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Equitable proprietary claim against a trustee - Mixing of two trust funds

Q: Explain the equitable solution in Barlow Clowes v Vaughan Russel-Cooke Trust Co v Prentis which prevents the rule in Clayton's Case from being applied?

Claytons' Case will not apply if it is impractical, unjust, and contrary to the parties' intentions.

Q: Where the trustee mixes two trust funds with his own money, which rules from which cases must be applied to allocate the withdrawals from the account?

First, apply the rules in Re Hallet and Re Oatway to allocate withdrawals from the account. Then apply Clayton to the balance.

5 important questions on Equitable proprietary claim against a trustee - Mixing of two trust funds

Why is the balance in the fund shared proportionately instead of allowing trustees to claim the amount of the trust fund that was misappropriated? Give an example?

The fund is shared proportionately to ensure that both trusts bear losses and enjoy profits proportionately. E.g. £30,000 is taken from trust A and £20,000 is taken from trust B which is used to purchase shares. The shares are now worth £30,000. Trust A contributed 3/5 of the purchase money (£30,000/total purchase money of £50,000 = 0.6 = 3/5) and therefore owns 3/5 of the shares worth £30,000 (£18,000). Trust B contributed 2/5 of the purchase money and can claim 2/5 of the shares (£12,000).

How do you decide which withdrawal belonged to which trust in a situation where the trustee pays in money from Trust W and then later adds money from Trust B and makes two withdrawals?

If a trustee pays £30,000 from Trust W and later adds £20,000 from Trust B and makes two withdrawals, the first being £10,000 which is dissipated and second £40,000, under the first-in-first-out rule in Re Clayton's Case the first money paid in is the first to be paid out. In this example, the first money into the account (£30,000) belonged to Trust W so the first dissipated withdrawal of £10,000 belongs to Trust W.

What happens to the second withdrawal of (£40,000) and how is that split between Trust A and Trust B?

The second withdrawal is split 50/50. Trust B receives half the shares and recovers the full £20,000 whilst Trust W only recovers £20,000 of the £30,000. Therefore, depends on the order of payments.

Explain the equitable solution in Barlow Clowes v Vaughan Russel-Cooke Trust Co v Prentis which prevents the rule in Clayton's Case from being applied?

Claytons' Case will not apply if it is impractical, unjust, and contrary to the parties' intentions.

Where the trustee mixes two trust funds with his own money, which rules from which cases must be applied to allocate the withdrawals from the account?

First, apply the rules in Re Hallet and Re Oatway to allocate withdrawals from the account. Then apply Clayton to the balance.

The question on the page originate from the summary of the following study material:

WS7. Actions against trustees and fiduciaries

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Topics that are related to Equitable proprietary claim against a trustee - Mixing of two trust funds

Equitable proprietary claim against a trustee

Equitable proprietary claim against a trustee - Mixing of two trust funds

5 important questions on Equitable proprietary claim against a trustee - Mixing of two trust funds

Why is the balance in the fund shared proportionately instead of allowing trustees to claim the amount of the trust fund that was misappropriated? Give an example?

How do you decide which withdrawal belonged to which trust in a situation where the trustee pays in money from Trust W and then later adds money from Trust B and makes two withdrawals?

What happens to the second withdrawal of (£40,000) and how is that split between Trust A and Trust B?

Explain the equitable solution in Barlow Clowes v Vaughan Russel-Cooke Trust Co v Prentis which prevents the rule in Clayton's Case from being applied?

Where the trustee mixes two trust funds with his own money, which rules from which cases must be applied to allocate the withdrawals from the account?

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