Equity - Remedies Against Fiduciaries

Front 1

Personal Claim

Back 1

Beneficiary must prove that:
a) The trustee has breached one of his duties, and,
b) That breach has caused loss to the trust.

Front 2

Sinclair v Versailles (2011)

Back 2

A proprietary claim is appropriate only where the fiduciary gains the profit by using trust property or an opportunity belonging to the trust. Not when simply using his position as a trustee.

Hint 2

Mr C, T’s director, permitted money to be transferred to Versailles where he held shares,Versailles carried out fraud, raising its share price, whereupon Mr C sold his shares for £28.69m. T claimed a proprietary interest in Mr C’s profits, which were an unauthorised gain in breach of fiduciary duty.

Front 3

Bartlett v Barclays Bank ( 1980)

Back 3

Set-off against the profit made on one breach of trust against the loss incurred on another breach permitted where the profit and loss arise from the same breach.

Hint 3

Profit and loss both arose from speculative property investment, breach by trustees.

Front 4

Defences against breach

Back 4

1) Knowledge and consent of beneficiary
2) s. 61 Trustee Act 1925
3) Express exclusion clause
4) Limitation and Laches

Front 5

Contribution and Idemnity

Back 5

• Can claim from co-trustees under Civil Liability (Contribution) Act 1978, or,
• Seek an indemnity (for 100%), if co-trustee fraudulently obtained a benefit from the breach, or, if the other trustee was a solicitor who exerted a controlling influence (Re Partington; Head v Gould).

Front 6

Re Partington (1887)

Back 6

Co-trustee can recover full indemnity from other trustee for a breach if they are a solicitor. The solicitor trustee must have also exerted a controlling influence (Head v Gould).

Hint 6

Two trustees of a settlement invested in a mortgage which was an improper investment for the trust.

Front 7

Re Hallett’s Estate (1880)

(No mixing)

Back 7

A beneficiary can elect to take the property purchased or to have a charge over the property to secure the amount due to the trust, an equitable lien.

Trustee deemed to spend own money first.

Hint 7

Solicitor (H) paid trust money into his own account, later also paid in a client’s money, so held money for two in his account. H then dissipated some of the money, H died insolvent. Who owned money left in account? Held, belonged to the trust and the client.

Front 8

Foskett v McKeown (2001)

(mixed asset)

Back 8

A beneficiary can elect to either:
• Claim a proportionate share of the asset, or,
• Enforce a lien upon the asset to secure his personal claim against the trustee.

Hint 8

Two property developers held £2.7 mil as trustees on behalf of various investors. One trustee took out a life policy using partly his money, partly stolen trust money, he then died and £1mil paid out). Held, investors claimed a pro rata share of the £1mil pay-out.

Front 9

Re Oatway (1903)

(mixed bank account)

Back 9

Re Hallett’s Estate – trustee is deemed to spend his own money first. Ben. have a proprietary claim in whatever left

The beneficiaries claim had to be satisfied from any identifiable part of the mixed fund before the trustee could set up his own claim.

Hint 9

Trustee withdrew money from a mixed bank account and used it to buy shares, later withdrew the balance and dissipated it. Held, beneficiaries were entitled to the shares purchased with the first withdrawal.

Front 10

Roscoe v Winder (1915)

(mixed bank account)

Back 10

If, having dissipated the trust money, trustee pays in his own money, not regarded as replacing the trust money. Beneficiaries cannot claim above the lowest balance to which the account sank after the trust money was paid in.

Hint 10

Wigham agreed to give book debts to the sellers. He collected £455 but kept them in his account, breaching his agreement and fiduciary duty to the company. He spent all but £25, but put in his own money so the balance on his death was £358. Roscoe Ltd sued to recover all the money in the account.

Front 11

Claytons Case (1816)

(mixing of two trust funds)

Back 11

Rule of first in first out, the first trust money to be paid into the account was also the first money paid out, so the first trust to be stolen from loses out, relies on chance.

Hint 11

Court attempting to ascertain competing claims to funds in a bank account between two innocent parties. Held, should be first in first out.

Front 12

Barlow Clowes v Vaughan (1992)

(mixing of two trust funds)

Back 12

The balance of account divided in proportion to the initial contributions to the account. Clayton’s will not apply when: a) Impractical
b) Injustice
c) Contrary to the parties’ intentions.

Hint 12

Investors contributed to a common investment scheme, the trustees held monies on separate trusts. When the scheme folded there wasn’t enough to satisfy all the investors. Rule in Clayton deemed not applicable as contrary to intention of investors. Remaining funds shared proportionately.

Front 13

Mixing of two trust funds method

Back 13

Where a trustee mixes money from two or more trusts with his own money, first apply the rules in Re Hallett and Re Oatway to allocate withdrawals from the account, and then apply Clayton to the balance, if Clayton if unjust, Barlow.

Front 14

Common law tracing vs Equitable tracing

Back 14

• Common law tracing cannot identify the claimant’s property once it has been mixed with other property (Taylor v Plumer).
• Equitable tracing can identify the claimants’ property in a mixed fund. Common law tracing also breaks down where funds are transferred between banks electronically (Agip v Jackson). Equitable tracing can follow electronic transfers.