When a trustee takes trust money and blends it with their own cash, spends it, or buys assets with it, the beneficiary loses the ability to point to specific pounds as theirs. Tracing is the set of equitable rules that lets you follow the value of trust money into whatever it becomes — a mixed bank account, a car, a house — so a beneficiary can assert a proprietary claim over it. For a solicitor advising a wronged beneficiary or untangling a misused client account, knowing how far the value can be followed, and what can be recovered, is essential.
Here's what we'll work through:
- The Basics of Tracing — why mixing creates a problem, and how equitable tracing succeeds where common law fails.
- Requirements for an Equitable Proprietary Claim — the elements a claimant must establish, starting with a pre-existing equitable interest.
- Tracing Into a Mixed Account — wrongful versus innocent mixtures, and the presumptions about whose money is spent first.
- Limits on Tracing — overdrawn accounts, dissipation, unsecured debts, and the lowest intermediate balance rule.
- Tracing Into Purchased Assets and Remedies — claiming assets, and choosing between a lien and a proportionate share.
- Innocent Mixtures and Attribution Methods — pari passu sharing and the first-in-first-out rule.
- Defences — the bona fide purchaser defence and what remedies survive if the proprietary claim fails.