Trust 15 - Equitable remedies and tracing

Question 1

What is the difference between following and tracing?

Answer 1

• Following = following same asset as it moves hands
• Tracing = identifying new asset as substitute for old

Question 2

What is the difference between a wrongful and innocent mixture?

Answer 2

• Wrongful: misapplied trust money & trustee’s own money
• Innocent: misapplied trust money & money from one or more innocent 3rd parties

Question 3

What potential claims are there for beneficiaries where trust money has been misapplied with mixed funds?

Answer 3

1. Beneficiary claims beneficial ownership itself
2. Claims share of asset
3. Claims equitable lien over asset (where asset decreased in value)
4. Subrogation (where used to pay off debts)

Question 4

What are the 3 different models for wrongful mixtures?

Answer 4

• Hallett Model: trustee’s drawings for own purposes are attributed to his fund and not trust funds
• Oatway Model: if choice between traceable asset & dissipation, trustee treated as protecting trust fund & dissipating their own
• Shalson Model: B can attribute trust money to most profitable use made (unless competing with unsecured creditors)

Question 5

What are 2 examples of innocent mixtures?

Answer 5

1. Money from 2 or more trusts
2. Innocent recipient of misapplied money mixes it with their own

Question 6

How are withdrawals attributed for innocent mixtures? (not for current bank accounts)

Answer 6

Rateably

Question 7

How are withdrawals attributed for innocent mixtures? (for current bank accounts)

Answer 7

Ex post facto method: identify amounts contributed to account by each contributor attributing all withdrawals fractionally
Technically rolling charge method used but this much more common