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 (, , ) is the southernmost NUTS statistical regions of Portugal, NUTS II region of continental Portugal. It has an area of with 467,495 permanent inhabitants and incorporates 16 municipalities (concelho, ''concelhos'' or ''município ...

Portugal Portugal, officially the Portuguese Republic, is a country on the Iberian Peninsula in Southwestern Europe. Featuring Cabo da Roca, the westernmost point in continental Europe, Portugal borders Spain to its north and east, with which it share ...

. 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 Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typical ...

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 An appellate court, commonly called a court of appeal(s), appeal court, court of second instance or second instance court, is any court of law that is empowered to Hearing (law), hear a Legal case, case upon appeal from a trial court or other ...

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 is the upper house of the Parliament of the United Kingdom. Like the lower house, the House of Commons of the United Kingdom, House of Commons, it meets in the Palace of Westminster in London, England. One of the oldest ext ...

held (

Lord Steyn Johan van Zyl Steyn, Baron Steyn, PC (15 August 1932 – 28 November 2017) was a South African-British judge, until September 2005 a Law Lord. He sat in the House of Lords as a crossbencher. Early life and education Steyn was born in Stelle ...

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 ''Chichester Diocesan Fund and Board of Finance Inc v Simpson'' 944AC 341 is an English trusts law and unjust enrichment case, concerning tracing and an action for money had and received. Facts Various charities, including the ...

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

Lord Millett

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

unjust enrichment Restitution and unjust enrichment is the field of law relating to gains-based recovery. In contrast with damages (the law of compensation), restitution is a claim or remedy requiring a defendant to give up benefits wrongfully obtained. Liability ...

. 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. 0011 AC 102, 131

Lord Hoffmann

Lord Hoffmann gave a short speech concurring with Lord Millett.

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 unjust enrichment 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

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References

* A Burrows, ‘Proprietary restitution: unmasking unjust enrichment’ (2001) 117 LQR 412 * Lord Millett, ‘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 United Kingdom case law