Chapter 19 Scenario Questions

Kurtis is short of cash. He asks his friend Kevin to lend him £10. Kevin gives him £10 and says, 'Don't worry about it, I think I owe you some money anyway, it's a gift.' Kurtis spends £8 on his dinner and £3 on a lottery ticket, the other £1 being contributed from change Kurtis found in his pocket. Kurtis wins £1 million in the lottery.
Kevin claims that he has a proprietary right over the £1 million. Does he?

Kevin's money had been used for two-thirds of the cost of the lottery ticket and so Kevin is entitled to two-thirds of the winnings.

The £8 spent on dinner is no longer traceable but the other £2 can be traced into the lottery winnings such that Kevin is entitled to £2 to be paid from those winnings.

Kevin is not entitled to recover anything.

Kevin is not entitled to recover anything, but the court has a discretion to recognize a constructive trust. The court would likely make such a finding given Kevin's contribution to the lottery ticket.

Teddy is a trustee. Teddy misappropriates £750 from the trust fund and gives it to his daughter, Alice, who thinks it is a thoughtful birthday gift. Alice spends the money on a holiday.
Do the beneficiaries have an equitable proprietary claim over the £750 or its traceable substitute?

The beneficiaries have no equitable proprietary base and so cannot assert any equitable proprietary claim.

The beneficiaries can bring a claim for £750 against Alice even though she has spent the initial money. This is because Equity allows tracing into mixed funds.

The beneficiaries cannot bring a claim for £750 against Alice as the money has been dissipated and there is no property in which the beneficiaries have an interest.

The beneficiaries can bring a claim for £750 against the holiday company.

Richard misappropriates £1,000 from a trust. He gives the £1,000 to his daughter, Sabrina, who buys a painting from Tony for £500. Tony is unaware that the money is trust money. Sabrina also buys shares with the money and gives them to her partner Ula. The shares fall in value so are now worth only £100.
Are the beneficiaries of the trust able to trace their misappropriated £1,000?

The beneficiaries can trace the value of £500 into Tony's bank account.

The beneficiaries can trace the value of £500 into the painting in Sabrina's possession.

The beneficiaries can trace the value of £500 into the shares held by Ula.

The beneficiaries cannot trace any of the value due to the rule about bona fide purchasers for value.

Sophie is in a fiduciary relationship with Harriet and receives property on Harriet's behalf. Sophie misappropriates the property and gives it to Harley who gives it to Hayden.
Can Harriet assert her equitable proprietary right against Haden?

Harriet cannot assert her proprietary right against Hayden as Hayden did not receive the property from a fiduciary acting in breach. Harley owed no fiduciary duties to Harriet.

Harriet can assert her proprietary right against Hayden as Hayden did receive the property from a fiduciary acting in breach. Upon receipt of the property, Harley owed fiduciary duties to Harriet and breached them by giving the property to Hayden.

Harriet can assert her proprietary right against Hayden as it is sufficient that Sophie was a fiduciary acting in breach.

Harriet can assert her proprietary right against Hayden as there is no longer a requirement for a fiduciary to be in breach in order for a claimant to bring a claim for tracing and assert an equitable proprietary right.

Fiorina is a trustee for Pedro. She misappropriates £100 from the trust and deposits it in her own bank account which already contains £100 of Fiorina's own money. Fiorina buys groceries worth £90 and eats them. She then buys a lottery ticket for £4 and wins £10,000.
What claims are available to Pedro?

Both the £90 spent on groceries and the £4 spent on the lottery ticket are presumed to be Fiorina's own money. Accordingly, Pedro has a claim for £100 of the remaining money in the bank account.

It is presumed that the initial £90 spent on groceries was purchased with Fiorina's own money but that the £4 spent on the lottery ticket was trust money. So, Pedro has a claim for £96 of the remaining money in the bank account and the £10,000 lottery winnings.

Both the £90 spent on groceries and the £4 spent on the lottery ticket are presumed to be trust money. Accordingly, the £90 has been dissipated and Pedro's equitable interest has been extinguished. Pedro has a claim over the bank account for £6 as he is entitled to trace the £4 lottery ticket and assert a claim over the £10,000 winnings.

The requirements for tracing have not been established such that Pedro cannot trace his £100 into either the bank account or the lottery winnings.

Jeffrey is a trustee of two trusts; one in favour of Douglas and one in favour of Ife. Jeffrey misappropriates £100 from both trusts and places the money in a bank account. Jeffrey first places the £100 from Douglas's trust and then the £100 from Ife's trust. Jeffrey spends £100 on petrol for his car and uses it swiftly.
What claims are available to Douglas?

There is a presumption that the £100 spent was Jeffrey's so Douglas can assert his equitable proprietary right over the remaining £100.

There is a presumption that the £100 spent was Ife's so Douglas can assert his equitable proprietary right over the remaining £100.

There is a presumption that the £100 spent was Douglas's so he has no equitable proprietary interest that he can assert over the remaining £100.

There is a presumption that the £100 spent belonged equally to both Douglas and Ife such that Douglas can assert an equitable proprietary interest of half of the remaining £100.

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