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Tracing & Liability of Strangers (Personal Claims (Re Diplock personal…
Tracing & Liability of Strangers
Proprietary Claims
Tracing
Common Law
Cannot trace into mixed funds
Can only trace if have legal title
Equity
Requirements (
Re Diplock
)
Fiduciary relationship
Not limited to misapplication of trust funds
Solicitors (
Re Hallett's
)
Accountants (
Agip v Jackson
)
Not limited to between C and D
Can be between C and person who transferred property to D
Very easily found (
Lipkin Gorman v Karpnale Ltd; Chase Manhattan Bank v Israel-British Bank (London) Ltd
)
Equitable proprietary interest in the property traced (confirmed in
Westdeutsche Landesbank Girozentrale v Islington LBC
but criticised in
Foskett v McKeown
)
Very easily found (
Re Diplock
)
Limitations
Cannot trace dissipated property as unidentifiable
Money paid into overdrawn account (
Bishopsgate Investment Management v Homan
) or spent paying off unsecured debts (
Re Diplock
) cannot be traced
Cannot trace into hands of Equity's Darling
Tracing through a bank account
Unmixed funds
Equitable charge on account for amount paid in (
Re Hallett's
)
Can trace payments out of account into substitute property
Can have charge over property for purchase price or property itself (
Re Hallett's
)
Funds used to pay secured debt
Can make a claim for subrogation
1 more item...
Mixed funds
Presumption of honesty (
Re Hallett's
)
Equitable charge on account for amount paid in (
Re Hallett's
)
Payments out that are dissipated assumed to be wrongdoer's own money
Rebut presumption of honesty (
Re Oatway
)
If funds spent on something traceable taken to be claimant's money spent
Cherry picking (
Shalson v Russo
)
Can trace earlier payments out of the account
Likely if assets bought that have appreciated in value
Lowest intermediate balance rule (
Roscoe v Winder
)
Cannot claim wrongdoer's money paid in after spending of claimant's money
If account is exhausted in intermediate property then cannot trace at all (
Bishopsgate Investment Management Ltd v Homan
)
Funds of innocent parties mixed
First in first out (
Re Clayton's Case
)
Not popular anymore but still technically good law
Not used if (
Barlow Clowes International Ltd v Vaughan
)
Contrary to express or implied intentions of claimants
Impractical
Would cause injustice
Rateable distribution (
Barlow Clowes International Ltd v Vaughan; Charity Commission v Framjee
)
Same for savings accounts (
Re Diplock
)
Extends to assets obtained (
Foskett v McKeown
)
Claimant's money used to improve innocent volunteer's asset
Where no value is added money is treated as dissipated (
Re Diplock
)
Where value added claimant can have 'at most a proprietary lien' (
Foskett v McKeown
per Lord Browne-Wilkinson)
Innocent volunteer may have inequitability defence (
Re Diplock
)
When asset bought using both wrongdoer's and claimant's money can claim proportionate share of asset or lien against it for amount of claimant's money spent on it (
Foskett v McKeown
)
Personal Claims
Re Diplock
personal action
Where money paid out wrongly in administration of estate can claim against recipients
Limitations
Unpaid beneficiaries should first sue wrongdoer. Recoverable amount limited to amount unrecoverable from personal representative
Cannot claim interest, only principal sum
Change of position defence (
Lipkin Gorman v Karpnale
)
Recipient must have incurred expenditure in reliance on payment leading to disenrichment
Expenditure must be extraordinary
Recipient must act bona fide (
Philip Collins Ltd v Davis
)
Knowing receipt
Requirements (
El Ajou v Dollar Land Holdings plc
)
Disposal in breach of trust or fiduciary duty
Beneficial receipt by the defendant of assets which are traceable to claimant
Receipt in a purely ministerial capacity not sufficient (
Twinsectra Ltd v Yardley & Others
)
Knowledge on part of the defendant that the assets are traceable to a breach of trust or fiduciary duty
Liable if would be unconscionable for them not to be so liable (
BCCI v Akindele
)
Flexible test with lower standard than dishonesty (
Starglade Properties Ltd v Roland Nash
Dishonest assistance (
Royal Brunei Airlines v Tan
)
Dishonesty
Objective test from
Ivey v Genting Casinos
What was D's knowledge/ belief as to facts surrounding actions
Was D dishonest by the standards of ordinary reasonable people
Assistance
Made the planning of the breach, the actual breach or the subsequent cover-up easier (
Ultraframe (UK) Ltd v Fielding
)
Unless joint venture accessory not liable for profit made by fiduciary- only profit they made (
Novoship (UK) Ltd v Nikitin
)