Tracing Flashcards
What is the difference between ‘following’ and ‘tracing’?
‘Following’ is a process of identifying the actual money belonging to a beneficiary. ‘Tracing’ is identifying some property that has been purchased with trust funds.
Which case tells us that a beneficiary may claim property that has been purchased with their trust fund money?
Taylor v Plumer (1815)
What happened in Taylor v Plumer?
A trustee who had gone bankrupt bought gold bullion and promissory notes with trust funds and tried to escape to America.
There are four equitable remedies to retain property from a breach of trust. What are they?
- Equitable ownership
- Equitable lien or charge
- Subrogation
- Personal remedy
Which of the four equitable remedies used in tracing are proprietary?
- Equitable ownership
- Equitable lien or charge
- Subrogation
What are the advantages of a proprietary remedy over a personal remedy?
- Priority over general creditors in insolvency
- Take any increase in value
- Under Limitation Act 1980 there is a limit of 6 years for personal claims. This doesn’t apply to proprietary claims.
What are the limitations to tracing at common law?
- Claimants must have legal title of property they are tracing (not useful for beneficiaries)
- Property must be identifiable (mixed accounts cause issues)
- Usually only results in a personal claim
How did LJ Goff describe the defence of change of position in Lipkin Gorman v Karpnale Ltd?
‘where an innocent defendant’s position is so changed that he will suffer an injustice if called upon to repay’
What are the two requirements to use the defence of change of position given by LJ Goff in Lipkin Gorman v Karpnale Ltd?
- There must be expenditure by the recipient based on reliance of the payment he received, which has ‘disenriched’ him;
- The expenditure should be ‘extraordinary’, in that it would not have been made had the funds not been received.
Which case tells us that the change of position defence can also be used when the defendant anticipates payment?
Dextra Bank & Trust Co Ltd v Bank of Jamaica
In which case did the Court of Appeal keep open the possibility that a defendant who had not become ‘disenriched’ could rely on the defence of change of position?
Commerzbank AG v Gareth Price-Jones
In Scottish Equitable Plc v Derby what was held not to be extraordinary expenditure? Why?
Payment of debts. They are considered to be payments in the ordinary course of business.
What was so extraordinary about the expenditure incurred in Phillip Collins Ltd v Davis given the fact that the items bought were of an everyday nature?
The amount that had been bought was extraordinary and showed reliance.
Who is not allowed the defence of change of position?
Those who spend money in bad faith ie know of the restitution claim
What added advice did Moore J give on the notion of bad faith and change of position in Niru Battery Manufacturing Co v Milestone Trading (No 1)?
Bad faith ‘is capable of embracing a failure to act in a commercially acceptable way and sharp practice of a kind that falls short of outright dishonesty’. He also pointed out negligence will not deprive the defendant of the defence.
What two prerequisites are there for tracing in equity give in Re Diplock?
- The claimant should have an equitable interest in the property claimed;
- There should be a fiduciary relationship
Which case approved that a fiduciary relationship must exist to trace in equity?
Westdeutsche Landesbanke Girozentrale v Islington London BC
In which case does LJ Millett and LJ Steyn criticise the requirement for a fiduciary relationship to trace in equity?
Foskett v McKeown
In Foskett v McKeown what might a fiduciary relationship have relevance to if not to determine whether you can trace in equity?
Whether the claim can be proprietary or merely personal.
Which case tells us that the fiduciary relationship does not have to be between claimant and defendant?
Re Diplock. The next of kin was sueing the charities who had been paid by the trustees.
The Australian case of Black v Freedman was approved by Lord Templeman in Lipkin Gorman v Karpnale Ltd and by Lord Browne-Wilkinson in Westdeutsche. But between whom was the fiduciary relationship established?
Thief and victim
In Chase Manhattan Bank v Israel-British Bank (London) Ltd in what circumstances did the court find a fiduciary relationship?
Chase Manhattan Bank had mistakenly paid Israel-British Bank $2m. The recipients were said to hold on trust.
Westdeutsche questioned the ruling in Chase Manhattan Bank v Israel-British Bank, that a mistaken payment could be held on trust by the recipient on mere receipt, but when might the recipient hold on constructive trust?
When the recipient has learned of the mistake.
Whose account can you not trace into?
A bona fide purchaser for value without notice
