Defence available to the innocent volunteer (Equitable proprietary claims against strangers -FS

Question 1

What is Defence of Inequitable Result (Innocent Volunteer)

Answer 1

A defence available to an innocent volunteer who has received and used trust property, where allowing tracing or enforcing a proprietary claim would result in an inequitable outcome, despite the claimant’s equitable interest.

Question 2

In what situation can an innocent volunteer rely on the inequitable result defence?

Answer 2

When enforcing a proprietary claim (e.g., lien or recovery) would cause unjust hardship to the innocent recipient, such as forcing the sale of their home, even though they acted in good faith.

Question 3

Can tracing be denied even if value has been added to the recipient’s property?

Answer 3

Yes. If tracing or enforcing a lien would be inequitable, for example by requiring the sale of an innocent volunteer’s home, the court may refuse the remedy—even if trust funds added value.

Question 4

What happens if trust funds were used to repay debts or make improvements that add no value?

Answer 4

The funds are considered dissipated and cannot be traced. No proprietary claim can be enforced in such cases.

Question 5

Situations Where Tracing Will Be Denied Against an Innocent Volunteer

Answer 5

1. Funds were used to repay debts
2. Funds were used for improvements that added no value.
3. Funds added value, but enforcing a lien would cause unjust hardship.
4. The innocent volunteer was completely unaware of the breach

Question 6

Why was tracing disallowed in the case of Jaswinder’s home extension?

Answer 6

Because enforcing a lien over the house (to recover £10,000) would result in disproportionate hardship to Jaswinder, who was innocent and unaware of the breach. The result would be inequitable.

Question 7

Is innocence alone enough to defeat a proprietary claim?

Answer 7

No. Innocence does not automatically bar proprietary claims. However, when innocence + inequitable consequences are both present, a claim may be denied.

Question 8

What is the underlying equitable principle in denying tracing for inequitable result?

Answer 8

Equity will not enforce rights in a manner that causes injustice to an innocent party. The balance of fairness between the parties determines whether a proprietary remedy will be granted.