Tracing Flashcards
Boscawen v Bajwa
Ratio: 1. Tracing is ‘the process by which the plaintiff traces what has happened to his property, identifies the persons who have handled it or received it, and justifies his claim that the money which they handled or received can properly be regarded as representing his property’. 2 Where the claimant’s funds are used to pay a secured debt, the claimant may be able to make a claim for subrogation which would revive the debt in favour of the claimant, allowing them to take a charge on the same terms as the original lender to secure that debt. The terms cannot be more favourable to the claimant that they were to the original lender.
Agip v Jackson
Ratio: Common Law has no way of tracing assets back out of a mixed fund.
Banque Belge v Hamsbrouck
Ratio: 1. Common Law treats property as a physical asset and can only identify a substitute if the identity is not lost. Tracing at equity is not defeated by mixing.
Re Diplock
Ratio: 1. There are two requirements for tracing in equity: a. A fiduciary relationship (does not need to be between claimant and defendant). b. An equitable proprietary interest in the property being traced. 2. Money spent on food and drink, paying unsecured debts and aesthetic property improvements is dissipated. 3. When the money of innocent volunteers is mixed in the defendant’s savings account, the two funds share the mixture in the account and payments out of it rateably. 4. A proprietary claim may not be allowed if it is inequitable. 5. When money is wrongly paid out in the administration of an estate, a personal action is available against those who received the money, even if they were innocent volunteers. But, beneficiaries must first sue the personal representative who has acted wrongly and the amount they can claim from the recipients is limited to the amount which cannot be recovered from the personal representative. Also, the entitlement is only to the principal sum.
Facts: A fiduciary relationship was found between executors of an estate and next of kin but the claim was agains the charities who had received the traceable proceeds of a misapplication of estate money. A hospital had spent the money improving its own property. The court did not allow the claimant to take a charge, enforceable by sale, over the property on the basis that it would be inequitable.
Westdeutsche Landesbank Girozentrale v Islington LBC
Ratio: Approved the requirement for a fiduciary relationship established in Re Diplock.
Foskett v McKeown
Ratio: 1. Suggested obiter that there is no logical justification for insisting on a fiduciary relationship for the tracing process to be available, though the existence of such a relationship would be relevant to whether the claim in respect of the traced assets was a proprietary one or merely a personal one. 2. If the claimant’s unmixed funds are used to purchase an asset, the claimant can choose whether to take ownership or take a charge. 3. If an asset is purchased using the claimant’s funds mixed with the wrongdoer’s, the beneficiary is entitled to either claim a proportionate share of the asset or take a charge to secure a personal claim against the trustee for the amount of misapplied money. 4. If the funds of innocent volunteers are mixed to acquire an asset, all must share rateably. 5. If the claimant’s money is used to improve an innocent volunteer’s pre-owned asset, the trust is entitled to a charge over the asset where value is added.
Chase Manhattan Bank v Israel-British Bank
Ratio: Fiduciary relationships have been found easily in circumstances where tracing is sought.
Bishopsgate Investment Management v Homan
Ratio: Money paid into an overdrawn bank account is dissipated.
Re Hallett
Ratio: 1. If the claimant’s money is paid into the wrongdoer’s empty bank account, the claimant has an equitable charge for the amount of money misappropriated. If payment is made out of that account, the claimant can trace into the substitute. 2. When the claimant’s money is mixed with the defendant’s, the claimant can take a charge over it. 3. Presumption of honesty - If funds are mixed, the defendant is presumed to have spent his own money first. 4. If a claimant’s funds are used to acquire substitute property, the claimant may either take ownership of the property or take a charge over it.
Facts: Hallett was a trustee who mixed trust funds with his own money in his personal bank account. He later made withdrawals from the account which he dissipated, but the balance of the account remained sufficient to meet the claims. Court held that both beneficiaries were entitled to a charge over the bank account.
Re Tilley’s
Ratio: Where the claimant’s money is mixed with the defendant’s, the claimant can choose to take a charge or a proportion.
Re Oatway
Ratio: When the defendant’s funds are mixed with the claimant’s, the claimant can rebut the presumption of honesty if the defendant spends money on something traceable and dissipates the rest.
Shalson v Russo
Ratio: A beneficiary should be allowed to ‘cherry-pick’ when their money is mixed with the defendant’s. I.e. even if there is enough money in the account to satisfy their claim, they could choose to trace earlier payments if money was spent on assets which have appreciated in value.
Roscoe v Winder
Ratio: Lowest intermediate balance rule - If the wrongdoer spends the claimant’s money and then pays in his own money, this will not be presumed to be a repayment unless there is express intention. The claimant is limited to the lowest intermediate balance on the account, which is the traceable proceeds of their property. If the account is exhausted in the intermediate period, the beneficiaries cannot claim at all.
Re Clayton’s Case
Ratio: Where funds of innocent parties are mixed in the defendant’s current account, the first in first out rule applies.
Barlow Clowes v Eurotrust: This rule will not apply if it would be impractical, unjust or contrary to the intention of the claimants. In this case, it was held that an investment fund was to be regarded by investors as a common pool, and that they should share rateably in what remained because they had experienced a common misfortune.
Charity Commission v Framjee
Ratio: The rule from Clayton’s Case is easily displaced and rateable distribution should be applied most of the time.
