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Tracing and recovering trust property
Problem scenario
Trevor is a trustee of two trusts, Black’s Settlement and White’s Settlement, each comprising £50,000 in cash. The trust monies are kept in separate bank accounts. Trevor also has a private bank account in which he holds £100,000. Suppose that the following events take place, in the following order:
• Trevor withdraws all the monies from the Black’s Settlement account and places them in his own private account.
• Trevor withdraws all the monies from the White’s Settlement account and places them in his own private bank account.
• Trevor withdraws £100,000 from his own account in order to purchase a piece of fine art.
• Trevor withdraws £50,000 from his account and uses the monies to pay off the building society mortgage on his house.
• Trevor withdraws the balance of his private account and spends the monies on a luxury world cruise.
• Trevor finally pays £10,000 into his private account.
Trevor has just been declared bankrupt. His general creditors claim the work of fine art which is now worth £150,000, and the balance of monies in Trevor’s private account. Advise the beneficiaries of the two trusts, who wish to recover the value of their misappropriated funds.