Tracing Trust Property: A Search for Justification and an Answer to the Change of Position Problem

Abstract

This paper was prepared as an Honours Thesis at the ANU College of Law, under the supervision of Pauline Ridge. Contemporary opinion can be divided into two competing views about the nature of tracing. The suggests that the beneficiary's rights in the original property transfer into the new property when the substitution is made, so the new property represents the original property. On this view the original property right continues to exist, but now resides in the new property. A tracing based property claim asks the court to recognise the beneficiary's rights in the new property. Many contemporary restitution theorists disagree. They consider the notion that property rights persist through substitutions is a fiction. Their view - the - is that the beneficiary's rights against the volunteer are entirely new rights: rights in restitution that arise in response to the unjust enrichment of the volunteer. The property view gives the beneficiary/plaintiff a property right in the traceable proceeds of the original property. According to the restitutionary view, however, the plaintiff has a restitutionary claim, against which there is a change of position defence. The orthodox view does not admit the of change of position defence. This thesis asks whether a change of position defence should be available against a tracing based claim. This thesis looks behind tracing authority for a justification for the orthodox view of tracing trust property. Tracing is explained as the application of the beneficiary's right to adopt the proceeds of an unauthorised transaction of trust property. The structure of the trust, and the vulnerable nature of the beneficiary's interests, as created by the trust, requires that the beneficiary may adopt unauthorised transactions. Adoption, and tracing, therefore, is an attribute of the beneficiary's property rights under the trust. So, the defendant's change of position has no relevance to the plaintiff's property rights.