Restitution Discussion Group Archives
| Sender: |
Charles Mitchell |
| Date: |
Thu, 10 Jul 2008 12:18 |
| Re: |
Tracing and the proceeds of crime |
List members will find points of interest in Serious Fraud Office v Lexi Holdings plc [2008] EWCA Crim 1443, a case on the Proceeds of Crime Act 2002 which required the court to consider some tracing rules, and also the nature of a claimant's possible proprietary interests in the proceeds of assets misapplied in a breach of fiduciary duty. At [36] Keene LJ cites Foskett for this proposition:
It is the case that where misappropriated trust assets are thereafter applied in the acquisition of other property the beneficiary is entitled at his option either (a) to assert, via a constructive trust, beneficial ownership of the proceeds (or a commensurate part of them) or (b) to make a personal claim against the defaulting trustee, if need be enforcing an equitable charge or lien over the proceeds in question to secure restoration by the defaulting trustee of the misappropriated assets. These are true alternatives. In the first kind of claim, the beneficiary is in effect saying: "Those proceeds (or part of them) belong to me". In the second, alternative, kind of claim the beneficiary is in effect saying "The trustee is obliged to account personally to me for his misappropriation and those proceeds stand charged as security for his personal obligation to me". At [40] he then goes on to hold that a claimant who obtains default judgment against a defendant in a form that shows he has elected to pursue his claim 'in personam' should not necessarily be taken to have abandoned his right to enforce the charge referred to in (b).
However at [46] ff he goes on to say that this charge cannot be presumed to extend to the whole of the defendant's assets, even though the defendant has failed to comply with a disclosure order explaining just what he has done with the money. Notwithstanding the rule in Armory v Delamirie, that would 'go against the whole rationale of tracing': [53]. To the extent that an evidential shortfall is created by the defendant's non-compliance, the claimant will fall to be treated as an unsecured creditor.
Regards Professor Charles Mitchell
tel: 020 7848 2290
Charles
School of Law
King's College London
Strand
London WC2R 2LS
fax: 020 7848 2465
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