ABSTRACT
OVERVIEW In situations in which the claimant seeks to identify a specifi c item of property (or its ‘clean’ substitute) in the hands of the defendant, the claimant will pursue a common law ‘following’ claim to require the return of that specifi c item of property. 1
The more complex situation is that in which the claimant’s property has passed into the hands of the defendant but has been substituted for another item of property in which the claimant has never previously had any proprietary rights. The claimant may pursue either a common law tracing claim, 2 or an equitable tracing claim 3 to assert title to the substitute property as being representative of the claimant’s original property. In the event that the original property or the substitute property has been mixed with other property then the claimant will only be able to bring an equitable tracing claim, because common law tracing claims are restricted to situations in which the property against which the claim is brought remains separate from all other property. An equitable tracing claim requires that the claimant had some pre-existing equitable proprietary right in that property 4 – although the validity of this latter rule has been doubted by many commentators. 5
The particular diffi culty arises in relation to money passed through bank accounts. English law treats each payment of money as being effectively distinct tangible property such that, when a bank account containing such money is run overdrawn, that property is said to disappear. 6 Consequently, there can be no tracing claim in respect of property which has ceased to exist. 7
The process of tracing, and identifying property over which a remedy is sought, is different from the issue of asserting a remedy in respect of that property. 8 Tracing is simply the process of identifying property against which the claimant may bring a claim; whereas the question as to the form of remedy which the court may award in support of that property right is a separate question. Aside from the loss of the right to trace, remedies in relation to tracing claims may typically include: the establishment of a constructive trust, an equitable charge, a lien, possibly a resulting trust, and subrogation. 9 In relation to mixtures of trust and other money held in bank accounts, a variety of approaches has been taken in the courts from the application of the old fi rst-in, fi rstout principle, 10 to the establishment of proportionate shares in any substitute property. 11
Defences available in relation to tracing claims include change of position, 12 bona fi de purchase of the property for value, 13 estoppel by representation, 14 and passing on. 15
This chapter considers the law relating to tracing. The function of the law of tracing is to enable the owner of property to recover that property in the event that it is taken from her involuntarily. By ‘involuntarily’ is meant that the owner has not agreed to any transfer of title in that property to the defendant. It may be that the property has been stolen, or taken in breach of trust, or taken by mistake: whatever the cause, the owner has not consented fully to giving that property up to the defendant.
