Tracing trust property-breach of law-trusts laws , Financial Accounting

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Tracing trust property
 
Apart from suing the trustee, in the event of a breach of trust, the beneficiary may follow the trust property and recover it from third parties, or the proceeds thereof from the trustee. But he cannot follow property which has ceased to be identifiable, or which has passed into the hands of a person taking for value without notice of his interest. Some rules of tracing:
 
1) Where the trustee mixes the funds of two separate trusts in one bank account, the presumption is that the first trust money paid into the account is the first drawn out, the Rule in Clayton's Case;

2) Where a trustee mixes trust funds with his own in a single bank account and draws upon that account for his own purpose, the presumption is that he has drawn on his own money first even if it was paid in more recently than the trust money - (re Hallett's Estate);

3) Where a trustee mixes trust funds with his own, the beneficiaries will have a first charge on the mixed fund for the trust money;

4) Where a trustee purchases property with his own money and with trust money, the beneficiaries will have a first charge on the property purchased.


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