is a leading case on the English law of trusts, concerning tracing and the availability of proprietary relief following a breach of trust.

Facts

In breach of trust, Mr Murphy took £20,440 from a company he controlled. Over 200 investors (including one Mr Foskett) had invested in the company for the purpose of buying land in the

Algarve The Algarve (, , ; from ) is the southernmost NUTS II region of continental Portugal. It has an area of with 467,495 permanent inhabitants and incorporates 16 municipalities ( ''concelhos'' or ''municípios'' in Portuguese). The region has it ...

Portugal Portugal, officially the Portuguese Republic ( pt, República Portuguesa, links=yes ), is a country whose mainland is located on the Iberian Peninsula of Southwestern Europe, and whose territory also includes the Atlantic archipelagos of ...

. The land had been bought, but not developed as promised. Mr Murphy used the trust money to pay off the fourth and fifth instalments on his life insurance policy. He had already paid the first two or three premiums with his own money. Mr Murphy committed suicide. His children (the Defendants) were paid the £1,000,000 under the insurance policy. Mr Foskett and the other investors (the Claimants) sued the Defendants, claiming a 40% share in the policy monies. The Claimants argued they had a proprietary interest in the insurance monies: the insurance policy had been purchased using a proportion of misapplied trust funds. The Defendants argued that only an equitable lien was available, and the beneficiaries should only receive the amount taken.

Judgments

Court of Appeal

The Court of Appeal held the Claimants could only get an equitable lien over the proceeds of the policy to secure the repayment of the fourth and fifth premiums. Sir Richard Scott VC suggested a beneficiary should get a share of the property’s total value that was created by any expenditure deriving from trust property money. Hobhouse LJ gave a concurring judgment and Morritt LJ dissented.

House of Lords

The

House of Lords The House of Lords, also known as the House of Peers, is the upper house of the Parliament of the United Kingdom. Membership is by appointment, heredity or official function. Like the House of Commons, it meets in the Palace of Westminste ...

held (Lord Steyn and Lord Hope dissenting) that the beneficiaries could claim a proprietary right over the insurance policy proceeds and J would get 35 and L would get 5%.

Lord Browne-Wilkinson

Lord Browne-Wilkinson gave the first speech, concurring with Lord Hoffmann and Lord Millett, suggesting the beneficiary can have a charge against property that was improved by paying the worker with trust money, unlike ''

Re Diplock ''Re Diplock'' or ''Ministry of Health v Simpson'' 951AC 251 is an English trusts law and unjust enrichment case, concerning tracing and an action for money had and received. Facts Various charities, including the Royal Sailors Orphans Girls� ...

'', whether or not expenditure increased the property value.

Lord Millett

Lord Millett Peter Julian Millett, Baron Millett, , (23 June 1932 – 27 May 2021) was a British barrister and judge. He was a Lord of Appeal in Ordinary from 1998 to 2004. Biography Early life The son of Denis and Adele Millett, he was educated at Har ...

, giving the leading judgment, held that this was a case concerning the vindication of property rights, not of

unjust enrichment In laws of equity, unjust enrichment occurs when one person is enriched at the expense of another in circumstances that the law sees as unjust. Where an individual is unjustly enriched, the law imposes an obligation upon the recipient to make re ...

. The claimants could elect between (proportionate) beneficial ownership or an equitable lien, whichever was the most advantageous. One traces inherent value, and one set of tracing rules suffices. Just as if the trustee had taken money, bought a lottery ticket and won, it would be fair to take away the winnings without a change of position defence. Tracing is distinct from following, which is just locating the asset itself. He appeared to reject possibility of a change of position defence, because tracing claims were not based on unjust enrichment, rather on the simple vindication of property rights. He continued, Lord Millett added that claimant may elect whether to have a proportional share of the beneficial interest, or an equitable lien.

001 001, O01, or OO1 may refer to: *1 (number), a number, a numeral *001, fictional British agent, see 00 Agent *001, former emergency telephone number for the Norwegian fire brigade (until 1986) *AM-RB 001, the code-name for the Aston Martin Valkyrie ...

1 AC 102, 131

Lord Hoffmann

Lord Hoffmann Leonard Hubert "Lennie" Hoffmann, Baron Hoffmann (born 8 May 1934) is a retired senior South African–British judge. He served as a Lord of Appeal in Ordinary from 1995 to 2009. Well known for his lively decisions and willingness to break ...

gave a short speech concurring with

Lord Hope

Lord Hope gave a dissenting judgment, and would have held that only an amount to cover the premiums plus interest should have been available. Lord Hope added that a claim formulated in terms of

would not be appropriate because the defendants were "innocent third parties to the unjust transactions between the life assured and the purchasers." It followed there was no causal link.

Lord Steyn

Lord Steyn gave a dissenting judgment, and would have held that only a lien was available.

Notes

{{reflist, 2

References

* A Burrows, ‘Proprietary restitution: unmasking unjust enrichment’ (2001) 117 LQR 412 *

, ‘Proprietary Restitution’ in Degeling and Edelman (ed) ''Equity in Commercial Law'' (Thompson 2005) 324 *G Virgo, ''The Principles of the Law of Restitution'' (2006) 569-580 *S Williston, 'The Right to Follow Trust Property when Confused with other Property' (1888) 2 Harvard Law Review 28, English trusts case law English unjust enrichment case law House of Lords cases 2000 in case law 2000 in British law