Foskett v McKeown:

Trustees held funds allegedly in pursuance of a land development deal which did not materialise. One
of the trustees effected a whole life insurance policy in the sum of £1 million. The first two annual
premiums were paid out of the trustee’s funds, but the fourth and fifth premiums were paid out of the
investors’ funds. The trustee committed suicide and the insurance company duly paid the sum assured
to the named beneficiaries under the policy. The claimant sued as a representative of the investors for a
pro rata share of the policy proceeds. The House of Lords, by a majority, held in favour of the claimant
on the ground that immediately before the payment of the fourth premium, the property, held in trust
for the defendants, was a chose in action, i.e. the bundle of rights enforceable under the policy was held
in trust against the insurers. The trustee, by paying the fourth premium out of the moneys of the
claimants’ trust fund, wrongly mixed the value of the premium with the value of the policy. Thereafter,
the defendants held the same chose in action (i.e. the policy) but with the enhanced value of both
contributions. The effect was that the proceeds of the policy were held in proportion to the
contributions which the parties made to the five premiums.

MCC Proceeds Inc v Lehman Bros International (Europe), The Times, 14 January 1998, CA

Macmillan Incorporated, a Delaware company, was taken over in 1988 by Maxwell Communications
Corporation plc (MCC) and became controlled by Robert Maxwell and members of his family. Macmillan
Inc placed shares in a wholly owned subsidiary (Berlitz International Inc) together w ith the relevant
share certificates, in the name of Bishopsgate Investment Trust plc (a nominee company controlled by
Mr Maxwell). An agreement was entered into declaring that Bishopsgate held the legal title to the
shares as nominees for Macmillan, who retained the beneficial interest in the shares. The agreement
specified that, on Macmillan’s written demand, Bishopsgate would immediately transfer the shares to
Macmillan. Without Macmillan’s knowledge or consent, Bishopsgate pledged the certificates with the
defendants as collateral under a stock lending scheme. The defendants, who were ignorant of
Macmillan’s interest in the shares and certificates, subsequently arranged for the cancellation of the
certificates on transfer of the shares into a central depository paperless system in New York. The
defendants subsequently sold the shares to an associated company, Shearson Lehman Bros Holdings plc.
The claimants, who were Macmillan’s successors and assignees, instituted proceedings against the
defendants in conversion. The claim was based on the ground that Macmillan had a beneficial interest in
the shares and certificates and was entitled to an immediate right to possession. Such interest, the
claimants alleged, was sufficient to maintain an action in conversion and the defendants’ lack of
knowledge of Bishopsgate’s wrongdoing or of Macmillan’s interest was no defence to the conversion
claim. The judge granted an application to the defendants to strike out the claim for conversion on the
ground that no reasonable cause of action was disclosed on the facts. The claimants appealed to the
Court of Appeal. The Court of Appeal dismissed the appeal on the following grounds: (a) The defendants,
who were bona fide purchasers of the legal interest in the shares without notice of any breach of trust
by Bishopsgate or of any claim by Macmillan, acquired good title to the shares and certificates, free from
any adverse claims. Thus, the claimants’ cause of action was extinguished. The claimants enjoyed an
equitable interest in the shares and certificates and, in the circumstances, their interest was
overreached. A claim for (b) conversion of goods was not maintainable by a person who had only an
 equitable interest in the property. Conversion was a common law cause of action and the common law
did not recognise the equitable interests of beneficiaries under a trust. Accordingly, the common law
recognised only the title of the trustee as a person normally entitled to immediate possession of the
trust property. The claimants’ action in conversion could not be maintained as its predecessor in title,
Macmillan, had only an equitable interest in the shares and certificates. This rule of substantive law was
not altered by the Judicature Acts 1873 and 1875, which merely fused the administration of law and
equity.

Spence v Union Marine Insurance Co (1868)- Court of Common Pleas

Facts: Cotton belonging to different owners were shipping in bales specifically marked. 43 bales
belonged to C, and were insured by D against the usual perils. In the course of her voyage the ship
was wrecked near Key West; all the cotton was damaged; some of was lost. Some was sold near
the wreckage and the rest was conveyed in another vessel to Liverpool. The marks on a large
number of the bales were obliterated by sea-water so that all of the bales sold at Key West were
non-identifiable; and only 2 of C’s bales were identified out of the ones in Liverpool and were
delivered to them. C claimed to recover against D for the loss of the other 41 bales.

Held (Bovill CJ):

 “When goods of different owners become by accident so mixed together as to be undistinguishable,

the owners of the goods so mixed become tenants in common of the whole, in the proportions which
they have severally contributed to it.”

Indian Oil Corporation v Greenstone Shipping SA [1988] 1 QB 345

In this case, Indian Oil Corporation (IOC) chartered a ship from Greenstone Shipping SA to transport
crude oil. However, the ship was delayed due to a strike at the loading port, causing IOC to incur
significant losses. IOC sought to recover these losses from Greenstone Shipping SA.

This case is important because it deals with the concept of frustration of contract. Frustration occurs
when an unforeseen event makes it impossible to fulfill the contract, leading to its termination. The
court had to determine whether the strike constituted frustration of the contract between IOC and
Greenstone Shipping SA.

The outcome of this case is significant as it provides guidance on the circumstances under which a
contract can be frustrated, impacting the rights and liabilities of the parties involved. It also highlights
the importance of considering unforeseen events and their impact on contractual obligations.
Taylor v Plumer (1815) 3 M & S 562

The defendant, Sir Thomas Plumer (later Master of the Rolls), had given money to Walsh, his
stockbroker, in order to purchase Exchequer bills. Walsh, without authority, purchased American
investments and bullion and attempted to abscond to America. There was a dramatic chase by the
defendant’s attorney and a police officer who caught up with Walsh at Falmouth where he was waiting
for a boat bound for Lisbon. Walsh handed the property over to the defendant’s agents and was later
adjudicated bankrupt. His assignee in bankruptcy claimed to recover the property from the defendant.
The court held in favour of the defendant because the property had belonged to him.

• Independent Trustee Services Ltd v G.P. Noble Trustees [2013] Ch 91

A wife (D)’s money from her divorce settlement had been stolen by her former husband from a number
of pension funds

The beneficiaries of the pension funds (C) brought a claim against her to recover the monies

D raised the bona fide purchaser defence on the grounds that the value given was the agreement not to
pursue any further claims under the court’s consent order

The consent order had been set aside by the time of the trial on account of C’s former husband’s failure
to make full disclosure during divorce proceedings

C argued that the setting aside of the court’s consent order meant that the D was no longer a bona fide
purchaser for value without notice of the stolen money

The judge held that C’s claim could not succeed as D was entitled to the bona fide purchaser defence

Held (Court of Appeal)

Appeal allowed; C’s claim should be allowed to succeed as the bona fide purchaser defence did not
apply after the consent order had been rescinded.

Re Diplock [1948]

Facts

 Caleb Diplock’s will left his property on trust for charitable purposes

 The trust was held to be invalid as a charity

 However, the executors had already distributed some of the trust money to various charities

 Some of the funds were mixed with the funds of the charities while others had been expended
for the improvement or alteration of the property of the charities

 Diplock’s next of kin sought to prove that they were entitled the funds and part of the altered
property
Held (Court of Appeal)

 The next of kin were entitled to the funds that were mixed with the funds of the charities on a
pari passu basis

 However, they were not entitled to the funds which were spent by the charities on the
improvement or alteration of property

Sinclair v Brougham [1914] A.C. 398

Facts: A building society took money from its members and leant it to other members to buy houses.
They began lending ultra vires (i.e. outside their powers), making the loan contracts void for illegality.

Held: When the building society went into liquidation it was held the money could be traced in equity by
the creditors (despositors)