Term
| What is tracing and what is following? |
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Definition
Tracing
'identifying a new asset as the substitute for the old'
Millet LJ
Foskett v McKeown
Following: 'process of following the same asset as it moves from hand to hand' '
neither a claim nor a remedy but a process'
Millet LJ
Boscawen v Bajwa |
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Term
| What remedies are available at law for misappropriation of trust funds and assets? |
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Definition
Proprietary remedy of restoration
Only for land
Very rare
Taylor v Plumer
FC Jones & Sons v Jones (1996)
Personal remedy of restitution
Personal claim against the recipient |
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Term
| What remedies are available in equity for misappropriation of trust funds and assets? |
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Definition
1. Equitable ownership
Court recognises the C as the equitable owner of the property.
2. Equitable charge or lien Claim the value that went in
(best if asset has depreciated)
3. Subrogation
claimant 'stands in the shoes' of the creditor
4. Personal remedies |
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Term
| What are the limitations on tracing on common law? |
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Definition
1. Require a physical asset
2. mixing defeats CL tracing
3. tracing at CL usually only leads to a personal claim
4. Defence of Change of Position
when an innocent defendant's position is so changed that he will suffer an injustice if called upon to repay in full, the injustice outweighs the injustice of denying the plaintiff restitution |
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Term
| What are the requirements for equitable proprietary tracing? |
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Definition
A fiduciary relationship
An equitable proprietary interest in the property being traced
(Re Diplock) |
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Term
| What are the advantages of proprietary tracing? |
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Definition
Priority creditor status
Benefit of increase in value
No limitation period |
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Term
| Into whose hands can property be traced? |
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Definition
1. whoever misapplied it
2. a recipient with knowledge (proprietary and personal actions)
3. an innocent volunteer
4. trustee
But not
5. Equity's darling (can trace but not recover) |
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Term
| By what is tracing defeated? |
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Definition
1. Inequitability (Re Diplock)
2. Dissipation (dinners, expenses, aesthetic 'improvements' OD bank account, unpaid debts
3. Equity's darling |
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Term
| What is the presumption of honesty (and which case and judge?) |
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Definition
Re Hallett
The presumption of honesty is that dissipated funds must have been used by the trustee who rightfully used his own money.
Jessel MR |
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Term
| Which case allows for the presumption of honesty to be reversed? |
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Definition
Re Oatway. Beneficiaries were entitled to take a charge on assets purchased where the remaining funds had been dissipated.
Claimant has the option. |
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Term
| Which questionable case did not apply Re Oatway? |
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Definition
| Re Tilley. A share of a house purchased was not allowed where there were sufficient funds available. |
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Term
| Which case allowed 'cherry-picking' if the only contest was between the beneficiary and the wrongdoer? |
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Definition
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Term
| Which case demonstrates the lowest intermediate balance rule? |
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Definition
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Term
| What is the lowest intermediate balance rule? |
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Definition
| If the wrongdoer pays his own money into the account, having spent claimant's money, it is not deemed to be a repayment to the claimant. |
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Term
| If the LIB is zero, funds cannot be traced into that account |
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Definition
| Bishopsgate Investment Management Ltd v Homan |
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Term
| What is a rateable share, and when does it occur |
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Definition
| If moneys from two innocent parties are mixed in a DEPOSIT account, the two parties share in proportion to the amounts in any loss or gain. |
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Term
| Which case(s) lead to the idea of the rateable share? |
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Definition
| Re Diplock following Sinclair v Brougham |
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Term
| What is the FIFO rule, and when does it apply? |
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Definition
If the account is an active bank account, the first payment in will be the first payment out. (Re Clayton's Case)
This is good law, reluctantly confirmed in Barlow Clowes v Vaughan. Can only displaced by a Supreme Court Judgment. |
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Term
| What is 'reviving subrogation' |
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Definition
| If a debt has been paid using claimant's money, the claimant can 'step into the shoes' of the creditor, and revive the debt in their own favour. |
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Term
| What is the leading case on subrogation? |
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Definition
| Boscawen v Bajwa A mortgaged house was redeemed by mistake. |
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Term
| What are the conditions for a 'Re Diplock' personal claim? |
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Definition
| These can be made against innocent volunteers, but only if the money is from a will (Re Montague), and claims against wrongdoers must be exhausted first. |
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Term
| Which case establishes the change of position defence? |
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Definition
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Term
| When does a beneficiary have a right of election between the presumption of honesty and its rebuttal? |
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Definition
When there are no competing claimants (ie bankruptcy)
Shalson v Russo |
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Term
| List typical fiduciary relationships, and a case which illustrates them. |
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Definition
solicitor-client (re Hallett)
accountant-employer (Agip v Jackson)
More debatably:
thief-owner (Black v Freedman)
mistaken payer - recipient (Chase Manhattan v Israel British Bank)
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Term
| When should FIFO not be used? |
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Definition
1. If the account is a deposit account
2. Contrary to express or implied intentions of the claimants
3. Impractical
4. Would cause injustice |
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Term
| Summary of dishonesty for knowing assistance |
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Definition
Nicholls LJ Objective test: Royal Brunei v Tan
More like Ghosh test: Twinsectra v Yardley
Reinterpreted to mostly objective: Barlow Clowes v Eurotrust
Confirmed in Abou Rahmah v Abacha |
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Term
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Definition
1. Knowledge
2. Nelsonian knowledge
3. Recklessly shutting eyes to obvious
4. Knowing circs that suggest facts
5. Knowing circs that put on enquiry |
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Term
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Definition
| 'knowledge such as to make it unconscionable for [the recipient] to retain the benefit of receipt' Nourse LJ |
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