Tracing (law) - Technical Aspects

Technical Aspects

The law of tracing is enormously complex, even to practitioners. Characteristically, tracing claims tend to involve fraud, and as a result most claims (and case law) are against the background of a complex factual matrix. However, the law itself is also complex, and a number of key aspects of the law remain ambiguous in many countries.

• Equitable tracing requires a fiduciary relationship, while common law tracing does not. However, this relationship does not need to have existed before the misappropriation took place. However, this difference between common law and equity has been criticized by Lord Millett and Lord Steyn in Foskett v McKeown, though they stopped short of deciding that the traditional precondition to equitable tracing should be overruled.
• The wrongdoer may mix the misappropriated funds with his own money, and then purchase an asset with the mixed fund.
• Where there are multiple innocent claimants.
• Where there is mixing of the funds by an innocent volunteer.