WILLS AND ESTATES
Photo credit: Matthew Chen
Trevor Todd
Tracing Assets
T
racing is a process by which a plaintiff
• traces what has happened to a parcel of property or other asset; • identifies the persons who have handled or received the property; and • justifies his or her claim in Court that it can be legally regarded as his or hers. It is not a legal remedy but instead “accompanies” the claim in law. The process of tracing is used in many types of litigation, ranging from bankruptcy, Wills and estates, commercial disputes, and thefts by fiduciaries to the matrimonial accounting of contributions and expenditures. Once the claimant demonstrates to the Court’s satisfaction that his or her assets can be properly traced to others, the Court will award a proprietary remedy of ownership in respect of the property or asset substituted for the original property or its proceeds. This equitable remedy is usually in the form of a remedial constructive trust imposed upon the substituted assets.
In Drucker Inc. v. Hong 2011 BCSC 905, the Court stated, I n regard to tracing, it is neither a claim nor a remedy. It is merely
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TABLE OF CONTENTS
The process of tracing is used in many types of litigation, ranging from bankruptcy, Wills and estates, commercial disputes, and thefts by fiduciaries to the matrimonial accounting of contributions and expenditures. a process by which a claimant demonstrates what has happened to his or her property so as to justify his or her claim that those proceeds can properly be regarded as representing his or her property: Foskett v. McKeown, [2000] 3 All E.R. 97 (U.K. H.L.). 1. Three conditions must be met. 2. The property must be traceable. 3. There must be an equity to trace. Tracing must not produce an inequitable result. See Snell’s Equity, 29th ed. (London: Sweet & Maxwell, 1990) at page 299. Forensic accountants are often required to trace a legal claim from the original assets such as a bank account to the new substituted assets, which could be in any form ranging from precious metals to digital funds and everything in between. The Society of Notaries Public of British Columbia
A simple example of tracing monies is where a controller steals money from his employer over many years and purchases a property that greatly increases in value. It is shown that the funds went directly from the employer’s account to the previous owner of the property and the thief became the registered owner of same. The funds can thus be traced to the purchase of the property and a constructive trust imposed upon the lands in favour of the rightful owner. The claimant may even be permitted to make a claim of the entire ownership of the property, even if it will give the claimant a substantial profit.
Illustrations of Tracing in Court Cases A famous example of a tracing claim is AG for Hong Kong v. Reid (1994) 1 AC 324. The Solicitor General for Hong Kong received bribes from organized crime over many years and invested the proceeds in New Zealand land that substantially increased in value. The Privy Council held that the Government of Hong Kong’s claim could be traced into the land and the claimant was entitled to the full value of the land. The Court reasoned that without the wrongdoing, the thief would never have made those profits and it would have been grossly inequitable for him to keep them. An example of the forensic accounting complexity that can be experienced in a tracing claim occurred in Dominion Bank v. Storr 2014 ONSC 4278. It was found that the defendant Volume 26 Number 1 Spring 2017
