Tracing Equity

Question:
1. Serena is a trustee of the Lockwood family trust. In October 2016, Serena withdrew £40,000 from the trust fund and paid it into her own personal bank account. At the time of the transfer, Serena had £10,000 in her account. Serena was hoping to make a quick profit and pay the money back to the trust before anyone found out about the transfer and so she invested £25,000 in shares in Buzzfeed Ltd – a company that she has been given a ‘hot tip’ on by a colleague.

Serena then transferred the remaining £25,000 in her account to her boyfriend, Tony. When Tony asked where it had come from, she told him to “Stop asking so many questions, just spend it as quickly as you can.” Tony spent £15,000 on a luxury city break to Monaco and bought a second hand car with the remaining £10,000.

Serena has recently been declared bankrupt. The tip about the shares in Buzzfeed Ltd had paid off and the shares have since increased in value to £35,000.

Advise the beneficiaries of the Lockwood family trust as to what remedies and actions are available to them.

In terms of equitable tracing:
1.There have been a mixed of Laura's and the trust funds.
Although under either Re Hallet or Re Oatway the amount of £25,000 will be recovered, Re Oatway would be preferred as the Beneficiary can claim the increase of 35,000 in shares.

However I am confused in regards to the remaining
15,000.

Am I to trace this through the third parties account?

So again Re Oatway, Tony is deemed to have spent the trust money first thus recovering the £15,000

Or is there a different rule for this?

Hi, thanks for replying!

Since Tony owns the car, if he is the BNF no proprietary claim would be valid against him.

I do however think the fact that the car is in the scenario it is meant to be traced..
Wouldn't it be more likely on the basis that he is an "innocent volunteer", a proprietary claim can still be made against him? (Re Diplock)

I'm not sure what a 'BNF' is so I don't understand why you can't make a proprietary claim for the car. If the car was purchased with trust money; what defence do you think Tony has?

Innocent???? (!)

If Tony is a Bona Fide Purchaser...
1. no proprietary claim can be made for the car (where equity's are equal,t he law will prevail) therefore legal title of the car will prevail
2. If it's established he is a bona fide purchaser, and indeed acted in good faith, it wouldn't make sense to bring a claim against him under third party liability

Also an innocent volunteer is one part of the law that states if trust money is mixed and then transferred to a third party, the beneficiary still has a right in the property (Re Diplock)
so on this basis..
1. Car can be claimed back
2. Remaining £15,000 can be recovered by a personal claim by stranger liability

..I think this is right?