Question 1

An action for tracing can be made in equity only.

Accepted Answer

An action for tracing can be made both in common law and equity.

Question 2

Is tracing a remedy or a claim in its own right?

Accepted Answer

Tracing is not a claim or a remedy in its own right; rather, it is a legal process or a procedural tool that allows a claimant to track the value or property that has been wrongfully taken or misappropriated through different forms into its current form or location. The purpose of tracing is to identify assets that may be subject to a claim for restitution or to impose a constructive trust.

Once the property or its substitute has been traced, the claimant can then assert a substantive claim or seek a remedy based on the underlying legal right that was violated, such as a claim for breach of fiduciary duty, theft, or unjust enrichment. The remedies that may follow successful tracing can include restitution, the imposition of a constructive trust, or an equitable lien.

In essence, tracing facilitates the assertion of rights against assets that have been transformed or transferred, but it does not itself create a substantive right. It is a means to an end, allowing the claimant to link the original assets to their current form and thereby lay the groundwork for a legal claim to recover the value or property in question.

Question 3

What three defences can a defendant subjected to a tracing process may forward?

Accepted Answer

In the context of civil litigation, particularly in cases involving the recovery of misappropriated assets or funds, a defendant subjected to a tracing process may put forward several defenses to challenge the plaintiff's claim. Tracing is a legal process used to identify and follow the path of an asset or funds that have been wrongfully taken or transferred, with the aim of recovering them or obtaining compensation. Here are three common defenses that a defendant might use:

1. **Bona Fide Purchaser for Value Without Notice**: A defendant may claim to be a bona fide purchaser for value without notice, meaning they purchased the assets in question for a fair price and without knowledge of any claims against those assets. If the defendant can prove they acquired the assets in good faith, without notice of the original owner's rights, and provided valuable consideration for them, this defense can prevent the original owner from reclaiming the assets.

2. **Change of Position**: The change of position defense is available to a defendant who has received assets in good faith and has since changed their position in reliance on the validity of the receipt. For example, if the defendant spent the money or assets on living expenses or other commitments under the belief that the assets were legitimately theirs, they may argue that it would be inequitable to require them to repay or return the assets. This defense is based on principles of equity and aims to protect those who might suffer an injustice if the assets were to be recovered.

3. **Overreaching**: This defense is applicable when the tracing claim overreaches the equitable interest of the claimant. For instance, if the assets have been mixed with other funds and the defendant has dealt with them in a way that cannot be easily unwound without causing disproportionate harm, the defendant may argue that the tracing claim is overreaching. This defense is particularly relevant when the assets have been used in a manner that makes it difficult to distinguish the claimant's property from that of the defendant or third parties.

It is important to note that the availability and success of these defenses depend on the specific facts of the case, the jurisdiction, and the applicable law. Defendants facing a tracing process should seek legal advice to determine the best course of action based on their circumstances.

Question 4

What is the difference between tracing and following?

Accepted Answer

The answer of What is the difference between tracing and...

Question 5

In which case does the ability to trace at common law come from

Accepted Answer

The answer of In which case does the ability to...

Question 6

What is the difference between tracing at common law and equity?

Accepted Answer

The answer of What is the difference between tracing at...

Question 7

Which case does the "first in first out" rule come from?

Accepted Answer

The answer of Which case does the "first in first...

Question 8

When does the rule in Clayton's Case not apply?

Accepted Answer

The answer of When does the rule in Clayton's Case...

Question 9

Is it possible for beneficiary to make a claim against a stranger to trust?

Accepted Answer

The answer of Is it possible for beneficiary to make...

Question 10

Aside from an action against the trustee for breach of trust, how else can the beneficiary recover what they are owed?

Accepted Answer

The answer of Aside from an action against the trustee...

Question 11

Name a situation where it may not be worthwhile for a beneficiary to bring an action against the trustee for breach of trust.

Accepted Answer

The answer of Name a situation where it may not...

Question 12

Common law tracing involves the trustee pursuing the legal title to property which has found its way into the wrong hands.

Accepted Answer

Common law tracing allows a trustee to recover property that has been transferred to someone who wasn't meant to receive it. The trustee pursues the legal title to the property rather than asserting a proprietary right over it.

Question 13

Equitable tracing offers someone who has benefitted from a fiduciary relationship (for example, a beneficiary) the ability to follow the equitable interest in property which has been misappropriated.

Accepted Answer

Equitable tracing allows a beneficiary to trace misappropriated property and identify the equitable interest they have in it.

Question 14

Tracing is a claim against the recipient of the property.

Accepted Answer

Tracing is a process used to identify the subsequent forms that property has taken, not a claim against the recipient of the property. It is a method to follow the value of the property through different transformations.

Question 15

Tracing is dependant on principles of the law on unjust enrichment being met.

Accepted Answer

Tracing is a process used in law to identify property (including money) that has been mixed with other property, and it is not dependent on the principles of unjust enrichment, which is a separate legal concept addressing situations where one person is unjustly enriched at the expense of another.

Question 16

Tracing may be undertaken against the wrongdoer or anyone who has knowingly acquired an interest in the trust property or knowingly assisted in the breach of trust.

Accepted Answer

Tracing can be done against the wrongdoer as well as anyone who has knowingly acquired an interest in the trust property or knowingly assisted in the breach of trust.

Question 17

At common law, the remedy that tracing leads to is a restitutionary one.

Accepted Answer

Tracing involves the identification of a specific asset or property that is linked to the underlying claim, and the remedy is to restore the claimant's interest in that specific asset through restitution. Therefore, at common law, the remedy that tracing leads to is indeed a restitutionary one.

Question 18

If tracing is pursued in equity, the main remedy that the claimant enjoys is a personal one against the recipient of the property.

Accepted Answer

Tracing in equity enables the claimant to follow the misappropriated property and recover its value or trace its substitute. However, the main remedy available is a personal one against the recipient of the property, as they are deemed to hold it on trust for the claimant.

Question 19

The common law will permit tracing to occur provided that the trust property remains clearly identifiable.

Accepted Answer

The common law recognizes the principle of tracing and will permit it as long as the trust property can be clearly identified. This allows beneficiaries to recover trust property that has been wrongfully appropriated or disposed of.

Question 20

In which case were the requirements of recipient liability established?

Accepted Answer

The answer of In which case were the requirements of...

Quiz 13: Tracing and Actions Against Strangers to the Trust