The law of following and tracing

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Following

Not really a legal process. More just the geographical location of a thing. Lionel Smith- a process not a claim. A 'physical exercise.' May be connected to the eventual claim. Simple example is a theft of something eg a bike. 

Example: A sells B a bike but keeps it for B to collect. Sometimes subject matter wont be a thing. Title has passed from A to B. The thing hasnt moved so cant follow bike.

Example: A sells B a bike. Might be following a thing or a right to a thing. 

Following things- Jones v DeMarchant- husband had beaver skins and gifted to wife. He made the same gift to his mistress. Inbetween he made a fur coat out of them. Could wife follow original gift to the mistress? Even though they had changed and were with the mistress, she could. 

Following rights- eg a debt. Not just rights- Armstrong v Winnington 2013- Subject matter was carbon credits- reduce carbon emission to offset emissions. Stops them being liable for fines. Theres a trade in them. CC were freedoms from having to pay fines. A could follow his CC, even though they were not strict rights. 

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Following

Special problems- What if what youre trying to follow has been turned into something else? Specificatio- Borden v Scottish Timber 1981- seller sells resin to buyer. B hasnt yet paid. S uses retention of title clause- until the buyer pays the seller holds title. Even though B hadnt paid, the material was used as it would be. Resin is now something else. Court said it was no longer identifiable so they couldnt follow it. The 'very existence' of the resin had been destroyed by the production of the chip board. 

Specificatio- Hendy Lennox v Grahame Puttick 1984- retention of title clause, engine sold. B hadnt paid. B still incorporates the engine. This time the court said could follow, it is really easy undo the transformation. 'They just remained engines, albiet connected to other things.'- Staughton. 

Mixtures- eg selling bags of corn and mixing with other bags of corn. Didnt have English solution until 19th C. Different approachs- Roman, Middle ages (non detinet) and now Buckley v Gross 1863- Blackburn J- 'the legal effect of such a mixture would be to make the owners tenants in common in equal proportions of the mass.' Anyone who contributed is an owner in common. Ownership is in shares according to contribution. 

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Wrongdoers

Indian Oil Corp v Greenstone Shipping 1988- mixer shouldnt have mixed the oil. Meant to keep the claimants separate, but it wasnt. Some oil was lost overboard. Wrongdoer has to bear the loss. If some lost, the wrongdoer always loses out. If B is innocent it is split how it shouldve been. If wrongdoer they get nothing. 

Money has no ear mark- Taylor v Plumer 1815- 'the right only ceases when the means of ascertainment fail, which is the case when the subject is turned into money, and mixed and confounded into a general mass of the same description.' If money is mixed you cant identify the original contributions. Menas recipient of money for value gets the best title. 

Miller v Race 1758- 'it has quaintly been said 'that the reason why money cannot be followed is because it has no earmark' but this is not true. The true reason is upon account of the currency of it.' Nemo dat quod non habet. About when you can claim money. Anyone who acquires money gets good title and you lose your claim, because you cant always work out where money comes from. 

Sinclair v Brougham 1914- bank money? 'The only possible remedy for the person who has paid the money would on principle be a claim to follow and recover specifically any money which could be earmarked as never having ceased to be his property.' Bank transfers dont transfer... 

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Money

anything. 

ITS v GP Nobel Trustees 2012- equitable title of the beneficiaries 'subsisted in the money after the payment to her.' Court talks as if coins have been moved. Transfer of a particular right or thing. 

R v Preddy- theft of bank money? Cant be theft as how are you appropriating something like that? Just a transfer of value. 

Agip v Jackson 1990- 'nothing passes from payor to payee but a 'stream of electrons.'- Millett. 

New obligation- Libyan Arab Foreign Bank v Bankers Trust 1989- 'transfer' may be a somewhat misleading word, since the original obligation is not assigned, a new obligation by a new debtor is created.' Transfer isnt of a particular thing or right. 

Summary- wrongdoing cannot affect allocation of title, affects only the size of claims. Specificatio, confusio (share), money has no ear mark, bank accounts. 

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Tracing

Identifying the substitute of a right. Not to do with things but to do with rights. Follow path of value from one right to its product. Trace the chain of value. Rights, substitutions, values. 

Tracing value- the value moves from one asset to another. Cant follow bank transfers. Value from one account to another, nothing transfers from one bank to another. 

Sometimes need to follow and trace. Price seems irrelevant. Which the original owner picks depends on what is most valuable to him.

Tracing special problems- Mixtures and mixed funds- court has just taken the rules and transplanted them into bank accounts, so had the same issues with oil etc. Dont know whose whose in the £20 in the bank account. 

Sinclair v Brougham 1914- pari passu (equally). Treat this as with mixture of physical things, A and C get £10 each as can assert equal claims as innocent parties. The claims deplete equally. 

Wrong doers- Re Hallets Estate 1880-  the simplest case put is the mingling of trust moneys in a bag with money of the trustees own. Suppose he has ten sovereigns in a bag, and he adds to them another hundred sovereigns of his own, so that they are commingled in such a way that...

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Tracing

they cannot be distinguished, and the next day he draws out for his own purposes a hundred. It is obvious that he must have taken away that which he had a right to take away- his own hundred. Rule same as physical. Re Hallett is the best authority, bonds were held by a fiduciary for an innocent claimant, bonds were wrongfully sold, what happened to proceeds. Not all money remained had been mixed in the fiduciaries account. Want wrongdoer to suffer the risk of loss. The loss is suffered by the wrongdoer. Wrongdoer suffers risk of loss first. 

Same principle as in Indian Oil Corp v Greenstone Shipping 1988. 

Cherry picking- Re Oatway 1903- there is a difference if say the trustee contributes £100 into the bag, and £100 of trust money and used a £100 to buy a painting worth £100'000, then B can say it was his money from the bag used to buy it. He can say its his money, or the fiduciary's but will most likely say its his own. 

The lowest intermediate balance rule- Roscoe v Winder. If £10 of A and C's money is paid into B's bank and he takes it out it is gone. When B pays £100 back into the account A and C still dont have a claim as that wasnt their money. Maybe have a personal claim, but no proprietary claim. If he spen the money they can trace, but here assumes money has just gone. 

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Tracing

Lowest intermediate balance- Smith- 'the law allows evidential difficulties, and thus impossibilities, to be resolved against the wrongdoer but it does not allow findings contrary to the evidence.' 

Maybe a possible exception- Bishopsgate v Homan 1995- maybe where B pays the money in deliberately intending to replenish the fund. 

Backwards tracing- Tracing into the payment of a debt. A buys a bike on credit, money not yet been paid. A steals C's money and uses it to pay. Want to show bike is product of C's money. C's money was used for the discharge of the obligation, not the bike. Not a valuable asset you can claim. 

There has been lots of judicial opinion on this so make sure to look at articles. 

Lionel Smith says the period of credit is a red herring. Confusion over nothing. He uses Sale of Goods as example. Title passes when agreement to pay, not when item give. Almost always a period of credit. 

Foskett v McKeown- allowed this. Relfo v Varsani- said couldnt. 

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Tracing

Brazil v Durant- said backwards tracing doesnt really matter. Just needs to resemble it. 

Tracing theory- Birks- leech theory. 'There is one right which detached from the original res, will want to sink its head into any passing substitute.' 

Unjust enrichment, and knowing reciept. 

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