when the trustee has withdrawed from a mixed bank account?
Re Haley: trustee is deemed to spend their OWN money first.
Foskett: beneficiary can take benefit of any increase in value in the assets into which they are tracing.
Re Oatway: everything is presumed against a wrongdoer. Beneficiary has first charge on mixed fund, therefore has “first choice” and can choose how best to satisfy proprietary claim.
What are the limitations to tracing rules?
Roscoe v Winder:
If trustee spends all money, and then subsequently pays extra money into account, beneficiary CANNOT trace interest into this extra money.
What happens if the trustee has multiple trusts and mixes trust property?
Must ensure equity between two trusts.
Beneficiaires of each trust will share PARI PASSU, in the mixed asset purchased - rateable in same proportionate as funds contributed to purchase price.
What happens if a trustee withdrawals mixed bank account with two different trusts in it?
How do benefitted know if share were from their trust or other trust?
Claytons rule: first in, first out. (FIFO).
Barlow Clowes: This is DEPARTED from, where it is impossible to apply FIFO, FIFO would be unjust, or application of FIFO would be contrary to parties intentions.
What happens if a trustee withdraws form a mixed bank account of 2 or more trusts, and mixes with OWN MONEY??
Should apply Re Haley and Re Oatway first, with every aim of pushing as much of the trustees own money into dissipation as possible.
THEN, apply Clayton’s case and Barlow, to allocate any remaining assets between the 2 trust funds.
Can you bring proprietary claims against other fiduciaries?
Yes. Principals of other fiduciary relationships can also bring proprietary claims to recover prperty that has been misappropriated by fiduciaries.
