W7 - Proprietary claims Flashcards
What happens if the trust property has dissipated?
A proprietary claim is unavailable and must rely on a personal claim.
What if the trustee is bankrupt?
A personal claim would be pointless.
A proprietary claim will give the claimant priority over the defendant’s trustee’s creditors as it would be enforcing an equitable interest on the asset/money.
What is the asset was purchased with trust funds that increased in value?
If so, the proprietary claim is better than a personal claim (Faskett v McKeown).
What if the breach occurred more than six years ago?
Personal claims are barred due to the statutory limitation period, but proprietary claims are not.
What happens if the trustee has died?
One may bring a proprietary claim against his executors.
What if the asset purchased with the stolen trust fund has increased in value?
A proprietary claim will be better than a personal claim as you can claim a proportionate share of asset.
Remedy: Trustee holds original trust property
Make a proprietary claim against the original trust property.
Remedy: Trustee has made a straight exchange of trust property for an asset
“Clean substitution”
Under Re Hallett - two options available for beneficiary:
1) claim ownership in new asset; or
2) claim an equitable lien (charge over asset to secure the amount)
Remedy: Trustee has purchased an asset using partly own money and money drawn wrongfully from trust
Faskett v McKeown - two options available for beneficiary:
1) Claim proportionate share of asset (choose if asset has increased in value
2) Enforce a lien upon the asset for the precise amount of money taken (choose if asset has depreciated in value).
Remedy: Trustee has mixed trust funds with own money and spent only part of this total balance on something
General rule: Everything is presumed against the wrongdoing trustee.
1) Trustee is deemed to have spent own money first (Re Hallett) OR
2) Beneficiary is entitled to what was purchased with the first withdrawal (Re Oatway).
Roscoe v Winder
Where the trustee has dissipated trust money, then pays in his own money, beneficiaries cannot claim this as it is not considered as trust property.
Foskett v McKeown
The beneficiary is entitled to recover any proportionate increase in the value of the purchase.
Note: This has never been used before and was only implied in Foskett v McKeown.
Remedy: The trustee (who is a trustee of more than one trust) mixes two trusts together
1) First In, First Out (FIFO) (Clayton’s Case); unless this:
(i) would resulting injustice
(ii) is impractical/difficult/expensive to ascertain order of payments; or
(iii) is contrary to the parties’ intentions
2) Barlow Clowes - divide the account balance/assets in proportion to initial contributions pari passu.
Pari passu
Same proportions as they contributed to the purchase.
Remedy: Trustee, who is a trustee of more than one trust and mixes two trusts together with his own money
1) Re Hallett and Re Oatway to the withdrawals from the account
2) Apply Clayton’s Case to the balance.
