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Equity and Trusts Law - Tracing
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- Kings College London (KCL)
Comprehensive notes on Equity and Trusts Law in the UK - Tracing.
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Equity & Trusts Revision NotesPROPRIETARY REMEDIES: TRACING
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A) INTRODUCTION
Context
A beneficiary / principal may wish to follow / trace their equitable interest in property, where the fiduciary / trustee in breach
has transferred the property to a third party. C must establish the third party has received property in which C has a recognised
equitable proprietary interest.
→ Property may be the original property, here C can follow his property into the hands of another;
→ Or substitute property, where C can to trace the value of his property into the substitute asset.
What is tracing?
→ Tracing is simply an evidential process to support a proprietary claim, but is itself neither a claim nor a remedy in itself. It
can lead to personal as well as proprietary claims.
→ Lord Millett in Foskett: “Tracing is thus neither a claim nor a remedy. It is merely the process by which C demonstrates what
has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his
claim that the proceeds can properly be regarded as representing his property.”
Two principal categories of proprietary remedy
(1) Personal Remedy: The property that was taken by the defendant no longer remains with him, so he has no identifiable
property left which the claimant can assert his rights over. This means that the claimant will need to go for a personal
remedy, which entitles him to the value of what was taken (monetary compensation).
! It is still a proprietary claim- because it arose due to the defendant taking the claimant’s property, but it’s a personal remedy
since the property no longer remains with the D.
(2) Proprietary Remedy: This enables claimant to assert right over the property the defendant has taken or its
substitute. It could have been raised in value, making proprietary claims better. C will get preference over creditors
as well. There are 2 ways to execute this remedy:
(i) C can to recover the property transferred / substitute property, often via imposing a CT on D. This will be preferred
if the property has risen in value.
(ii) C can impose a charge / lien over the property (reflecting his interest in it), which gives C priority over unsecured
creditors of D.
The great debates
→ Equity lawyers (determination of property rights is an objective process of evidencing. This is the orthodoxy) vs
Restitution lawyers (on the basis of unjust enrichment.) The debate between the two ideas plays out in Foskett.
Two judges (minority): I deserve a proprietary remedy, therefore I ought to be able to trace. This is the unjust
enrichment idea. Burks disagrees with this, saying it is not objective – you can’t see property rights, so just be
straightforward and say that you are making up a property right. The reason for this is because when the
wrongdoer transferred property to a new owner, that new owner had no good juristic reason for that ownership,
which gives rise to the new property right.
, Equity & Trusts Revision Notes
Three judges (majority): that’s mine, I want it back – objectively speaking, that property belongs to me – give it
back. It doesn’t matter whether there is a wrongdoer defendant or an innocent volunteer. Virgo refers to this as
a ‘vindication of proprietary right’.
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