How are withdrawals from a mixed account allocated? (Trustees' liability for breach: Proprietary claims)-FS Flashcards
(16 cards)
What is the rule established in Re Hallett’s Estate for allocating withdrawals from a mixed account?
The rule in Re Hallett’s Estate assumes that a trustee spends their own money first before trust money when making withdrawals from a mixed account.
In which case was the Re Hallett rule set aside in favor of protecting beneficiaries where it would be inequitable?
Re Oatway allows beneficiaries to claim property purchased with mixed funds even if Re Hallett would suggest the trust money was dissipated later. It protects trust assets from being dissipated unjustly.
What does Foskett v McKeown establish regarding the value of assets purchased with mixed funds?
: It confirms that beneficiaries can claim a proportionate share of an asset purchased with mixed funds, including any increase in the asset’s value.
What principle was laid down in Roscoe v Winder regarding replacement of dissipated trust funds?
Once trust money has been dissipated, it cannot be replaced by later deposits unless the trustee specifically intended the replacement to be trust property.
What is the “first in, first out” rule from Clayton’s Case, and when is it used?
Clayton’s Case presumes that the first money paid in is the first money withdrawn, but it is only applied where it does not lead to injustice.
When is the rule from Barlow Clowes International Ltd v Vaughan applied instead of Clayton’s Case?
When applying Clayton’s Case would be impractical, unjust, or contrary to the parties’ intentions, the court uses a proportional distribution approach.
If a trustee mixes funds from two innocent trusts, how is ownership of a purchased asset determined?
Both trusts are treated equally, and each takes a proportionate share in any property purchased with the mixed funds.
Doctrine: Equity is equal among equals.
Why can beneficiaries not claim later trustee income (e.g. salary) to restore dissipated trust money?
Under Roscoe v Winder, later additions to the account (e.g. salary) are not considered trust property unless explicitly intended as such. Tracing ends at the lowest intermediate balance.
If a trustee mixes trust money with their own funds and purchases an asset, what are the beneficiaries’ options if the asset has appreciated in value?
Beneficiaries may claim a proportionate share of the asset or enforce a charge over it, depending on which remedy is more favorable.
In a case where a trustee spends mixed funds on a dissipated expense (e.g., a holiday) followed by purchasing an asset, which rule protects the trust?
Re Oatway applies—beneficiaries can claim the asset bought, as applying Re Hallett would be inequitable.
What happens if a trustee dissipates part of the trust fund and later deposits personal funds into the same account?
Under Roscoe v Winder, trust money cannot be retroactively replaced unless the trustee shows clear intent to do so. Later deposits are not automatically trust property.
If two trusts’ funds are mixed and then used to buy a single asset, how is ownership determined?
Each trust receives a proportionate share of the asset based on its initial contribution. Enforcement of a charge is not allowed, as both are innocent.
How does Clayton’s Case affect multiple trusts when funds are dissipated from a mixed account?
The first trust fund deposited is treated as the first withdrawn. This may result in the first trust’s funds being entirely dissipated.
: Why might courts reject Clayton’s Case and instead apply Barlow Clowes in mixed trust fund scenarios?
If applying Clayton’s would be unjust, impractical, or contrary to intentions, Barlow Clowes allows proportionate division of assets or funds.
When a trustee uses trust money to purchase an asset and dissipates the rest, what claim can beneficiaries make if the asset value increased?
Beneficiaries can claim the entire asset (not just a portion) if Re Oatway applies, as this maximizes the return of their property.
Can beneficiaries claim a dissipated sum from a trustee’s salary or later deposit?
No, under Roscoe v Winder, later funds (e.g., salary) cannot substitute for dissipated trust money unless there’s an explicit intent to repay the trust.
