Tracing and Liability of Strangers Flashcards
What is a proprietary claim when it comes to strangers who can get involved with the mismangement of trust property?
Claim to return the trust property or profits from it back to the beneficiary.
When does such a breach occur?
When stranger takes trust property without from a bad trustee KNOWING that the property was from a trust (so with notice) OR when someone receives the trust property but has not paid any consideration.
CANNOT BE USED AGAINST A BONA FIDE PURCHASER FOR VALUE WITHOUT NOTICE: aka a purchaser who bought in good faith, with no idea about the existence of a trust
What are the 2 types of claims to be made against strangers?
Proprietary claims - getting back items
Personal claims - getting stranger to give back money from their own pocket for the loss suffered
What is a personal claim when it comes to strangers who can get involved with the mismangement of trust property?
CAN ONLY BE USED WHEN THE STRANGER KNEW THAT THERE WAS A TRUST AND THEREFORE their consciousness was at fault.
Basically when the stranger must pay out of their own pockets for any profits or losses made by their actions.
Difference between proprietary and personal claims?
proprietary = getting the property and any profits from this back
personal = about getting fiscal compensation
What are the 2 instances of bad stranger behaviour that will lead to a valid personal or proprietary claim?
- Unconscionable receipt: when the stranger RECEIVES trust property knowing it is from a bad trustee breaching trust duties: the stranger must return the property or any money received from it etc back to the beneficiaries - basically account the full value of the property or the property and the profits back to beneficiary.
- Dishonest assistance: what it says on the tin. The stranger HELPS the trustee breach the trust and they are aware that what they are doing is dishonest.
Can a claim be made against a stranger who is a bona fide purchaser who is without notice (of the trust)?
NOOOOO. They are innocent.
What is tracing?
This is a technique to find the property or what it is now existing as.
Basically, tracking what has happened to their property, what it has been converted into, like a villa, money, investments etc and being able to retrieve that if the whole property is no longer in existence.
Then a claim can be made.
What must be done if the trust property, upon the breach of trust and a stranger’s involvement, has dissapated (disappeared)?
Cannot make a proprietary claim - the thing is no longer in existence in no form whatsoever.
One example of dissapation is when the money paid into an overdrawn account has disappeared. YOU CAN DO A PERSONAL CLAIM WHEN TRUST HAS DISSAPATED. MAKE STRANGER GIVE COMPENSATION FROM THEIR MONEY.
When can a proprietary claim against a stranger be made?
When trust property has been successfully traced and it (1) has not dissapated and (2) the property was not purchased by a bona fide purchaser without notice.
What happens when the trust has been traced back into a trustee/ stranger’s personal account?
The money is now mixed with their own money.
It is assumed that when they spend money from this account, their own money will be used up first and then when their funds are below the trust amount that was put in, it is said that part of the trust money has been used.
If money is then repaid back into the account, it is not considered that this money is to refill the trust money but their own money. UNLESS they intend to refill and top up the trust money they have taken.
What if trustee or stranger puts money from 2 different trusts into one account?
Money used will be treated on a first in first out basis. So whatever trust was put in first, thats the first trust to have its money used.
