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Dear Colleagues,

Evans-Lombe J decided a short case on Friday which may be of interest: Cooper v PRG Powerhouse Ltd & Ors [2008] EWHC 498 (Ch) (14 March 2008).

A Quistclose trust was found and there is then a short but nice point on tracing (including a citation for Prof L Smith), see paras 29-32:

29. In "The Law of Tracing" by Lionel D. Smith at page 266 the following passage appears:-

The other point is that not all bank account transactions are final; some are provisional. It might be that the balance on a given day is £500, and the claimant is in the position to assert that £500 of value traceably exists in the account. On the next day a cheque might be drawn on the account for £600, leading to a provisional balance of £100 overdrawn. If that cheque were dishonoured, the balance would return to £500. The claimant's ability to trace would not be affected. The cheque having been dishonoured, the value never actually left the account. Provisional transactions which are reversed should therefore simply be ignored.

30. In my judgment, on conventional principles of equitable tracing Mr Cooper is entitled to trace his payment into the Company's current account to the extent of £31,218.82.

31. It is accepted that all the Company's bank accounts were with Barclays Bank. It is also accepted that, at the date of the administration order, the Company had net cash at bank amounting to £1,306,153.85. Again it is to be assumed that that balance did not fall below £34,239.00 before 5th September 2006. It was submitted by Mr Boeddinghaus for Mr Cooper, and I accept, that, on the material before me, I am entitled to assume that the net balance after consolidation of all accounts between the Company and the bank never fell below £34,239. There is no evidence that any other claimant is making a claim to trace money into the Company's accounts with Barclays Bank.

32. It is Mr Boeddinghaus' submission that an alternative approach to tracing his client's payment is by taking the asset into which it can be traced as the net balance due from Barclays Bank to the Company at all material times since 7th July 2006 until Mr Cooper's claim was notified on 5th September 2006. On this basis, he submits, his client's claim has always been traceable into an asset of the Company, notwithstanding the shifting balances between the various accounts. He was not able to adduce any direct authority on the point. Equally no authority against this contention in principle was adduced and I know of none. I propose to accept it.