“As to paragraph 21 of the Order of Justice, it is admitted that the commissions referred to in paragraph 20 hereinbefore [the schedule 3 payments] were paid from the Chanani account to the bank account of Durant held with Deutsche Morgan Grenfell (CI) Limited as particularised in schedule 4 of the Order of Justice. Specifically, it is denied that the said sums so particularised ... amount to bribes and/or secret commissions relating to, and/or the proceeds of, the alleged or any fraud.”
“Take, for example, a situation in which a debit on one day and a credit a few days later are each accompanied by a bank notification advice unequivocally indicating that they relate to one and the same transaction. Is it to be said in such circumstances that the later credit cannot be traced into the earlier debit simply because of the order in which the two items appear on the bank statement or because at some point between the two the balance on the account fell, say, to zero before being replenished with new funds? As Professor Andrew Burrows observes in his treatise on The Law of Restitution, 3rd ed (2011), p 142: ‘Indeed it would seem that ‘backward tracing’ must be accepted if one is to explain tracing into and through ‘in credit’ bank accounts. This is because if one is tracing funds into a bank account, the account is often credited before the bank has received the relevant funds. In other words, the debt owed by the bank to the customer, which is treated as a substitute for the funds, exists in advance of the funds being received.’”
“The equitable remedies presuppose the continued existence of the money either as a separate fund or as part of a mixed fund or as latent in property acquired by means of such a fund. … It is, therefore, a necessary matter for consideration in each case where it is sought to trace money in equity, whether it has such a continued existence, actual or notional, as will enable equity to grant specific relief.”
“I regard it as likely, that [the purchasers] will establish that it was [the deceased’s] intention throughout to use [the] purchasers’ money to pay the 1988 premium. If that is the case, it does not seem to me at all obvious that the circumstance that the payment into the account of the purchasers’ money was made very shortly after the payment of the premium, rather than before or at the same time as the payment, should be regarded as fatal to the purchasers’ equitable tracing claim. The availability of equitable remedies ought, in my view, to depend upon the substance of the transaction in question and not upon the strict order in which associated events happen. Moreover, there is at least some authority which the purchasers could pray in aid: see Agricultural Credit Corpn of Saskatchewan v Pettyjohn (1991) 79 DLR (4th) 22 and [Professor Lionel Smith] “Tracing into the Payment of a Debt” [1995] CLJ 290, 292-295.”
“We speak of money at the bank, and of money passing into and out of a bank account. But of course the account holder has no money at the bank. Money paid into a bank account belongs legally and beneficially to the bank and not to the account holder. The bank gives value for it, and it is accordingly not usually possible to make the money itself the subject of an adverse claim. Instead a claimant normally sues the account holder rather than the bank and lays claim to the proceeds of the money in his hands. These consist of the debt or part of the debt due to him from the bank. We speak of tracing money into and out of the account, but there is no money in the account. There is merely a single debt of an amount equal to the final balance standing to the credit of the account holder. No money passes from paying bank to receiving bank or through the clearing system (where the money flows may be in the opposite direction). There is simply a series of debits and credits which are causally and transactionally linked. We also speak of tracing one asset into another, but this too is inaccurate. The original asset still exists in the hands of the new owner, or it may have become untraceable. The claimant claims the new asset because it was acquired in whole or in part with the original asset. What he traces, therefore, is not the physical asset itself but the value inherent in it.”
“When the already precarious position of unsecured creditors is weighed against the concomitantly far better protected position of trust beneficiaries, it is suggested that the law ought not to recognise the possibility of tracing backwards. The unsecured creditors should not have their position worsened further by effectively making them insurers for the beneficiaries against trustee defalcations. Trust beneficiaries whose money has been wrongly applied in satisfaction of a debt can stand in the position of the satisfied creditor (by subrogation), but it is a step too far, in policy terms, to allow them to stand in the position of the debtor and act as owners of property that the trustee acquired before the debt was paid. Alternatively, if backward tracing is to be allowed, then the policy concerns that have been highlighted above suggest that the extent to which payment of the debt is considered attributable to acquisition of the asset should perhaps be limited in some way, such as by reference to whether the trustee intended at the time the asset was acquired to (mis)use trust funds to pay for it. … That would be consistent with equity’s traditional concern for substance – meaning intention – over form. However, the evidential difficulties inherent in a test that is focused on the defalcating trustee’s intentions provide yet further reasoning for concluding that the balance is appropriately struck by refusing to recognise backward tracing.”
“The … requirement, that the value have been used to acquire such rights, presents greater difficulties. How can it be said that the moneys advanced were used to acquire rights when the purchase had already taken place and the rights already acquired? It is, however, commercially unreasonable to divide the transactions so minutely. The Pettyjohns used the value given to them to pay off interim financing, but the interim financing had not been obtained as a separate transaction, but always with the view that it would be repaid through the moneys advanced by ACCS. The Pettyjohns used the value given as part of a larger, commercially reasonable transaction to acquire rights in the 1981 and 1984 cattle. The fact that the use of the value given was, due to the nature of the transaction, after the acquisition of rights does not alter the conclusion that the value given was used to acquire those rights.”