Tracing Flashcards
What is meant by tracing?
Where the original trust asset no longer exists, a new asset can be identified that is a substitute for the old one (Lewin)
What is the difference between a clean and mixed substitution
Clean: Where the whole value inherent in the new asset is attributable to the whole value of the old one
Mixed: Where it is not wholly attributable to the old asset and comes from different sources
What does the case of Foskett v McKeown tell us about tracing?
-Different to following which is simply following the same asset as it moves
-Beneficiaries cannot follow trust money once it reaches a bank or insurance company since identity is lost
What is the rule in Re Hallett?
Where a wrongdoing trustee makes a withdrawal form a mixed account, it is presumed they dissipated their own money first
What is the rule in Claytons case?
First in, first out
If a trust mixes multiple funds in a single account and then makes transactions these are presumed to be using the money on the same basis as it went in
When can the rule in Claytons case be rejected?
- It would be inappropriate (large scale fraud)
- It would be too expensive, impractical or difficult to apply
- It would be contrary to the presumed or actual intention of the contributors
- It would be unjust
What is the rule in Re Oatway?
Where the wrongdoer withdraws money from the mixed fund and then uses it to purchase a substitute right before dissipating the remainder, the wrongdoer is treated as having dissipated their own money
What is the rule in James Roscoe v Winder?
Lowest intermediate balance, where trust money was misappropriated into a mixed fund and withdrawals were subsequently made by the trustee, claims cannot be made for any money put in after this (i.e. if the account had £100, £80 was spent before another £50 was put back in, the claimant would be allowed only £20)
What is the simple pari passu approach?
Dividing any remaining funds in proportion to each claimants initial contribution. Any deposits or withdrawals between the initial contribution and remedy being sought are ignored
What is the rolling charge method?
Each contributor is entitled to proportionate share of the mixed funds corresponding to the size of their contribution, this being recalculated each time a deposit and withdrawal is made
What is meant by backwards tracing?
The action of tracing money through payment of a debt (i.e. if the wrongdoer had bought a car on loan before misappropriating the money, but then used the money to pay off the loan)
Can backwards tracing be used in English law?
Bishopsgate Investments v Homan would say no, however the more recent case of Brazil v Durant International says it can in limited circumstances where there is a ‘coordinated scheme’
