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Tracing Is a Process Not a Remedy

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Tracing Is a Process Not a Remedy Tracing - Scenario 1(b): Trustee Mixes Trust Money - Tracing is a process not a remedy. With His Own In His Account, subsequently - It allows us to identify a new asset as the purchases property with some money in the substitute for the old (Foskett v McKeown). account, then exhausts remaining money. - Tracing follows the value of the beneficiaries - SOLUTION: Re Oatway: We get an property, not the property itself (following). exception to the rule in Hallett’s estate: if the wrongdoer purchased assets which still exist, Distinguishing Tracing; Following & Claiming then it is presumed that he did so with the - Following is the process of following the same stolen money and the beneficiaries are asset as it moves from hand to hand. entitled to the assets. - Claiming refers to the process of recovering property, or the substitute for that property (This - Scenario 1(c): Trustee Mixes Money With His refers to the Barnes v Addy; knowing receipt, Own In His Account, and makes payment in knowing assistance doctrine - MUST and out of that account. CONSIDER THIS AFTER TRACING). - SOLUTION: Lofts v McDonald: Lowest Intermediate Balance Rule: trust cannot claim more than the lowest intermediate balance Tracing at Common Law - credited to the wrongdoer’s bank account Tracing is not unique to equity, however at CL it - If it went up from the lowest point, that is requires that the property you are tracing is not the trust’s money. identifiable, giving rise to problems with banks. - - Although you are deprived of a proprietary Equity has developed rules for identifying remedy, not personal remedies. property mixed with other property. - - EXCEPTION: The plaintiff may claim any Equitable proprietary remedies are more money the defendant puts in after the lowest flexible/effective than limited recovery allowed balance, provided it was put in with the at CL (equitable lien, resulting trust etc). intention of benefiting the plaintiff. - Scenario 2: Trustee Mixes Money of More General Rules of Tracing Than One Beneficiary In A Bank Account, - Rule: Cannot trace value of property to bona then spends some of the money. fide third party purchaser without notice. - Solution 1: Apply Clayton’s case above However, we can trace money received from (however rejected by Keefe v Law Society of that sale; NSW). - Can only trace your interest in something that - Solution 2: Beneficiaries will share rateably in still exists; tracing ends when substitute asset the money remaining in the account. stops existing (destroyed, consumed, lost in - SOLUTION 3 (USE THIS) Stillman v Wilson; gambling). Re Global Finance Group; Margery Farlam Lawyers Trust Account: We need to look at Requirement 1: Fiduciary Requirement the facts to determine whether there was any - AG (Hong Kong) v Reid: You only need an party that the trustees had intended to steal equitable interest, not a fiduciary relationship to from first. Intention of the trustee = key. trace property. (lack of equitable interest frustrates the claim (Evans v Eur Bank) - Scenario 3: Trustee Mixes Beneficiary’s - Fiduciary requirement may assist in framing the Money With Own in Account, withdraws and plaintiff’s claim. successfully invests some. - SOLUTION: Scott v Scott: Beneficiary entitled to the proportion of the investment Mixing Money in a Bank Account which represents her contribution in making - Scenario 1(a): Trustee Mixes Trust Money the investment; secured by equitable lien With His Own In His Account, subsequently over the investment in proportion of trust spends some of the money in the account. money used to make the investment. - Solution 1: Clayton’s Case (1816): First in - Assessed at the date of judgment. first out;the earlier money gets used first. - Foskett: Beneficiary’s bear the risk of any - SOLUTION 2 (USE THIS): Re Hallett’s depreciation once the constructive trust Estate (approved in Brady v Stapleton): The over the investment has been imposed. wrongdoer is presumed to spend his or her own money first before they spend the money of the trust. - Scenario 4: Trustee Pays Beneficiary’s Defences to Equitable Tracing Claim Money To Honest Volunteer Who Mixes - A claim to a proprietary ready based on Money In His Own Account. equitable tracing principles will be defeated by: - SOLUTION: Re Diplock: Depends on how - A claim that the property is untraceable; such the money as used by the honest volunteer. as when the value cannot be identified (Re - A: Used to Make Improvements and Diplock); Alternations to Property: CANNOT BE - When the recipient is a good faith purchaser TRACED, as value does not always increase. for value without notice; - B: To pay off unsecured debts: CANNOT BE - When the change of position defence TRACED, as creditor has defence of bona applies, such s when a person acquired the fide purchaser for value without notice. money in good faith such that it would be - C: Payment of secured debts such as inequitable to allow for tracing. mortgage: CANNOT BE TRACED, as money can no longer be identified. - D: Mixing of money in the recipients bank account CAN BE TRACED, where the court will either use Clayton’s Case or rateable distribution to determine who is owed money. - E: Money invested in security CAN BE TRACED, using the principle of proportionality. - F: Money used in general operations CANNOT BE TRACED, because it has been dissipated in everyday operations. .
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