Tracing (law) - Defences

Defences

In most jurisdictions, there are several reasonably well establishing defences to tracing claims, although the case law is not entirely consistent. The common defences to an equitable tracing claim are:

1. good faith purchaser for value and without notice
2. dissipation
3. discharge of a debt (such that the proceeds are no longer traceable and there is no substitute asset)
4. innocent change of position (usually, but not always, by an innocent third party)

Importantly, in each case it is only the remedy of tracing that is lost. The claimant may well still enjoy a personal claim against the wrongdoer, even though they may have lost their proprietary right to trace into substituted assets.