Tracing Money

Foskett v McKeown (H of L WLR 24 May)

It is a fundamental error to think that because certain property rights are equitable rather than legal, such rights are in some way discretionary. The present case did not depend on whether it was fair, just and reasonable for the court in its discretion to provide a remedy. It was a case of hard-nosed property rights. The claimant and 219 other potential purchasers of plots of land in Portugal paid between them over £21.5m to Timothy Murphy. The land was never developed, the money was dissipated by Mr Murphy, who committed suicide. Mr Murphy had effected a whole-life policy in the sum of £1m at an annual premium of £10,220, the beneficiaries of which were his children. The last two annual premiums had been paid out of the money paid by the claimant and those whom he represented. He sought a proportionate share of the proceeds of the policy. By a 2-1 majority, the Court of Appeal had held that the purchasers were entitled to be repaid the amounts of the two premiums together with interest, but were not entitled to a pro rata share of the policy proceeds. The House of Lords, by a 3-2 majority, held that the purchasers were entitled to trace their money through the policy into the amount paid out by the insurers after the trustee’s death and to claim a proportionate share of it from his children.