When a trustee misapplies trust property — selling it, swapping it, or mixing it with other money — the beneficiary's first question is whether anything can still be recovered, and from whom. Following and tracing are the tools that answer this. They let you track property as it changes hands and changes form, opening the door to proprietary claims that beat other creditors in insolvency, capture rises in value, and reach even innocent recipients. For a solicitor advising a beneficiary or a recipient, knowing how far a claim can stretch — and where it stops — is essential.
What this lesson covers:
- Following, Tracing and the Proprietary Base — the difference between following and tracing, and the equitable interest a claimant must start with.
- Proprietary Claims and Choice of Remedy — why proprietary claims are powerful, and choosing between beneficial ownership and an equitable lien.
- Tracing into Mixed Assets and Bank Accounts — proportionate shares, the presumption against the wrongdoer, and the lowest intermediate balance rule.
- Mixing Innocent Parties' Funds — sharing funds and shortfalls pari passu, contrasted with first-in-first-out.
- When Tracing Fails — dissipation, overdrawn accounts, subrogation, and the four elements of a claim.
- Defences, Limitation and Laches — the bona fide purchaser defence, notice, statutory time limits, and delay.