Tracing Notes

Front 1

Tracing is neither a claim nor a remedy but a

process

Back 1

Boscawa v Bajwa

Front 2

Once property is identified can make either

a personal or a proprietary claim.

Back 2

Proprietary is better because:

priority in insolvency. However this can be defeated by

Front 3

dissipation,

Back 3

untracability,

inequitability

Front 4

Common Law vs Equity:

Back 4

Common law requires:

legal title.

It is also more limited because:

once the property is mixed it

Front 5

ceases to be identifiable:

Back 5

Agip v Jackson

so:

Front 6

Tracing in equity:

Case:

Back 6

Re Diplock:

requirements:

1. Fiduciary relationship:

2. Equitable proprietary interest being traced.

Front 7

1. Fiduciary relationship:

Back 7

Westdeutsche v Islington

it's a

low bar

'A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.' Lord Millett, Bristol and West Building Society v Mothew

Front 8

A fiduciary relationship need not be

Back 8

between the claimant and the defendant.

case:

Re Diplock:

can be, but can also be between the claimant and the person who supplied the defendant.

Easy to find a fiduciary relationship:

Front 9

Lipkin Gorman v Karpnale

and

Back 9

Chase Manhattan v Israel-British Bank

Followed in Ireland by

Hint 9

Re Irish Shipping

Front 10

Limitations:

Back 10

1. Dissipation:

includes:

Front 11

Overdrawn bank accounts:

Back 11

Bishopsgate v Homan

and

Front 12

Unsecured debts:

Back 12

Re Diplock

Front 13

2. Tracing into the hands of third parties::

including innocent volunteers

Back 13

Can trace into anyone's except

Bona fide purchaser for value without notice:

Equity's Darling.

Front 14

Tracing through a bank account:

Back 14

Unmixed funds

Mixed funds

Front 15

Unmixed funds:

Back 15

Re Hallett's Estate:

if the money is paid into the wrongdoer's account, claimant has an equitable charge over the amount paid in.

When it's paid out:

can trace their money into any substitute property.

Front 16

Mixed funds:

Back 16

Re Hallett's Estate:

Front 17

Presumption of honesty

Back 17

mixed with trustees own money, then withdrawals were made then: dissipated.

But there was still enough left over to cover the claimants money, so it was presumed the wrongdoer had spent their own first.

But what if there isn't enough money left?

Front 18

Rebutting the presumption:

Re Oatway:

Back 18

Spent part of the funds on something traceable and then dissipated the remainder. Presumption of honest would lead to injustice. Unless, rebut it and say the first, traceable expenditure was the claimants.

Could say

This is still the presumption of honesty, as the honest trustee would have spent the claimants money more wisely than their own, and then wasted their own.

also:

Front 19

Cherry picking:

Back 19

If the earlier payments have been spent on assets that have increased in value the claimants will probably want to trace their money into that rather than stick with the money in the account:

case:

Front 20

Shalson v Russo:

Back 20

Can cherry pick if it is only a contest between the claimant and the wrongdoer:

'everything is presumed against the wrongdoer'.

c.f.

Front 21

Turner v Jacob:

Back 21

mother spent daughter's money, then replaced it. There was still enough in the account and it was not a deliberate breach of trust AND the claimant was trying to win twice = bad faith, = not clean hands, = equity didn't like it.

What else?

Front 22

The general rule of evidence

Armory v Delaminie

Back 22

In the case of (evidential) uncertainty created by the wrongdoing, it's resolved against the wrongdoer.

Front 23

Lowest intermediate balance rule:

Back 23

Roscoe v Winder:

If the wrongdoer spends the claimants money and then pays into the account their own money, this is

Front 24

NOT a repayment to the claimant.

The claimant is limited to the

Back 24

lowest intermediate balance - which can be seen to be

traceable to the proceeds of their property.

UNLESS:

Front 25

Later payments can be demonstrated to have been paid in with an intention to reimburse the trustee, e.g.

Back 25

they had opened a separate bank account for the trust:

affirmed in

Bishopsgate Investment v Homan;

Goldcorp.

Front 26

Mixed funds of innocent parties:

Back 26

Depends on the type of account:

Savings account or current account:

Front 27

Savings:

Re Diplock says

Back 27

Share the mixture rateably. As with

payments:

10G+30G = 1/4 + 3/4

Front 28

Current accounts:

Re Clayton's Case says:

Back 28

First in first out.

criticised

BUT:

Front 29

Barlow Clowes v Vaughan:

Back 29

Confirmed the rule reluctantly, with a willingness to find any contrary intention:

(Followed in Ireland in)

Hint 29

Re W and R Murrogh

Front 30

The investment fund here was intended as a common pool so

Back 30

should share rateably the common misfortune.

(so they confirmed Re Claytons but distinguished and followed Re Diplock).

Said Claytons shouldn't be followed if:

it was likely to exhaust the funds of the beneficiaries.

Front 31

So Re Claytons shouldn't be applied if:

Back 31

i) contrary to the express, implied intention of the claimants;

ii) impractical;

iii) would cause injustice.

Clayton's followed in Ireland

Hint 31

Re Money Markets

Can displace if shown doesn't accord with presumed intention of beneficiaries

Front 32

Proprietary claims:

Once tracing is complete, what to claim:

Back 32

If property or sale proceeds are still identifiable:

Reclaim the property or proceeds of the sale etc.

Front 33

Funds used to acquire a substitute property:

Choice of remedies:

Back 33

Re Hallet's Estate:

Front 34

Take property or a

Back 34

charge over it for the amount of claimant's money expended on the purchase.

basically:

Front 35

- if the value goes up, take the property.

Back 35

- if the value goes down, take the charge AND

sue the defendant.

applies regardless of

Front 36

whether the property is held by the wrongdoer or

Back 36

an innocent volunteer.

Front 37

Mixed funds:

Mixed with wrongdoers:

used to acquire a new asset

Back 37

Foskett v Mckeown:

same rule as above,

claim a proportion of the property or

a charge (lien) and sue.

Front 38

Mixed with an innocent party:

Re Diplock:

Back 38

must share the funds rateably (pari passu)

This was agreed obiter in

Foskett v Mckeown:

No innocent claim is subordinated

BUT:

Front 39

If the innocent volunteer used the claimant's money to improve a pre-owned asset:

Re Diplock:

Back 39

If no value is added then

dissipated.

But

Front 40

If value is added:

Foskett v Mckeown said obiter:

Back 40

The most a claimant would have is a property charge (i.e. a lien, ie. damages-ish¿?¿?).

However

Front 41

The defendant may have the defence of

inequitability

Back 41

Re Diplock

(subject to Foskett's criticisms)

Front 42

Funds used to pay a secured debt:

Back 42

an unsecured debt =

dissipated.

a secured debt; e.g.

Front 43

a mortgage:

Back 43

may be able to claim subrogation. The debt can be 'revived' in favour of the claimant, as if they were the original lender.

But

Front 44

It can be no more favourable than the original mortgage:

Back 44

Boscawen v Bajwa

BUT

Front 45

This was defeated in Re Diplock because:

Back 45

it would be inequitable to force the sale.

c.f.

Front 46

Foskett v Mckeown:

Back 46

Proprietary remedies are enforcing proprietary rights and shouldn't be discretionary. Irrelevant that it's unfair. (obiter).

Boscawen v Bajjwa also said

re Diplock was too lenient and might =

an injustice to the claimants.

Front 47

Personal Claims

Back 47

No general personal action against the recipients in equity:

Front 48

Re Montagu:

Back 48

no personal claim against an innocent volunteer who dissipated it before they realised it was trust property.

- Only if their knowledge made it unconscionable that they didn't pay back would they be forced to:

BCCI v Akindele.

Front 49

Personal action in

re Diplock:

Back 49

where money was wrongly paid out in administration of an estate, a personal action is available against the recipients, even when a proprietary claim isn't possible (again, so they can get damages but not claim a whole hospital¿?¿?)

There are:

Front 50

Two limitations:

Back 50

1. Sue the personal representative first, only claiming the remaining amount from the innocent volunteer.

2. Sue for the principal sum only, not the

interest.

BUT

Front 51

The change of position defence:

Back 51

Lipkin Gorman v Karpnale:

Front 52

1. recipient incurred expenditure in reliance on the payment.

Back 52

2. Expenditure was extraordinary

e.g.

Front 53

they wouldn't have spent it if they hadn't had that extra money:

Back 53

Phillip Collins v Davis

Front 54

Chase Manhattan (on which agip v jackson decided can

Circumvent fiduciary req because wasn't necessary for the funds to be traced to be subject of fiduciary obligations -

based its logic)

was followed in Ireland (re fiduciary duty) in

Back 54

Re Irish shipping