Meaning
Equitable remedy allows a claimant to track assets or their value through various changes of form and hands. This methodology, called fiduciary tracing, depends on the existence of an initial relationship of trust between the claimant and the party holding the assets. It enables the recovery of misappropriated funds that have been mixed with other bank balances.
Asset Matching
Identification of value is followed across transactions to isolate the claimant’s portion of the funds. When applying fiduciary tracing, courts use specific accounting rules to determine which withdrawals from a mixed account belong to the wrongdoer and which belong to the beneficiary. This process prevents the defendant from claiming the money is gone.
Proprietary Remedies
Direct claims against the new asset or mixed fund are granted to the claimant rather than a mere personal judgment for debt. This means that if the trustee buys land with the mixed funds, fiduciary tracing allows the claimant to assert a charge over that land. This protection persists through the trustee’s insolvency.
Defeated Claims
Bona fide purchasers for value without notice can block the recovery of the assets from their possession. If the trust property is sold to a third party who has no knowledge of the breach, fiduciary tracing stops at that transaction. The claimant is then left with a personal claim against the wrongdoing trustee.
