Tracing

Front 1

Case- distinction between tracing and claiming?

Back 1

Foskett v McKeown [2001]- tracing is a process of identifying assets (belongs to the realm of evidence)
-claiming is the way in which a claimant identifies his property.

Front 2

What is rule regarding tracing at common law? which case states this?

Back 2

tracing is not possible thought a mixed fund at common law.

Taylor v Plumer (1815)- where the original thing has been turned into money and mixed, tracing becomes impossible at common law.

Front 3

Case- clean substitution at common law?

Back 3

Taylor v Plumer (1815)- a broker misapplied the money purchasing american stock and bullion rather than exchequer bills.
-the money could be traced into the stock and bullion

Front 4

What happened the Banque Belge case?

Back 4

-clean substitution
-mistress paid some fraudulently gained money into her bank account.
-the key point was that the account had originally been empty so thee was no mixing, therefore it was possible to trace the money at common law.

Front 5

Case- tracing through a mixed fund at common law?

Back 5

Agip (africa) Ltd v Jackson [1990]
-money had become mixed when the transfer took place, so common law tracing was not possible.

Front 6

Can beneficiaries trace at common law? Why?

Back 6

No- common law tracing requires legal ownership, so mere equitable ownership is not enough.

Front 7

What are the 2 requirements for tracing in equity?

Back 7

1) a fiduciary relationship
2) equitable owneship

Front 8

Which cases state the 'traditional rule' that for tracing in equity, there must be an 'initial fiduciary relationship?'

Back 8

Re Diplock [1948]
Agip (africa) Ltd v Jackson [1990]

Front 9

What happened in Re Diplock?

Back 9

Charities wrongly received payment of a large amount of money under a will.
the next of kin were entitled to trace the money into the charities' hands in equity because executors clearly stood in a fiduciary relationship to the estate.

Front 10

What is a fiduciary relationship?

Back 10

one of moral or personal responsibility with regards to a particular transaction/ general affairs and business.

Front 11

What was the fiduciary relationship in Agip (africa) v Jackson [19900]?

Back 11

The chief accountant of Agip was held to be in a fiduciary relationship- therefore tracing in equity was possible.

Front 12

Which case stated that a subsequent fiduciary relationship is now sufficient for tracing in equity?

Back 12

Chase Manhattan Bank [1981]
-CMHB accidentlaly paid £1 million to the israeli-british bank twice in one day.
-dificulty was that there was not initial fiduciary relationship.
-the court held that a fiduciary relationship came into being the moment the mistaken payment was made.
-"a peson who pays money to another due to a factual mistake retains an equitable property in it."

Front 13

How did Lord millet criticise the requirement of a fiduciary relationship for equitable tracing in Foskett v McKeown?

Back 13

-highly critical of distinction between equitable and common law tracing.
-stressed that existence of a fiduciary may be relevant to the nature of the claim, but should NOT be a precondition for applying equity's tracing rules.

Front 14

Which case stated that as well as a fiduciary relationship, and equitable proprietary interests is required or equitable tracing?

Back 14

Re Diplock [1948]

Front 15

What are the 4 rules of tracing in equity?

Back 15

a) trust funds retained or cleanly substituted by different property- no mixture.

b)tracing into a mixed bank account containing both trustee's and beneficiary's money.

c) tracing into assets purchased with a mixed and of trustee's and beneficiary's money.

d) tracing into a mixed bank account containing the money of 2 different trusts/ one trust and an innocent volunteer.

Front 16

Which case states that in a situation (a) where the trust fund is retained or cleanly substituted by different property, the beneficial owner has the right to either take the property purchased, OR to hold it on security for the original amount of trust money misappropriated.

Back 16

Re Hallett's Estate (1880)
-if the property has increased in value the beneficiary will wish to claim the property, if it has decreased in value, he will hold it on security for the original trust value.

Front 17

Which case states that where the beneficiary's and trustee's money is mixed in a bank account, the presumption of honesty states that a trustee will be presumed to spend his own money first, so that the trust fund survives.

Back 17

Re Hallet's Estate (1880)

Front 18

What is the lowest intermediate balance rule?

Back 18

if trust money was deposited in an account from which subsequent withdrawals were made, the maximum claim the beneficiaries can make is the LOWEST BALANCE between the time of deposit and time of claim.

Front 19

Which case shows the lowest intermediate balance rule? and how can the rule be rebutted?

Back 19

Roscoe v Winder [1915]- he rule can be rebutted if the beneficiaries can show that subsequent credits into the account were paid with the specific intention of replenishing the trust fund.- this requires CLEAR EVIDENCE.

Front 20

Which case affirmed the lowest intermediate balance rule?

Back 20

Bishopgate Investment Management [1995]

Front 21

What happens when the trustee purchases assets with a mixed fund of north trustee and beneficiary moneys (c)?

Back 21

the beneficiary cannot claim the property outright as it was only partly purchased with his money.

Front 22

What was the historical position regarding a charge over the property?

Back 22

Re Hallett's Estate (1880)- the beneficiary was limited to a charge to the value of the misappropriated money, even if the value of the property increased.

Front 23

What is the current position regarding the increase of property value partly purchased with the beneficiary's money?

Back 23

Foskett v McKeown [2001]- a trustee should not be able to profit from a breach of trust, and therefore the beneficiary is entitled to trace a PROPORTIONATE SHARE of the increased value of the property.

Front 24

In what situation may the presumption of honesty be displaced, and what case displays this?

Back 24

When the presumption would work AGAINST the beneficiary.

Re Oatway[1903]- shares were purchased first and the rest of the money was dissipated.
the beneficiary would not have been able to trace the dissipated money, so the shares were considered to be the product of the trust money .

Front 25

which case emphasises the narrow application of Re Oatway?- the presumption of honesty is only displaced where the balance of the account has been dissipated and is insufficient to satisfy the beneficiary's claim.

Back 25

Turner v Jacob [2006]

Front 26

Which case states that mixing by innocent volunteers (d) does not prevent the beneficiary from tracing?

Back 26

Re Diplock [1948]- money was wrongly given to a charity under a will.
-the charity had already (innocently) mixed the money with it's own money.
-the claimants could still trace.

Front 27

Which case is the starting point when the money of 2 trusts is mixed in a bank account?

Back 27

Re Clayton's Case (1817)

Front 28

What is the 'first in first out' rule in Re Clayton's Case?

Back 28

withdrawals from the account are presumed to me made in the same order they were paid in.

Front 29

What type of account does the the rule in Re Clayton's case apply to?

Back 29

only a current account, not a deposit account.

Front 30

Does the rule in Re Clayton's case apply where a trustee mixes his own money with that of a beneficiary?

Back 30

Yes, but it will be trumped by the presumption of honesty in Re Hallett's Estate.

Front 31

What was the dicta of Barlow Clowes International v Vaughan [1992]?

Back 31

The rule in Re Clayton's Case (first in first out) is the general rule, but i can be departed from where it would result in injustice (e.g. would benefit later but not earlier investors)
-The court applied the Pari Passu solution instead.

Front 32

What is the Pari Passu solution applied in Barlow Clowes International v Vaughan [1992]?

Back 32

The money is distributed among all unpaid investors rateably in proportion to the amounts due to them.

Front 33

Which case affirmed the use of the Pari Passu rule, and suggested that the rule in Clayton's Case may be more of an exception?

Back 33

Russell-Cooke Trust Co v Prentis [20003]

Front 34

Which further case refused to apply the rule in clayton's case where it was both 'impracticable and unjust' and used the pari passu rule?

Back 34

Commerzbank AG v IMB Morgan [2004]

Front 35

what are the 3 bars to tracing in equity?

Back 35

1) A bona fide purchaser for value without notice;
2) Dissipation of trust property;
3) Where tracing would produce an inequitable result.

Front 36

Bar 1?

Back 36

Even if the claimant can show that he was the original owner of the trust property, he will not be able to claim in the defendant is a bona fide purchase for value without notice.
-however if the defendant provided no valuable consideration (i.e. it was a gift) then claiming will still be possible.

Front 37

Which case displays Bar 2, that tracing will be impossible once the money had been dissipated/ destroyed?

Back 37

Re Diplock (1948)

Front 38

What was the example of dissipated money in Shalson v Russo [2005]?

Back 38

money paid into an overdrawn bank account- no asset to claim so tracing is impossible.

Front 39

Displaying Bar 3, why was tracing not possible in Re Diplock [1948]?

Back 39

some of the charities to whom money ha been wrongly conferred ha already spent the money making improvements to their land.
The court held that even where the money could be traced, the only remedy possible would be a charge over the land, which would be inequitable. (a charge is enforceable by sale, so the innocent volunteers could have been forced to sell their property)
Therefore the claimant's were barred from tracing.

Front 40

What is claiming?

Back 40

the assertion of an appropriate remedy in respect of the assets traced.

Front 41

What are the 2 ways of claiming at common law?

Back 41

1) personal claims;
2) proprietary claims.

Front 42

What 'personal claims' are available at common law?

Back 42

1) Money had and received- an action where the claimant sues the defendant to recover the money- RESTITUTIONARY.

2) Tort of conversion- an award of compensatory damages for deliberately depriving the owner of use or possession of his goods.
3) Action for debt- action claiming a sum of money.

Front 43

What is the proprietary claim at common law?

Back 43

claimant will demand specific recovery of the asset (or land)

Front 44

What are the 2 ways of claiming in equity?

Back 44

1) a proprietary claim to the assets identified as representing the original trust property. (best choice where the person in possession is insolvent or the asset has increased in value)

2)a claim to enforce an equitable lien over the assets identified as representing the original trust property. (best choice where the asset has decreased in value)

Front 45

Which case shows claiming under a clean substitute?

Back 45

Re Hallett's Estate (1880)

Front 46

Which case shows claiming into a mixed fund?

Back 46

Foskett v McKeown