Tracing Flashcards
What is tracing?
Where the beneficiary decides to track down or pursue the trust property especially where the trustee has misappropriated it
What is it called in common law?
Tracing
This following is available to who?
To a person with legal title in the goods meaning only the trustee can follow
The trace must prove ?
Prove that his title is better than that of the third party purchaser
Can chattels be traced?
It cannot
Where the trust property has taken a new identity, can he still follow?
Provided the property is identifiable
Obiter of who in which case?
Lord Ellenborough in Taylor v Plummer
What happened in the case?
Where the part of 22,000 Pounds was used to purchase gold bullion
What did the court hold?
Held that it is still traceable
Can trust funds be traced to a bank account
Yes
If?
It is the only fund therein
In equity?
Tracing can be done even when the fund is mixed
Case?
Taylor v Plummer , AGIP v Jackson
TRACING AT EQUITY
To trace in equity which relationship must be there?
There must be fiduciary relationship btw the beneficiary and the trustee or third part with the property
Case?
Re Diplock
Case?
Re Hallet’s Estate
What happened
Fiduciary relationship was construed where it was her solicitor that also managed her estate
What must the beneficiary show?
Show that he has proprietary interest in the property
Is there need to prove legal ownership in equity
No
How is the power to trace exercised
By alleging constructive trust or making a declaration of charge in respect of the property notwithstanding that it has been mixed
Case?
Foskett v McKeown
Where the trustee used 24,499 from the trust money to pay for 2 out of his 5 life insurance installment which paid out 1 million pounds . The court held that the beneficiaries were entitled to 2/5 of the 1 million being the proportionate share
What can defeat a tracing claim?
A bona fide party purchaser for value without notice
Case?
Re Diplock
Tracing in equity covers?
Equitable interest in property
When does tracing terminates
If the trust property has been dissipated I.e where neither the property cannot be found nor can the converted form be found
Case?
Bishopsgate Investmenr Management V. Homan
What happened in the case?
The account was overdrawn and no investment accruing from the money could be found
Principles the court may used in mixed funds
1?
The first withdrawal principle
What happens here
Looks at the money that was first withdrawn as that of the trustee/ account holder then the balance in the account is for the trust
Case?
Re Hallett’s estate
What happened in the case?
Hallett paid 770 pounds from one trust into his account. Pod 1804 pounds from another trust into his account . His account was buoyant and was able to satisfy both claimants
What did the court note?
Assuming Hallett had withdrawn some money, the first withdrawn is deemed to be his own and the rest for the trust
Second principle
First in, First our principle
The principle was in what case?
Clayton’s case
What happens here?
Where more than 2 trusts try to claim an insufficient account, it is presumed that the first trust that was pain in is the first that was withdrawn then what is left in the account is that of the trust that was paid in second or later
Third principle
Date of payment principle
Case?
Oatway’s case
What was held?
The first to be paid into account would take priority . Then the rest of the fund can be traced to the various investment if they can be found
4th principle
Lowest intermediate balance principle/ rule
What happens where the sum in the sum in the bank account falls below that taken from the test fund?
The balance should be traced to its new destination
Case?
Roscoe v Winder
Case?
Quistclose V Barclays Bank
What happened in Jones v Jones
The court held that where the trust fund was fraudulently invested and made profits, the beneficiaries are entitled to recover the fund including profit
