Tracing, following and constructive trusts

by Practical Law Dispute Resolution

A practice note that explores the principles of following and tracing assets, particularly in equity, to identify misappropriated property or its substitutes arising from breaches of trust or fiduciary duty. This practice note clarifies the distinction between following and tracing, outlining the fundamental requirements for each process. It delves into the differences between equitable and common law tracing, explaining how these distinct rules operate, including equitable tracing's ability to navigate mixed funds and the prerequisite of a fiduciary relationship. Furthermore, this practice note examines the crucial role of constructive trusts, detailing the requirements for their establishment and the circumstances in which they arise, thereby providing a proprietary base for equitable claims. The note also considers available defences to claims of following and tracing and summarises the range of proprietary and personal remedies that claimants may pursue upon successful identification of assets, guiding the choice between them.