What happens where the trust property is mixed with other property? (Trustees' liability for breach: Proprietary claims)-FS

Question 1

What remedy is available when a trustee mixes trust funds with their own to purchase an asset?

Answer 1

The beneficiaries can either
(1) claim a proportionate share of the asset or

(2) enforce a charge over the property for the value of the trust funds misappropriated.

Question 2

In a mixed fund situation, what determines whether a beneficiary claims a share or a charge over the asset?

Answer 2

Whether the asset has appreciated or depreciated in value. If appreciated, they claim a proportionate share; if depreciated, they enforce a charge to recover the full value.

Question 3

What is the effect of asset appreciation on proprietary claims in a mixed fund context?

Answer 3

Beneficiaries will seek a proportionate share to benefit from the increased value of the asset purchased with misappropriated and mixed funds.

Question 4

What is the effect of asset depreciation on proprietary claims in a mixed fund context?

Answer 4

Beneficiaries are more likely to enforce an equitable charge (lien) to recover the full original value of the misappropriated trust funds.

Question 5

Can a proprietary claim be made if trust property is mixed with the trustee’s own funds?

Answer 5

Yes. The beneficiaries can trace their portion into the mixed property and claim either a proportionate share or enforce a charge, depending on value fluctuation.

Question 6

If a property purchased with mixed trust and personal funds increases in value, which option benefits the beneficiaries most?

Answer 6

Claiming a proportionate share of the property, since this reflects the increase in value.

Question 7

If the value of a mixed fund asset falls, what remedy should the beneficiaries seek?

Answer 7

Enforce a charge over the property for the amount of trust money taken, ensuring full recovery of their funds.

Question 8

What is the legal principle allowing beneficiaries to trace trust property into a mixed fund asset?

Answer 8

Equitable tracing permits beneficiaries to identify and assert rights over trust funds mixed with personal funds, by applying either a proportionate share or a charge.