Tutorial 10+

What is the difference between following and tracing? Explain this with reference to case law.

Common law tracing : Taylor v Plumer

Tracing in Equity : Boscawen v Bajwa

1. Bruce Wayne is a trustee of huge amount of trust fund left to a beneficiary named Riddler.
Bruce commits a few breaches of trust while dealing with the trust fund.

(a) He puts in RM 25,000 of the trust money into an account which contains RM 15,000 of
his own money. He then proceeds to buy a bat mobile using the bank’s higher
purchase loan facility for RM 30,000. He also bought a new Armani suit for RM 5000
for his date with his girlfriend Selena. He paid for their dinner, movie and drinks,
worth RM 2000.

Mix fund – equitable tracing

• There is a fiduciary relationship between Riddler (beneficiary) and Bruce Wayne

 Agip (Africa) Ltd v Jackson [1990] Ch 265

Better to trace into Bat mobile straight away (can use Re Oatway case to justify ignoring
order of deposits and transactions)

o Higher purchase loan facility (take debt from bank and pay later)

o Most likely taken because he will use the money in the account to pay off the HP
loan (Beneficiary’s money)

o Backwards tracing would allow the beneficiaries to trace their RM 25,000 into the
bat mobile

o They can take a charge over the bat mobile (take possession and sell it if Bruce
Wayne does n

o Backwards tracing would allow the beneficiaries to trace their RM 25,000 into the
bat mobile

o They can take a charge over the bat mobile (take possession and sell it if Bruce
Wayne does not pay back)

o Or they can have a lien (keep in possession until Bruce Wayne pays back)

(b) He also withdraws RM20,000 from the trust fund to buy a new diamond studded Cat
suit for his girlfriend Selena.
Q.2 (b)
• Clean substitution
• Unmixed funds
• No mixing of funds
 • Common law tracing is sufficient
• Banque Balge Pour L’Estrager v Hambrouck [1921] 1 KB 321

(c)Bruce Wayne also convinced some innocent people to invest in his Renewal Project. Miss
Felicity Smoke who was inspired by Bruce’s passionate speech on giving back to the poor,
deposited RM 50,000 into his account in May. Then, a Mr Barry Allen, another wealthy prominent
society member also deposited RM 100,000 into his account in June. Bruce withdrew RM90,000
from this account in August to use as down payment for a new mansion.

• Felicity and Barry are both innocent volunteers

• Mixed fund

• Equitable tracing is preferred

• GR: First in/First Out rule

But not preferred as it causes unfairness o Courts came up with 4 ways to avoid using first in/first
out rule

1. Running bank accounts  Re Goldcorp Exchange Ltd [1995] 1 AC 74

2. Impossible/impracticable  Re Eastern Capital Futures Ltd [1989] BCLC 371

3. Contra-indication  Barlow Clowes International Ltd (In Liquidation) v Vaughn [1992] 4 All ER 22

4. Result in injustice  Barlow Clowes International Ltd (In Liquidation) v Vaughn [1992] 4 All ER 22 o
Woolf J (main reason they departed from the rule in this case)

Can argue that it will cause injustice

• Use Pari Passu (proportionate share) solution instead

o Proportion of each individual contribution made

o Distributing available assets in the same proportions

Felicity + Barry = RM 150, 000

Felicity’s share= 50,000/150,000

=1/3

Barry’ share= 100,000/150,000

= 2/3

150,000- 90,000 (Bruce’s withdrawal) = 60, 000

Felicity’s share= 1/3 x 60,000

=20, 000

Barry’s share= 2/3 x 60,000

= 40,000
Basically- when Bruce withdrew RM90,000; RM30,000 came from Felicity’s RM50,000 and RM
40,000 came from Barry’s RM100,000

if courts are bold- use the Rolling Charge/North American Solution

o same as pari passu but takes into account the lowest intermediate balance rule very closely
(bookkeeping is only in relation to withdrawals and NOT deposits)

o good rule if there were more withdrawals and ensures a very specified brand of fairness and
justice

o but here no necessity to use the rule since there was only one withdrawal and the shares
would be the same calculations as above

(d) Bruce also had a current account (CA) which he used to write cheques when needed for
any of his businesses. He deposited RM 60,000 of his own money and monies he had
collected from another philanthropy scheme he was running into the account. This scheme
was to help educate the poor children of Gotham City. He had a donation of RM20, 000
from a famous actor named Oliver Queen and RM 60,000 from his sister, Thea Queen in
the month of September. In October, a man named Cisco paid RM 5000 into this account.
That very same month, Bruce withdrew RM 30, 000 for his daily spendings that month
(food, petrol etc.). Later in November, Bruce withdrew another RM 20, 000 to buy a new
Rolex watch as a treat for himself.

Analyse the situations above and determine if common law or equitable tracing is the
preferred method. Explain your answer by showing how the preferred tracing method can
help the Riddler and the other parties (Felicity Smoke, Barry Allen, Oliver and Thea Queen)
their money back.

Mixed funds

• Equitable tracing is preferred

• Although Oliver, Thea and Cisco are innocent volunteers- the withdrawals and deposits are
to do with a current account (a type of running account)

• First in/first out rule will be applied

• First deposit- his own RM 60,000

• Consecutive deposits- RM 20,000 (Oliver) and RM 60, 000 (Thea) plus RM 5000 (Cisco)

• First withdrawal of RM 30, 000 (only eaten into his money of RM 60,000-)

• Still balance of RM 30,000 from his money

• Then RM 20,000 also is taken from his balance of RM 30,000

Leaving behind RM 10, 000 of Bruce’s money (for him to prove it was his and not the
Riddler’s trust money)
• And all the other innocent’s money untouched

Leaving behind RM 10, 000 of Bruce’s money (for him to prove it was his and not the Riddler’s trust
money)

• And all the other innocent’s money untouched