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Lookup NU author(s): Dr Derek WhaymanORCiD
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Can equitable tracing be better justified as an instance of fiduciary account of profits rather than as a right of property?Research into tracing has undergone something of a renaissance in recent years, challenging old orthodoxies and looking to first principles justifications of this extraordinary process. In Whayman (2018) 82 Conv 157 I made the argument that obligation, particularly trust and fiduciary obligation, still pervades the rules of tracing. Furthermore, I tentatively suggested that one underlying justification of equitable tracing was the account of profits remedy for breach of fiduciary duty. I did not have the space to explore that proposition with a first principles analysis. I propose to do so now.The complication, I argue, is that different parts of the remedies for trust and fiduciary wrongs, which have different justifications, have been lumped together. A custodial duty justifies a priority remedy where trust money is misused, but not access to increases in value and unauthorised profits unless there a certain degree of fault. While we have seen the splitting of the obligations of fiduciaries from the late 1990s, particularly in Lord Millett’s jurisprudence, this has not yet happened in tracing. Particularly, breach of trust and breach of fiduciary duty are separate, and I argue there are further divisions the duties of fiduciaries to be found. Once these are taken into account, equitable tracing is better explained and justified by trust and fiduciary obligations rather than as a right of property. Moreover, while tracing rules will always be approximations, many unfair outcomes that would arise from overly rigid rules – whether those of property or the fiduciary obligation – can be avoided while preserving certainty in the law provided there are some tweaks.Most of the first principles analyses of tracing have pre-dated the 1990s changes (e.g. Goode (1976) 92 LQR 528 and Smith, The Law of Tracing (1997)). The most recent literature, particularly Cutts (2016) 79 MLR 381 and (2019) 135 LQR 140, is concerned with deeper, more theoretical matters. Particularly, Cutts argues that the conventional justifications for tracing are insufficiently robust and more satisfactory replacements may place a new emphasis on the status, perhaps the fiduciary status, of the party who caused the loss. By extension, one might also consider the positions of other parties to the tracing exercise. It seems that Cutts and I have been approaching the same problem from different ends. I argue our positions are consistent and we can meet in the middle.
Author(s): Whayman D
Publication type: Conference Proceedings (inc. Abstract)
Publication status: Published
Conference Name: Modern Studies in Property Law Workshop
Year of Conference: 2019
Online publication date: 11/04/2019
Acceptance date: 02/04/2018
