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Law Notes Trusts and Equity Notes

Tracing Notes

Updated Tracing Notes

Trusts and Equity Notes

Trusts and Equity

Approximately 1016 pages

Equity notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB trusts cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

These were the best Equity and Trusts Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest re...

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Proprietary Remedies: Following and Tracing

Proprietary Remedies


(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).



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 [2001];

+ 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).


  • Foskett v. McKeown [2001];

+ 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 Analysis

  • Foskett v. McKeown [2001]; 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 (2.6million). 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 20,000 from trust to meet the next two premiums. He committed suicide and the life assurance policy paid death benefits to his children of 1million.

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 1million. Children argued there should just be a lien over the property for the 20,000 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 life assurance policy. When the trustee died, the beneficiaries successfully claimed a proportionate (i.e. 40%) share of the million pound death benefit paid out under the terms of the policy to the trustee’s children.


Birks argued where a T mixes trust money with his own to purchase an asset with mixed funds the claim should not be proprietary, it should be personal only. H of L rejected.

The House of Lords accepted that the beneficiaries had an equitable property right in the money which were misappropriated and used to meet the two premiums. The trust money belonged in equity to the Bs. Was very clearly a property claim.

Per Lord Browne-Wilkinson at p. 108: “The crucial factor in this case is to appreciate that the purchasers are claiming a proprietary interest in the policy moneys and that such proprietary interest is not dependent on any discretion vested in the court. Nor is the purchasers’ claim based on unjust enrichment. It is based on the assertion by the purchasers of their equitable proprietary interest in identified property.” It is a case of “hard nosed property rights”.


The beneficiaries’ money which was used to pay the two premiums was traced first into the insurance policy itself (which HL treated as an asset held by the trustee, taking the form of a chose in...

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