Tracing
Tracing at common law
At common law tracing allowed property to be traced into the possession of
another, provided the property remained identifiable
Common law is unable to trace into mixed funds – once money is mixed there can be
no tracing at common law – Agip (Africa) v Jackson
Only identifiable assets can be followed - Taylor v Plummer
Tracing in equity
Tracing is neither a right nor remedy – it’s a powerful and flexible tool – it an obvious
exception to the rule that equity acts in personam (as tracing is a proprietary
remedy)
There is a distinction between following and tracing – Foskett v McKeown:
i. Following – involves the following of a distinct asset into the possession of
another
ii. Tracing – is required when the distinct asset is transferred into the possession
of another and that person exchanges it for another asset – tracing permits
one asset to stand in place of another
Its possible to follow monies into a mixed fund and then to trace an asset that was
purchased with the mixed fund
Tracing into bank accounts
Where trust monies are mixed into a bank account, equity provides for the tracing of
those monies
The rule in the Clayton Case – a bank account is treated as a series of debts, the debt
that is first in time being discharged before the other debts – first in first out
i. The rule is subject to any contrary intentions of the parties – Halletts Estate
ii. Courts have departed from the rule in circumstance’s where it was
inconsistent with the intention of the investors – Barlow Clowes International
v Vaughan
iii. The rule in the Clayton Case was prima facia applicable although it may be
departed from in circumstances where it’s not in concurrent with the
intention of the beneficiaries of a trust fund – Money Markets International
Stockbrokers Ltd
The requirement of a fiduciary relationship
Tracing in equity will only extends to persons that are in fiduciary relationship – Agip
(Africa) v Jackson – reaffirmed in Boscawn v Bajwa
Loss of the right to trace
May occur in a number of circumstances:
1. Property that has been dissipated will not be possible to trace – Diplock
2. Tracing is unavailable if a bona fide purchaser for value without notice
acquires the property
3. No claimant can trace who has acquiesced in the wrongful mixing or
distribution of property
4. Tracing won’t be allowed where it causes inequity
Following
The process is quite straightforward
Complications arise where the assets become mixed with other assets
It is possible for the claimant to follow their assets into the mixture and asserts that
their contribution exists as part of the mixture
Where there is a reduction in the mixture any claim will be reduced in proportion to
the relative contributions
Claiming
Distinct from tracing or following
It’s entirely dependent upon the extent of the rights that a claimant in asserting
against an asset
When the beneficial owner of an asset has followed it into the possession of another
they may assert their equitable ownership and obtain an order compelling the
defendant to restore that asset to them
Where an asset is transferred into a mixed fund, the claimant may either assert a
charge over the fund or asset an entitlement to a share of the fun which is
proportionate to their contribution - Foskett v McKeown
