Trustees and innocent volunteers

How may a claimant employ tracing to identify property that has passed into a defendant’s hands? Charles Fussell of Herbert Smith has previously examined changes in form and mixing, restrictions on tracing cash at law through an exchange product and tracing into mixed funds in equity. In the final article in this series he looks at tracing against a trustee/constructive trustee. He also examines the position when an innocent volunteer is involved before considering recent legal developments and possible future changes.

Charles Fussell may be contacted on tel: +44 (0)20 7374 8000, email: charles.fussell@herbertsmith.com

Tracing against a constructive trustee/trustee

The order of payments into and out of the bank account into which the claimant seeks to trace his funds is irrelevant. Whilst in Re Hallet’s Estate [1] it was presumed that the trustee had an honest intention and drew out his own money first, thereby entitling the claimant to trace the remaining monies in the fund, in Re Oatway an application of this presumption would have defeated the claims of the claimants. In this case, the trustee withdrew money from the mixed fund and placed it in certain investments and subsequently withdrew the balance and dissipated it. Joyce J held that the investments belonged to the beneficiaries.