Question 1

Tracing may be undertaken against the wrongdoer or anyone who has knowingly acquired an interest in the trust property or knowingly assisted in the breach of trust.

Accepted Answer

A) True 
 B)False  True

Question 2

Which case does the "first in first out" rule come from?

Accepted Answer

The "first in, first out" (FIFO) rule is not derived from a specific legal case; rather, it is a principle used in various contexts, most notably in inventory management and accounting. FIFO is an asset-management and valuation method in which assets produced or acquired first are sold, used, or disposed of first.

In the context of inventory management, FIFO assumes that the oldest items in a company's inventory have been sold first and that the remaining inventory consists of items that were acquired or produced more recently. This method is particularly useful for perishable goods where the oldest stock (first in) needs to be sold before it expires.

In accounting, FIFO is used to calculate the cost of goods sold (COGS) and ending inventory. Under FIFO, it is assumed that the costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold. This can be particularly relevant for businesses during periods of inflation, where the cost of purchasing inventory may increase over time. Using FIFO can result in lower cost of goods sold and higher reported profits because the older, usually cheaper, costs are matched against current revenues.

FIFO can also be applied in other areas, such as data structures in computer science, where it refers to the order in which objects are accessed. In queuing theory, FIFO describes the principle of servicing customers in the order that they arrived.

It's important to note that FIFO is just one of several inventory valuation methods; others include "last in, first out" (LIFO) and the weighted average cost method. The choice of inventory valuation method can have significant tax and financial reporting implications, and businesses often choose the method that best matches their inventory consumption patterns or provides the most favorable financial presentation, within the constraints of the accounting standards they are subject to.

Question 3

Is tracing a remedy or a claim in its own right?

Accepted Answer

Tracing is not a claim or a remedy in its own right; rather, it is a legal process or a procedural tool that allows a claimant to track the value or property that has been wrongfully taken or misappropriated through different forms into its current form or location. The purpose of tracing is to identify assets that may be subject to a claim for restitution or to impose a constructive trust.

Once the property or its substitute has been traced, the claimant can then assert a substantive claim or seek a remedy based on the underlying legal right that was violated, such as a claim for breach of fiduciary duty, theft, or unjust enrichment. The remedies that may follow successful tracing can include restitution, the imposition of a constructive trust, or an equitable lien.

In essence, tracing facilitates the assertion of rights against assets that have been transformed or transferred, but it does not itself create a substantive right. It is a means to an end, allowing the claimant to link the original assets to their current form and thereby lay the groundwork for a legal claim to recover the value or property in question.

Question 4

If tracing is pursued in equity, the main remedy that the claimant enjoys is a personal one against the recipient of the property.

Accepted Answer

A) True 
 B)False

Question 5

Tracing is a claim against the recipient of the property.

Accepted Answer

A) True 
 B)False

Question 6

Common law tracing involves the trustee pursuing the legal title to property which has found its way into the wrong hands.

Accepted Answer

A) True 
 B)False

Question 7

Aside from an action against the trustee for breach of trust, how else can the beneficiary recover what they are owed?

Accepted Answer

The answer of Aside from an action against the trustee...

Question 8

Equitable tracing offers someone who has benefitted from a fiduciary relationship (for example, a beneficiary) the ability to follow the equitable interest in property which has been misappropriated.

Accepted Answer

A) True 
 B)False

Question 9

The common law will permit tracing to occur provided that the trust property remains clearly identifiable.

Accepted Answer

A) True 
 B)False

Question 10

What three defences can a defendant subjected to a tracing process may forward?

Accepted Answer

The answer of What three defences can a defendant subjected...

Question 11

Is it possible for beneficiary to make a claim against a stranger to trust?

Accepted Answer

The answer of Is it possible for beneficiary to make...

Question 12

What is the difference between tracing at common law and equity?

Accepted Answer

The answer of What is the difference between tracing at...

Question 13

At common law, the remedy that tracing leads to is a restitutionary one.

Accepted Answer

A) True 
 B)False

Question 14

When does the rule in Clayton's Case not apply?

Accepted Answer

The answer of When does the rule in Clayton's Case...

Question 15

In which case does the ability to trace at common law come from

Accepted Answer

The answer of In which case does the ability to...

Question 16

In which case were the requirements of recipient liability established?

Accepted Answer

The answer of In which case were the requirements of...

Question 17

An action for tracing can be made in equity only.

Accepted Answer

A) True 
 B)False

Question 18

What is the difference between tracing and following?

Accepted Answer

The answer of What is the difference between tracing and...

Question 19

Tracing is dependant on principles of the law on unjust enrichment being met.

Accepted Answer

A) True 
 B)False

Question 20

Name a situation where it may not be worthwhile for a beneficiary to bring an action against the trustee for breach of trust.

Accepted Answer

The answer of Name a situation where it may not...

Exam 13: Tracing and Actions Against Strangers to the Trust

Tracing may be undertaken against the wrongdoer or anyone who has knowingly acquired an interest in the trust property or knowingly assisted in the breach of trust.

Which case does the "first in first out" rule come from?

Is tracing a remedy or a claim in its own right?

If tracing is pursued in equity, the main remedy that the claimant enjoys is a personal one against the recipient of the property.

Tracing is a claim against the recipient of the property.

Common law tracing involves the trustee pursuing the legal title to property which has found its way into the wrong hands.

Aside from an action against the trustee for breach of trust, how else can the beneficiary recover what they are owed?

Equitable tracing offers someone who has benefitted from a fiduciary relationship (for example, a beneficiary) the ability to follow the equitable interest in property which has been misappropriated.

The common law will permit tracing to occur provided that the trust property remains clearly identifiable.

What three defences can a defendant subjected to a tracing process may forward?

Is it possible for beneficiary to make a claim against a stranger to trust?

What is the difference between tracing at common law and equity?

At common law, the remedy that tracing leads to is a restitutionary one.

When does the rule in Clayton's Case not apply?

In which case does the ability to trace at common law come from

In which case were the requirements of recipient liability established?

An action for tracing can be made in equity only.

What is the difference between tracing and following?

Tracing is dependant on principles of the law on unjust enrichment being met.

Name a situation where it may not be worthwhile for a beneficiary to bring an action against the trustee for breach of trust.