Part 5III&IV Unsecured Creditors Post-Judgment Remedies Specific Enforcement Procedures
Proprietary Remedies IV
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Transcript of Proprietary Remedies IV
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REMEDIES FOR BREACH
OF TRUST
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Learning Objectives
• Students wi be abe !
i" T# $n#w t%e re&edies '#r breac% #'trust
ii" T# understand t%e c#nce(t #' (ers#nare&edies against t%e trustee
iii" T# earn ab#ut (r#(rietar) re&edies
and its advantagesiv" T# understand t%e c#nce(t #' tracingand its i&(e&entati#n
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Intr#ducti#n
• Re&edies are avaiabe t# guardagainst breac% #' trust*
•
T%ese can be divided t# tw#+i" ,ers#na re&edies against trustee
ii" ,r#(rietar) re&edies avaiabe t#
t%e bene-ciaries*
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,ers#na Re&edies againsttrustee
• It can be divided t# t%ree!
i" Measure #' iabiit)
ii" Invest&entsiii" Interest
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Measure #' iabiit)
• .%en t%ere is a breac% #' trust/ direct)#r indirect)/ t%ere wi be interest*
• I' t%ere is unaut%#rised (r#-t+ trusteewi %ave t# acc#unt '#r (r#-t*
• Trustee wi be iabe #n) '#r #sesarising '#r& t%e breac% #' trust
• T%e) are n#t insurer t# t%e trust(r#(ert)
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Di&es v Sc#tt 01234" 5 Russ126
• T%e) are n#t a#wed t# set #7 (r#-t &adein #ne transacti#n against #ss in an#t%er*
• Suc% (r#-ts be#nged t# bene-ciaries
• Trustee cann#t cai& t%e (r#-t just t#essen t%eir #wn iabiit) '#r #ss causedb) a breac%*
•
T%ese wi n#t a(() i' (r#-t and #ss canbe seen t# be (art #' t%e sa&e transacti#n
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Invest&ent
1" I' trustee &a$e unaut%#risedinvest&ent/ t%e) wi be iabe '#ran) #ss w%ic% is incurred w%en t%e
invest&ent is reaised
3" .%ere unaut%#rised invest&ent arei&(r#(er) retained/ t%e &easure #'
iabiit) is t%e di7erence betweent%e (resent vaue #' invest&ent andt%e (rice
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8" I' trustee are directed b) trust instru&entt# &a$e a s(eci-c invest&ent but t%e)eit%er+
i" Ma$e n# invest&ent #r
ii" invest s#&ew%ere*
T%e) wi be iabe t# su(() t%e aunt #'t%e s(eci-c invest&ent 9 %ad t%e) investedat (r#(er ti&e*
5" A trustee used trust ne) '#r %is #wnbusiness 9 iabe t# %#d '#r (r#-t
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Interest
• Re(ace a #ss wit% an interest
•
Traditi#na rate 5 :• Ma) be iabe '#r %ig%er rate at t%e
discreti#n #' t%e c#urt
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,RO,RIETAR; REMEDIES
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Meaning ,R
• A $ind #' re&ed) w%ere t%e (ainti7can cai& t%at (r#(ert) in t%e %ands#' t%e de'endant is t# be treated ast%at #' (ainti7*
• It is n#t t%e sa&e as
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• It entites t%e (ainti7 t# treat an)(r#(ert)/ usua) ne)/ in t%e%ands #' t%e de'endant as being t%e
(ainti7 t# t%e e>tent t%at %e cancai& re(a)&ent in 'u regardess #'t%e de'endant=s ins#venc)*
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t t
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vantages r#(r etar)Re&ed) c#&(ared t#
,ers#na Re&ed)• 1" Satis'acti#n #' t%e (ainti7=sde&and d#es n#t de(ends #n t%es#venc) #' t%e de'endant
• 3"T%e (ainti7 wi be abe t# ta$eadvantages #' t%e increase in vaue#' t%e said (r#(ert)
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• It c#ncerns an inc#&e (r#ducingassets w%ereb) interest wi becacuated 'r#& t%e date #n w%ic%
t%e (r#(ert) ca&e t# t%e de'endant=s%and*
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• E?uitabe ,r#(rietar) Re&ed) is$n#wn as trustee
• T%is is a $ind #' re&ed) w%ic%entites a cai&ant t# treat s(eci-c(r#(ert) as %is #wn
• Tw# t)(es+
• A" Tracing at C#&n Law
• B" Tracing at E?uit)
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0i" Tracing at C#&n Law
• T%e #wner #' (r#(ert) can cai& '#rt%e return #' suc% (r#(ert) #r its vaue
• I' t%e (r#(ert) %ad been c#nverted t##t%er (r#(ert) and can be identi-abe#n its (%)sica sense/ t%e bene-ciar)
sti can cai& against t%e trust(r#(ert)
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• H#wever/ i' t%e (r#(ert) %asc%anged eit%er in cas%@#t%er'#r&@&i>ed wit% #t%er ne)/ t%e
tracing under c#&n aw is n##nger (#ssibe*
• S# #ng as t%e (r#(ert) is
identi-abe/ it can be rec#vered*
• Once &i>ed/ it is n#t traceabe
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• Taylor v Plumer (1815) 3 M & S
562. L#rd Eenb#r#ug%+• It &a$es n# di7erence in reas#n #r
aw int# w%at #t%er '#r&/ di7erent'r#& t%e #rigina/ t%e c%ange &a)
%ave been &ade/ w%et%er int# t%at#' (r#&iss#r) n#tes '#r t%e securit)#' t%e ne) w%ic% was (r#ducedb) t%e sae #' g##ds i' t%e(rinci(a * * * '#r t%e (r#duct #' #rsubstitute '#r t%e #rigina t%ing sti-s t%e &ature #' t%e ting it se'/
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• as #ng as it can be ascertainabe t#be suc% and t%e rig%t #n) ceasesw%en t%e &eans #' ascertain&ent
'ai/ w%ic% is t%e case w%en t%esubject is turned int# ne) and&i>ed and c#'#unded in a genera
&ass #' t%e sa&e directi#n*
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ii" Tracing Under E?uit)
• T%e c#nce(t is re wider ande>ibe
• It a((ies n#t #n) w%en t%e (r#(ert)is in t%e %ands #' trustees #r #t%er-duciaries/ but as# in a c#&&erciac#nte>t*
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c".%# can trace
• It is n#t c#n-ned t# cai&s betweentrustee and bene-ciar) but as#between -duciaries*
• T%is c#nce(t can be seen in 'ewcases*
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Re Haet 0144" 18 C% 2
• A s#icit#r %ad de(#sited (art #' %iscient=s ne) int# %is acc#unt w%ic%as# c#&(rised ne) 'r#& %is &arriage
sette&ent* He &ade vari#us (a)&ent'r#& and int# t%e acc#unt and as#incurred debts* At %is deat% t%e acc#untwas sucient t# &eet cai&s #' t%etrustees in t%e &arriage sette&ent andt%e cient but n#t %is (ers#na debts*
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• Hed + B#t% t%e trustee and t%e cient
were entited t# c%arge t%e ne) in t%eacc#unt and t%e) %ad (ri#rit) #ver t%egenera credit#rs* Mr* Haet / t%es#icit#r/ st##d in a -duciar) (#siti#n
t#wards t%e cient*
• Gesse MR + Has it ever been suggestedunti recent) t%at t%ere is an) distincti#n
between an e>(ress trust #r an agent #ra baiee #r a c#ect#r #' rents #ran)b#d) ese in a -duciar) (#siti#n
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Sincair v Br#ug%a& 01215"AC 824
• T%e need t# deter&ine t%e rig%t #' de(#sit#rt# trace int# t%e genera assets #' t%e S#ciet)w%ic% %ad been subject t# winding u(*
• HOL + T%ere was a -duciar) reati#n betweent%e de(#sit#rs and t%e direct#rs! t%edirect#rs %ad &i>ed t%e 'unds and t%ede(#sit#rs %ad t%e rig%t t# trace t%e& int#
t%e %ands #' t%e S#ciet) rec#gnising an e?uacai& i' t%e s%are%#ders wit% w%#& t%e)s%ared pari passu
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Re Di(#c$ 01254" C% 56
• e>t #' $in were %ed entited t#trace t%e ne) in e?uit) int#c%arities %ands because e>ecut#rscear) st##d in a -duciar)reati#ns%i( t# t%e estate*
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d" Tracing #' Un&i>ed Fund
• I' t%e trustee %as s#d t%e trust(r#(ert)/ rig%t) #r wr#ng)/ t%ebene-ciar) &a) ta$e t%e (r#ceeds i'%e can identi') t%e&
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• I' t%e (r#ceeds #' sae %ave been
used t# (urc%ase #t%er (r#(ert)/t%e bene-ciar) &a)
• 1" '##w t%e& and &a) eect eit%ert# ta$e t%e (r#(ert) (urc%ased #r%#d it as securit) '#r t%e aunt#' trust aid #ut in t%e (urc%ase
• 3" %e is entited at eecti#n eit%er
t# ta$e t%e (r#(ert)• 8" t# %ave a c%arge #n t%e (r#(ert)
'#r t%e aunt #' trust (r#(ert)*
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• T%e (#siti#n can be seen in t%e case#' Re Haet=s Estate 0144" 18 C%2
• It s%a never be vaid against a b#na-de (urc%aser '#r vaue*
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e" Tracing #' Mi>ed Fund
• A c#&(icated situati#n
• T%is is w%en t%e trustee %as &i>ed t%etrust 'unds wit% #t%er ne) #r #t%er
(r#(ert)*• T%e (#siti#n #n t%is un&i>ed 'und
de(ends #n di7erent situati#ns/ eg
w%et%er t%e #wners%i( #' t%e &i>ed 'und&ust be a((#rti#ned between tw# trust#r a trust and an inn#cent v#unteer*
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i" .%en t%e w%#e bended(r#(ert) is iabe
• T%e bene-ciaries wi %ave t%e -rstc%arge #ver t%e &i>ed 'und #r an)(r#(ert) (urc%ased wit% it uness #'
t%e trustee can (r#ve t%at t%e (art #'t%e &i>ed 'und is %is #wn*
• T%e burden is #n t%e wr#ngd#er t#
s%#w t%at t%e asset #r baancere(resents %is #wn ne)*
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• I' t%e (resu&(ti#n in Re Haet w#r$edunjustice/ it s%#ud n#t be a((ied*
• Re Oatwa) 128J 3 C% 86* G#)ce G
• It is/ in &) #(ini#nj/ e?ua) cear t%atw%en an) #' t%e ne) drawn #ut %as beeninvested and t%at invest&ent re&ains in t%ena&e #r under t%e c#ntr# #' t%e trustee K
%e cann#t &aintain t%at t%e invest&entw%ic% re&ains re(resent %is #wn ne)a#ne**
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ii" ,#siti#n w%en 'unds #' tw#
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ii" ,#siti#n w%en 'unds #' tw#trusts are &i>ed #r t%at #' trust
and t%ird (art)
• T%is a((ies t# t%e situati#n w%eret%e trustee %as &i>ed t%e 'unds #'tw# trusts/ w%et%er #r n#t wit% %is/ #r%e %as trans'erred t%e 'unds t# aninn#cent v#unteer/ w%# %as &i>ed
t%e& wit% %is #wn*
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• T%e rue %ere is t%at t%e tw# trusts #rtrust and t%e v#unteer/ s%are pari
passe/ i*e* rateab) in t%e &i>ed'unds #r an) (r#(ert) (urc%ased #ut#' ter&
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Sincair v Br#ug%a& 01215" A*C824
• Cai& between s%are%#ders andde(#sit#rs in res(ect #' assetsdistributabe b) i?uidat#r in t%e
winding u( #' a buiding s#ciet)*
• Hed+ T%e tw# casses s%aredrateab)
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iii" Mi>ing #' ne) in t%e ban$acc#unt
• In t%e c#urse w%ere t%ere was a &i>edin a ban$ing acc#unt/ s(ecia rues wi
a(()
• T%ere is %#wever necessar) t#distinguis% t%e (#siti#n between
trustee and bene-ciaries and asbetween tw# trust and an inn#centv#unteer
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i" Mi i i b $ t i ti
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i" Mi>ing in a ban$ acc#unt c#nsisting#' t%e trust (r#(ert) and t%e trustee=s
#wn (r#(ert)
• T%e (rinci(es as betweenbene-ciar) and trustee is t%at t%etrustee is (resu&ed t# s(end %isne) -rst*
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Re Haet=s Estate
• One #' t%e ?uesti#n! %#w t# a#catet%e (a)&ents 'r#& t%e 'und asbetween Haet and t%e cient*
• Hed+ T%e trustee &ust be (resu&edt# %ave s(ent %is #wn ne) -rstand t# %ave (reserved t%e trust
ne)*
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RE HALLETS ESTATE
• Gesse MR + it see&s t# &e (er'ect)(ain t%at %e cann#t be %eard t# sa)t%at %e t##$ awa) t%e trust ne)w%en %e %as a rig%t t# ta$e awa) %is#wn ne)* His ne) was t%ere/and %e %ad a rig%t t# draw it #ut and
w%) s%#ud t%e natura act #' si&()drawing #ut t%e ne) be attributedt# an)t%ing e>ce(t t# %is #wners%i(
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ii" Mi>ing in a ban$ acc#unt c#nsisting
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ii" Mi>ing in a ban$ acc#unt c#nsisting#' t%e trust (r#(ert) and (r#(ert) #'
an inn#cent v#unteer
• A((ied t%e rue in Ca)t#n=s case*
•
Ca)t#n=s case (resu&es t%at ne)is (aid #ut #' a current acc#unt in t%esa&e #rder in w%ic% it %ad been(aid*
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'" Increase in vaue
• A bene-ciar) w#ud be abe t# cai&t%e #rigina ne) ta$en wit% interestand in (ri#rit) t# t%e credit#rs and
t%at t%e trustee w#ud $ee( a t%e(r#-ts*
• I' t%e trust increased in vaue/ it
w#ud be in %is interest t# d# s# and i't%e 'und decrease in vaue/ it w#udbe in %is interest t# %ave a c%arge*
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'" L#ss #' rig%t t# trace
1" I' (r#(ert) reac%es t%e %ands #' b#na-de (urc%aser '#r vaue wit%#ut
n#tice
3" I' t%e cai&ant=s (r#(ert) disa((ears#r t%e (r#(ert) ceases t# be
identi-abe* eg w%en t%e trust 'und #rt%e (r#ceeds #' t%is sae #' t%e trust%ave been dissi(ated*
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8" .%ere tracing w#ud be ine?uitabe
5" ,a)&ent #' debt* + A trustee w%#used trust (r#(ert) t# disc%arge adebt and n#t%ing w#ud be e't t%atc#ud be said t# re(resent t%e trust(r#(ert)*
• A debt is a c%##se in acti#n and #nceit %as been (aid it ceases t# e>ist*