Lloyd's Maritime and Commercial Law Quarterly
TRACING WITHOUT FIDUCIARIES: REALISM IN THE AUSTRALIAN FEDERAL COURT
Harry Sanderson* and Sabina Popescu†
RnD v Roncane
Does the right to trace in equity depend on a prior fiduciary relationship? For some time, the answer has been “yes”. A recent case of the Australian Federal Court, RnD Funding Pty Ltd v Roncane Pty Ltd,1 has done away with the requirement. This renovation of equitable doctrine is welcome, and better accords with authority and principle.
In this note we argue that the Full Court’s decision understates the significance of its own change to the law. This is due to overlooking a persistent fiction within the English authorities on tracing, which adopted the fiduciary requirement as a gauze over uncertain aspects of restitution cases. Australian law now adopts a realist approach which has long been called for by academics: that the ability to trace is grounded in equitable proprietary rights.
The Federal Court’s decision
As is common in matters before the Federal Court, the facts of this case were convoluted, commercial and extensive. The salient points are as follows. The appellant company lent another company money subject to a security interest. Following default, that company disposed of money in one of its accounts for the benefit of the respondent—which was controlled by the defaulting company—by way of the purchase of shares in another company in the respondent’s name. The appellant claimed that it was entitled to trace its security interest in the funds held by the defaulting company into the shares purchased by
* Tipstaff, New South Wales Court of Appeal.
† Corpus Christi College, Cambridge.
1. [2023] FCAFC 28 (hereafter “RnD”).
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