Foskett v McKeown
Where trust money is used to pay premiums on a life insurance policy, the beneficiaries can claim a proportionate share of the policy proceeds, including any increase in value.
Facts
Mr Murphy held money on trust for purchasers of land in a development in Portugal. He used some of the trust money to pay two of the five premiums on a life insurance policy for £1 million, which he had taken out for the benefit of his children. He then committed suicide, and the insurance company paid £1 million to the children. The purchasers claimed a share of the policy money, in proportion to the premiums paid with their money.
Legal principle
The House of Lords held, by a majority, that the purchasers were entitled to a share of the policy money proportionate to the premiums paid with their money, about 40 per cent. Lord Millett said that tracing is neither a claim nor a remedy, but a process of identifying a new asset as a substitute for the old, and that beneficiaries whose money has been used to acquire an asset can claim a proportionate share of it, or a lien over it for the amount of their money. The claim was proprietary, not based on unjust enrichment, and the beneficiaries were entitled to the increase in value. The children were volunteers and had no defence.
Related cases on tracing and third party liability
- Agip (Africa) Ltd v Jackson [1991] Ch 547
- Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509
- Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37, [2006] 1 WLR 1476
- Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22
- BCCI (Overseas) Ltd v Akindele [2001] Ch 437
- Bishopsgate Investment Management Ltd v Homan [1995] Ch 211
- Devaynes v Noble (Clayton's Case) (1816) 1 Mer 572
- El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685
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