Tracing Flashcards
Who gave the significant speech in Sinclair v Brougham? What did he say?
Lord Sumner: “What ought to be done I think is clear; the only difficulty is how to describe the principle and how to affiliate it to other legal or equitable rules.”
What are two criticisms of tracing?
- Lack of coherence.
2. Artificial distinction between the common law remedy, and the equitable remedy.
What is tracing at common law?
Not a proprietary right, but a right to assert against another a personal claim of some kind by reason of his receipt and retention or disposal of the asset.
What did Millett J say in Agip (Africa) v Jackson?
“Tracing at common law… serves an evidential purpose. The cause of action is for money had and received. Tracing at common law enables the defendant to be identified as the recipient of the plaintiff’s money and the measures of his liability to be determined by the amount of the plaintiff’s money he is shown to have received.”
What are the problems of common law tracing?
- If the property is no longer identifiable, the personal action will abate in bankruptcy.
- If legal title did pass, tracing at common law will be unavailable.
- Common law gets very confused about mixtures and bank accounts!
In which case does Lord Ellenborough address identification of property? What does he say?
Taylor v Plumer: Lord Ellenborough: “…the right only ceases when the means of ascertainment fail, which is the case when the subject is turned into money, and mixed and confounded in a general mass of the same description. [Money as recognised in fact must be] an undivided and undistinguishable mass of current moneys.”
What can be noted about the decision in Agip?
Each court gave different reasons as to why it failed- trials judge because there was no paper involved in the transaction and so nothing to trace, plus the receiving bank credited the account before the sending bank debited the corresponding account; court of appeal because the money was mixed with other money so could not be traced at common law. But could trace in equity.
What did LJ Atkin say in Banque Belge pour L’Etranger v Hambrouck?
“The question always was, Had the means of ascertainment failed? But if in 1815 the common law halted outside the bankers’ door, by 1879 equity had had the courage to lift the latch, walk in and examine the books: Re Hallet’s Estate. I see no reason why the means of ascertainment so provided should not now be available both for common law and equity proceedings.”
What is the reason for division in the Court of Appeal and Banque Belge?
LJJ Bankes and Atkin believe both common law and equity may trace, even where money has gone through more than one bank. LJ Scrutton believes only equitable tracing could succeed.
What is a source of uncertainty following Banque Belge?
The issue of personal current accounts, into and from which moneys are regularly deposited/withdrawn.
What was the ratio of Lipkin Gorman v Karpnale?
HoL: when a person has received stolen property he must hand it back to the rightful owner because otherwise he would be unjustly enriched. Thus tracing was possible at common law against a casino where the ‘bad’ solicitor had gambled and lost the money from his client accounts, but a defence of change of position was available to the casino in respect of the proportion of the money which it had paid out to other customers as winnings.
What is the rule of Clayton’s Case?
That which is first deposited in a bank account is to Ve set against that which is first withdrawn: first in, first out.
What was significant about the decision in Trusts of the Property of F.C. Jones (a firm) v. Jones?
Going further than Lipkin Gorman, Nourse L.J. says the claimant could trace both the original property and the profit made on that property received; to let the defendants keep the profit would be unconscionable.
What is the sole requirement for establishing an equitable proprietary right for tracing property?
A fiduciary relationship.
What legislative basis exists for an equitable proprietary right?
Insolvency Act 1986 s283
What is the significance of Re Goldcorp Exchange?
That ordinary commercial transaction are unlikely to afford any of the claimants am equitable proprietary right.
Why did the Privy Council in Attorney-General for Hong Kong v Reid not apply Lister v Stubbs?
(a) A fiduciary must not be allowed to benefit from his own breach of duty.
(b) A fiduciary should account for a bribe as soon as he receives it.
(c) Equity regards as done that which ought to be done.
What does MR Greene say in Re Diplock to support the notion that…?
To argue that equitable tracing is available to legal as well as beneficial owners: “…equity may operate on the conscience not merely of those who acquire a legal title in breach of some trust, express or constructive, or of some other fiduciary obligation, but of volunteers provided that as a result of what has gone before some equitable proprietary interest has been created and attaches to the property in the hands of the volunteer.”
Which cases appear to deny the notion that beneficial owners may claim equitable tracing?
Banque Belge; Lipkin Gorman
In latter: there was an express finding of fact that the rogue Cass was the legal owner of the money he stole from the client account, yet the solicitors also had legal title; one way of rationalizing this is to say that the money is traced in equity (although that is not what the HoL did); on facts could only trace at common law
What does Re Hallett and Clayton’s Case say about following:
A is a sole trustee of two funds holding the first for B and B’s children and the second for C and C’s children. A paid into his own bank account, which then had a credit balance of £800, dividends of £500 belonging to B’s fund. He then paid into the same account £1,500, the proceeds of sale of investments belonging to C’s fund. Subsequently. A withdrew first £700, which he invested in securities now worth £1,050, and then £1,000 with which he purchased a car now worth £600. A then went bankrupt leaving £1,100 remaining in the account.
Applying the rule in Clayton’s Case and Re Oatway the first withdrawal is treated as £500 belonging to B and £200 belonging to C. Applying Re Tilley’s WT the £350 profit made on the £700 will be divided proportionately between Band C, £250 belonging to B and £100 belonging to C. Thus B will recover £750 and C will recover £300.
What does Re Hallett say about the following:
A is a sole trustee of two funds holding the first for B and B’s children and the second for C and C’s children. A paid into his own bank account, which then had a credit balance of £800, dividends of £500 belonging to B’s fund. He then paid into the same account £1,500, the proceeds of sale of investments belonging to C’s fund. Subsequently. A withdrew first £700, which he invested in securities now worth £1,050, and then £1,000 with which he purchased a car now worth £600. A then went bankrupt leaving £1,100 remaining in the account.
What happens to the Roscoe v Winder rule?
Applying the rule in Re Hallett the second withdrawal is treated as £800 belonging to A and £200 belonging to C. C is entitled to a charge for £200 on the car.
C is entitled to the £1,100 in the account. The rule in Roscoe v. Winder does not apply.
What happens to the following, pre- and then post-Westdeutsche?
2.X, a thief, stole £1,000 from Z, a stranger and mixed it with his own current bank account, which then had a credit balance of £500.
X then went bankrupt.
Pre-:
Personal action would abate. Fiduciary relationship would not exist.
Post-:
The equitable tracing rules assist because the thief is treated as being constructive trustee.
What cases have said something important to question “is fiduciary relationship necessary?”
Jessel MR in Re Hallett said so- treated it as necessary to trigger the application of equity so as to allow tracing into a mixed bank account. It creates an equitable owner/beneficial owner who can pursue a proprietary claim in equity. Can almost always find an initial fiduciary relationship. But note Goldcorp- PC refused to find one in a commercial contractual relationship because would interfere too much with insolvency: and HOL in Westdeutsche refused to accept that parties to a void contract have an initial fiduciary relationship, allowing recovery of money paid by mistake only through personal common law restitutionary claim.
What does Sinclair v Brougham say regarding the fiduciary relationship?
Fiduciary relationship need not exist between the parties to the action; there just needs to be an initial fiduciary relationship.
It was agreed that the outside creditors should be paid off first.
Lord Dunedin: Equity will intervene to help the rightful owner wherever the property has, without justification, got into another’s hands.
The House of Lords held that there was a fiduciary relationship between the depositors and the directors. The directors had mixed funds and the depositors had a right to trace into the funds of the Society, recognising an equal claim belonging to the shareholders, with whom they shared pari passu.
