Tracing Flashcards
What are the three requirement to equitable tracing
(1) Must be based on pre-existing fiduciary relationship
(2) Must be in traceable form
(3) Must be equitable to trace
What can a person do?
Charge on the property, take the property etc. May trace (Re Hallet’s Estate)
Re Hallet Estate
Her solicitor wrongfully sold her bonds to a purchaser, who was acting in good faith. However, instead of transferring the proceeds directly to Ms. Cotteral, the solicitor deposited the money into his own bank account, where it became mixed with his other funds. Subsequently, the solicitor passed away insolvent. The central question was whether Ms. Cotteral could trace her entitlement into the solicitor’s bank account, given the commingling of funds. Master of the Rolls Jessel rendered a strong judgment, affirming Ms. Cotteral’s proprietary claim against the solicitor. He reasoned that as the solicitor held her bonds as a bailee, he held them on her behalf, granting her an equitable proprietary interest in the bonds themselves. Furthermore, because the solicitor wrongfully sold these bonds, Ms. Cotteral also acquired an equitable proprietary interest in the proceeds of the account where the funds were deposited. This ruling positioned Ms. Cotteral ahead of ordinary unsecured creditors in the solicitor’s insolvency proceedings, highlighting the relevance of the solicitor’s fiduciary role and affirming Ms. Cotteral’s property rights in the matter.
Re Diplock
Non-charitable purpose trust. Void on the basis that the charitable purpose failed and was thus held on resulting trust. The residual beneficiaries brought an action against trustees who had distributed the monies. Equitable tracing is available. Charities for breach of trust were liable. Charities even bona fide, even unconscionably, proprietary equitable interest had been created. Equity appleis on property on innocent volunteers also. Proprietary claim not a personal claim.
Agip v Jackson
accountant embezzled funds from their employer, Agip (Africa), by writing fraudulent checks and directing them to a shell company, which then transferred the money to the defendants, Jacksons, an accounting firm in the Isle of Man. The defendants subsequently distributed the funds to various destinations, but some money remained in their account. The central issue revolved around whether the employer could trace this remaining money at common law. The court ruled against common law tracing, citing the absence of a physical asset directly belonging to the claimant. Despite money being present in the Jacksons’ account, its commingling with other funds rendered it impossible to identify the original source, thereby defeating the tracing attempt and resulting in a limited remedy for the claimant. [limitation of common law tracing]
First In - First Out case
Rule in Re Clayton
Presumption of Honesty
Re Hallet’s Estate
Lowest Intermittent Balance Rule
Rule in Roscoe
What case gives an exception to the lowest intermittent balance rule
Re Hughes - Solicitor on purpose put money back, thus there is an exception
Rule to trace the purchase from money taken out (unjust enrichment)
Re Oatway
Trust money sinks to the bottom
Re Lehman Brothers
What case answers the question of profit
Foskett v McKeown (EQ) – life insurance (pari passu) Jones and Jones (CL)
What rules apply for trust money mixed with trust money
Rule in Clayton with exception in Barlow (common intention)
When do you lose the right to trace
Inequitable - Re Diplock
Untraceable - BIM v Homan
Bona Fide Puchaser - Foskett
