A more recent version of these Tracing notes – written by Oxford students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our Trusts and Equity Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Equity and Trusts
Proprietary Remedies: Following and Tracing
Proprietary Remedies Advantages: (i) Gives C priority over unsecured creditors in the case of D's insolvency; and (ii) Potentially it may also give access to increases in value of the asset claimed because you are claiming that that asset is yours, i.e. land goes up in value. E.g. In AG v. Reid the land was worth more than the bribes. Proprietary remedies may take one of two forms: (i) recovery of property in rem held by D, or of its exchange product in D's hands; or (ii) a security interest (e.g. a lien) over property held by the defendant. Appropriate where the property you are tracing is mixed with other property, so you cannot claim the whole asset, but only part as it represents some of your property. Both forms of remedy give priority over unsecured creditors, but only recovery of property in rem gives access to increases in the value of the property. Both forms of remedy are defeated by the dissipation of the asset. Personal Remedies By contrast, personal remedies give neither priority over unsecured creditors in the case of insolvency, nor access to increases in value (they are for someone owed, not owned). It is really a monetary (liquidated or unliquidated sum) claim. They may however, be of particular utility where assets received by the defendant have declined in value; dissipation of assets will not defeat a personal remedy. Personal remedies may be restitutionary - assessed by reference to the value of what D has received (e.g. an account for unauthorised profits/unjust enrichment based on the gain made - e.g. fiduciaries), or they may be compensatory, that is, assessed according to the loss suffered by the claimant (e.g. an action to restore the trust fund following unauthorised disbursements or an action for equitable compensation). ______________________________________________________________________________________________ Definitions 'Tracing': The general consensus is that tracing is not an independent, free standing cause of action. It is not a right or claim to trace. It is an evidential process/a mechanism to enable you to identify property. It is an equitable proprietary claim, a process of tracing and then an equitable proprietary remedy. After the process is complete the Bs may be able to make a claim.
+ Smith: Tracing 'is not a right but an exercise'. Tracing gets you from A to B, to prove that property is yours.Foskett v. McKeown ;
+ Lord Millett: 'Tracing is... neither a claim nor a remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the person who have handled or received them, and justifies his claim that the proceeds can properly be regarded as representing his property'. 'Following': Identification of C's property may involve tracing into its value, or into its exchange product (i.e. a substitute asset); it may also involve following the property itself in the hands of third parties (identify your property as it passes).
1 Equity and Trusts
- Foskett v. McKeown ;
+ Lord Millett: Following and tracing are, 'both exercises in locating assets which are or may be taken to represent an asset belonging to the [Cs] and to which they asset ownership. The processes of following and tracing are, however, distinct. Following is the process of following the same asset as it moves from hand to hand. Tracing is the process of identifying a new asset as the substitute for the old.'
Problem Question Model of AnalysisFoskett v. McKeown ; concerned a claim brought by the beneficiaries of an express trust (prospective purchasers of property in Portugal). Facts: Murphy paid for building of properties in Portugal. He set up an express trust so that he held money for potential purchasers (PS2.6million). Foskett was one of the prospective purchasers, so a beneficiary. Murphy set up a life assurance in 1986 policy on his own life, the Bs of which were his children. Annual premiums had to be paid - paid first three annual payments himself, but then stole PS20,000 from trust to meet the next two premiums. He committed suicide and the life assurance policy paid death benefits to his children of PS1million. Bs claimed/raised an equitable proprietary claim. Claimed the money used to pay the premiums was theirs, and so they traced into the death benefit and so the remedy was that they should get 2/5 of the PS1million. Children argued there should just be a lien over the property for the PS20,000 stolen. Decision: H of L held in favour of Bs 3:2. Whose trustee had misappropriated their trust moneys, using them to meet two out of five annual premiums paid on a
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