Tracing and Proprietary Remedies
(Supervision Six)
Agip (Africa) Ltd v Africa (judgment) - ANSWER Can trace misappropriated property at law
provided does not cease to be identifiable by being mixed with other money in the bank account
derived from some other source. Can still trace at common if mixed with defendant's own money.
Affirms that only restriction on the ability of equity to follow assets is the requirement that there
must be some fiduciary relationship which permits the assistance of equity to be invoked. Millett J
criticised this as based more on authority than principle.
Armstrong DLW v Winnington Networks (judgment) - ANSWER Change of position is
defence to claim for restitution based on unjust enrichment. It is hard to see why, if the defendant
purchases with notice
Bailey v Angove Pty Ltd (judgment) - ANSWER A advance payment to a company made
before the commencement of the liquidation for an obligation performable afterwards will form part
of the company's estate, notwithstanding that its supervening insolvency means that the obligation
will not be performed, at any rate in specie. Will NOT be held on trust.
Same for money received for principal's account by agent who becomes insolvent before accounting
for it - unless (not on facts) relations between parties such that agent express trustee of money in
hands
Bank of Cyprus UK Ltd v Menelaou (judgment) - ANSWER Subrogation as a remedy requires
that the claimant establish that its money was used to discharge the security through the process of
tracing; the looser test of "economic reality" or simple causation (applied by the Court of Appeal in
this case) is insufficient. Here, there was a clear "tracing link" between the Bank and the money used
to purchase the Property. The Bank's interest in the purchase money was clear and direct
Barlow Clowes International v Vaughan (facts) - ANSWER BCI managed investment portfolio
that investors contributed to; dissipated much of their money.
Barlow Clowes International v Vaughan (judgment) - ANSWER Rule in Clayton is the starting
point, but it is not applied if it would be contrary to express/inferred intentions of the investors
(here, presume intended rule not to apply - paid into common rule, intended to share misfortune).
Then apply pari passu approach. Would prefer to apply the 'rolling charge' approach but if that would
be impractical (due to cost/difficulty - expense of carrying out the analysis is out of all proportion to
the actual sums at issue) - then apply the pari passu rule.
Clayton is only applied when just/convenient to do so - Re Hallett's Estate shows that the rule is
displaced where its application would unjustly assist the trustee to the disadvantage of the
beneficiaries.
Bishopsgate v Homan (judgment) - ANSWER Misappropriated trust monies could not be
traced through a bank account which was overdrawn at the time of payment or later became
overdrawn
, Tracing and Proprietary Remedies
(Supervision Six)
Boscawen v Bajwa (facts) - ANSWER AN let money to purchase of house Money paid to
purchaser's solicitor + transferred money to vendor before completion. This money used to discharge
earlier charge - but sale fail. AN didn't get security right - property then sold on default.
Boscawen v Bajwa (judgment) - ANSWER Subrogation could apply even though it was
impossible to infer a mutual intention to the effect on the part of the creditor and the person
claiming to be subrogated to the creditor's security.
Tracing was process by which AN sought to est. money was applied in discharge in H's charge;
subrogation was remedy sought to deprive B of unjust enrichment would otherwise obtain
Campden Hill v Chakrani (judgment) - ANSWER Claimant must first establish a fiduciary
relationship arising either from a division of the legal and beneficial ownership in the monies sought
to be traced or from the very nature of the relationship
(suggests F requirement adds nothing + satisfied when equitable property base)
Charity Commission v Framjee (facts) - ANSWER Trustee of charity trust; website allowed
donations to charity. Shortfalls between donations + donations charities received.
Fund should have been distributed (hold on trust for donees); Charity Commission brought
proceedings seeking determination on how to distribute the funds.
Charity Commission v Framjee (judgment) - ANSWER It would be incredibly expensive to
apply Clayton's case in this scenario, as this would require documentation of all accounts of the trust
over the last decade. The rolling charge approach would be impractical in this case as there are a lack
of computer records
Suggests Clayton can be displaced with relative ease in favour of a solution which produces a fairer
result.
Rejected two-pool approach to pari passu whereby donations before and after a certain date are
separated into two funds and shared pari passu.
Chase Manhattan (judgment) - ANSWER Goulding J concluded that a fiduciary relationship
existed between two banks when one bank had made a payment to another bank by mistake
Chaudhary v Yaruz (judgment) - ANSWER C transferred to D following legally binding
undertaking that D would deal w/ property for benefit of person + D breaches. Equity require D to
hold property on CT for person D agreed to benefit.
(Supervision Six)
Agip (Africa) Ltd v Africa (judgment) - ANSWER Can trace misappropriated property at law
provided does not cease to be identifiable by being mixed with other money in the bank account
derived from some other source. Can still trace at common if mixed with defendant's own money.
Affirms that only restriction on the ability of equity to follow assets is the requirement that there
must be some fiduciary relationship which permits the assistance of equity to be invoked. Millett J
criticised this as based more on authority than principle.
Armstrong DLW v Winnington Networks (judgment) - ANSWER Change of position is
defence to claim for restitution based on unjust enrichment. It is hard to see why, if the defendant
purchases with notice
Bailey v Angove Pty Ltd (judgment) - ANSWER A advance payment to a company made
before the commencement of the liquidation for an obligation performable afterwards will form part
of the company's estate, notwithstanding that its supervening insolvency means that the obligation
will not be performed, at any rate in specie. Will NOT be held on trust.
Same for money received for principal's account by agent who becomes insolvent before accounting
for it - unless (not on facts) relations between parties such that agent express trustee of money in
hands
Bank of Cyprus UK Ltd v Menelaou (judgment) - ANSWER Subrogation as a remedy requires
that the claimant establish that its money was used to discharge the security through the process of
tracing; the looser test of "economic reality" or simple causation (applied by the Court of Appeal in
this case) is insufficient. Here, there was a clear "tracing link" between the Bank and the money used
to purchase the Property. The Bank's interest in the purchase money was clear and direct
Barlow Clowes International v Vaughan (facts) - ANSWER BCI managed investment portfolio
that investors contributed to; dissipated much of their money.
Barlow Clowes International v Vaughan (judgment) - ANSWER Rule in Clayton is the starting
point, but it is not applied if it would be contrary to express/inferred intentions of the investors
(here, presume intended rule not to apply - paid into common rule, intended to share misfortune).
Then apply pari passu approach. Would prefer to apply the 'rolling charge' approach but if that would
be impractical (due to cost/difficulty - expense of carrying out the analysis is out of all proportion to
the actual sums at issue) - then apply the pari passu rule.
Clayton is only applied when just/convenient to do so - Re Hallett's Estate shows that the rule is
displaced where its application would unjustly assist the trustee to the disadvantage of the
beneficiaries.
Bishopsgate v Homan (judgment) - ANSWER Misappropriated trust monies could not be
traced through a bank account which was overdrawn at the time of payment or later became
overdrawn
, Tracing and Proprietary Remedies
(Supervision Six)
Boscawen v Bajwa (facts) - ANSWER AN let money to purchase of house Money paid to
purchaser's solicitor + transferred money to vendor before completion. This money used to discharge
earlier charge - but sale fail. AN didn't get security right - property then sold on default.
Boscawen v Bajwa (judgment) - ANSWER Subrogation could apply even though it was
impossible to infer a mutual intention to the effect on the part of the creditor and the person
claiming to be subrogated to the creditor's security.
Tracing was process by which AN sought to est. money was applied in discharge in H's charge;
subrogation was remedy sought to deprive B of unjust enrichment would otherwise obtain
Campden Hill v Chakrani (judgment) - ANSWER Claimant must first establish a fiduciary
relationship arising either from a division of the legal and beneficial ownership in the monies sought
to be traced or from the very nature of the relationship
(suggests F requirement adds nothing + satisfied when equitable property base)
Charity Commission v Framjee (facts) - ANSWER Trustee of charity trust; website allowed
donations to charity. Shortfalls between donations + donations charities received.
Fund should have been distributed (hold on trust for donees); Charity Commission brought
proceedings seeking determination on how to distribute the funds.
Charity Commission v Framjee (judgment) - ANSWER It would be incredibly expensive to
apply Clayton's case in this scenario, as this would require documentation of all accounts of the trust
over the last decade. The rolling charge approach would be impractical in this case as there are a lack
of computer records
Suggests Clayton can be displaced with relative ease in favour of a solution which produces a fairer
result.
Rejected two-pool approach to pari passu whereby donations before and after a certain date are
separated into two funds and shared pari passu.
Chase Manhattan (judgment) - ANSWER Goulding J concluded that a fiduciary relationship
existed between two banks when one bank had made a payment to another bank by mistake
Chaudhary v Yaruz (judgment) - ANSWER C transferred to D following legally binding
undertaking that D would deal w/ property for benefit of person + D breaches. Equity require D to
hold property on CT for person D agreed to benefit.
