Key Facts
- •Lapome Limited (Claimant) sued Ross Kemp and K Capital Limited (Defendants) for breach of fiduciary duty and knowing receipt.
- •The defendants made an open offer of settlement exceeding the Claimant's claimed profit.
- •The dispute centered on whether the Claimant could trace funds into assets purchased from a mixed fund where the fund's value never fell below the trust money.
- •The Defendants received £322,660.26 profit, but their offer was £500,000.
- •The Defendants' bank accounts (current and reserve) were linked, operating as one ‘pot’.
- •The Claimant argued for the right to 'cherry-pick' the most profitable asset acquired from the mixed fund.
Legal Principles
Where trust monies are mixed with the trustee's own monies, and the trustee spends some of that mixed fund, the spent funds are attributed first to the trustee’s monies, leaving the trust monies intact (subject to the lowest intermediate balance rule).
Re Hallett's Estate (1880) 13 ChD 696
Where mixed trust and personal monies are used to purchase an asset, and the trustee then dissipates what remains, the trustee is deemed to have used trust money to buy the asset.
Re Oatway [1903] 2 Ch 356
The court should be reluctant to strike out a claim on a controversial question in a developing area of law.
Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 at [84]
A judge of first instance will usually follow the decision of another judge of first instance unless convinced that the first judgment was wrong.
In a mixed fund case where the trustee maintains an amount equal to the remaining trust fund, the beneficiary's right to trace is limited to that fund unless the sum expended includes trust monies or the balance is spent, becoming untraceable.
Turner v Jacob [2006] EWHC 1317 (Ch) at [102]
A claimant is not entitled to elect between bringing proprietary claims against different third-party recipients in an arbitrary manner.
ED & F Man Capital Markets Ltd v Come Harvest Holdings Ltd [2022] EWHC 229 (Comm) at [684]
Outcomes
The defendants' application to strike out the claim was dismissed.
The question of whether the claimant could 'cherry-pick' a remedy is a controversial and unsettled area of law, requiring a full trial to determine on the basis of complete facts and evidence.