(D) TRACING IN EQUITY
The main advantage of tracing in Equity is that it will not be defeated by the irretrievable mixing of property.[1] This difference in approach between Law and Equity has been expressed in terms that the Common Law views property as physical assets, whereas Equity is able to view property metaphysically.[2] Consequently, where money in which the claimant has a proprietary interest is mixed in a bag with the defendant’s money, so that it is not possible to say which coins or notes belong to which party, tracing at Law will fail because the Common Law cannot identify the actual coins or notes in which the claimant has a proprietary interest. But Equity is able to assume that the claimant’s property continues to exist in the mixture, albeit that it is not possible to say which coins or notes belong to which party. The reason Equity can do this is because, when the claimant has traced an equitable proprietary interest into a mixed fund, an equitable charge will be placed on the whole fund as security for the claim.[3] Consequently, Equity does not specifically regard any particular part of the fund as actually belonging to the claimant, but is prepared to assume that the claimant has an equitable interest in the mixture by means of a charge on the fund.
Since Equity is prepared to trace into and through a mixed fund, complex rules have been developed to determine how such tracing can occur. This will be examined after a further distinction between tracing at Law and Equity has been considered, namely that, to trace in Equity, it is first necessary to identify a fiduciary relationship.
- [1] Re Hallett’s Estate (1880) 13 Ch D 696; Sinclair v Brougham [1914] AC 398; Agip (Africa) Ltd v Jackson
- [2] [1991] Ch 417. 410 Re Diplock [1948] Ch 465, 520.
- [3] Re Hallett’s Estate (1880) 13 Ch D 696, 708-10 (Jessel MR); Sinclair v Brougham [1914] AC 398, 420-2(Viscount Haldane LC), 441-2 (Lord Parker of Waddington), and 459-60 (Lord Sumner); El Ajou v DollarLand Holding [1993] 3 All ER 717, 735-6 (Millett J).
