Tracing in Equity

There are three main issues to be addressed in this article on equitable tracing, says Paul McGrath , barrister at Essex Court Chambers: who can invoke the equity rules on tracing? How are equity’s presumptions applied in modern fraud contexts? What is “backwards tracing” and does it have a role to play in equity’s tracing rules?

Paul McGrath may be contacted on tel: +44 (0) 20 7813 8000; email: pmcgrath@essexcourt.net. This article reproduces a paper that the author presented at the C5 Euro Legal Fraud and Asset Tracing and Recovery conference in London. For further information on C5 events visit www.c5-online.com

The rules on tracing in equity do not, in the main, suffer from the same technical limitations which we have addressed at common law (see Dec/Jan 06 issue of FI ). There are no problems tracing through mixed funds or clearing systems and there is no suggestion that tracing requires some form of physical substitution. Nevertheless it is hampered by a historic if not principled requirement of the existence of a fiduciary relationship. As examined below, this requirement can often be fudged but it does lead to difficult issues of legal principle arising.