Re Hallett's Estate
Where a trustee mixes trust money with his own and then withdraws money for himself, he is presumed to have spent his own money first.
Facts
Mr Hallett, a solicitor, held bonds on trust for his client, Mrs Cotterill, and also for a marriage settlement of which he was a trustee. He sold the bonds and paid the proceeds into his own bank account, which also contained his own money. He then withdrew money from the account for his own purposes. When he died, the account did not contain enough to meet all the claims, and the beneficiaries claimed priority over his general creditors.
Legal principle
The Court of Appeal held that the beneficiaries were entitled to trace into the account in priority to the general creditors. Jessel MR said that where a trustee has mixed trust money with his own, he is presumed to have intended to act honestly, so any money he withdrew for his own purposes is presumed to have been his own money, and the trust money is treated as remaining in the account. The beneficiaries were entitled to a charge over the balance in the account for the trust money.
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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