| Bishopsgate Investment Management Ltd v Homan | |
|---|---|
 | |
| Court | Court of Appeal |
| Citation(s) | [1994] EWCA Civ 33, [1995] Ch 211 |
| Court membership | |
| Judge(s) sitting | Dillon LJ, Leggatt LJ, Henry LJ |
| Keywords | |
| Tracing, backwards | |
Bishopsgate Investment Management Ltd v Homan [1994] EWCA Civ 33 is an English trusts law case about whether a beneficiary whose fiduciary breaches trust, may trace assets through an overdrawn account to its destination.
Mr Homan, a PriceWaterhouseCoopers partner, administered the insolvent companies of Robert Maxwell. After Maxwell fell off his luxury yacht and died, it was revealed that he had taken his employees' pension money. Pension money for employees of Maxwell Communications Corporation plc was kept in Bishopsgate Investment Management Ltd. Maxwell, in breach of trust, put the pension money into overdrawn accounts. Bishopsgate claimed it was entitled to trace the pension money to create an equitable charge over all the assets of MCC, and thus priority over unsecured creditors of MCC.
Ian Robert Maxwell, born Ján Ludvík Hyman Binyamin Hoch, was a British media proprietor and Member of Parliament (MP). Originally from Czechoslovakia, Maxwell rose from poverty to build an extensive publishing empire. After his death, huge discrepancies in his companies' finances were revealed, including his fraudulent misappropriation of the Mirror Group pension fund.
Vinelott J held that there could be no equitable charge. He accepted there could be backwards tracing if (1) property is acquired with money from an overdrawn account, because the defendant could be presumed to intend to pay off the overdraft (2) if trust money is paid into an overdrawn account to free up the limit and enable purchase of another
The Court of Appeal held that a tracing chain between the misappropriated money and the present assets of MCC could not be established. The misappropriated money was paid into an overdrawn account. At that point the mixed fund was exhausted. Unless there was evidence that payments were made to the overdrawn account with the intention of benefiting the trust fund from which monies had been withdrawn, which in Maxwell’s case appeared highly unlikely, no equitable charge could be imputed against the credit balance. BIM could therefore not recover any of the misappropriated pension fund monies from MCC in priority to the unsecured creditors.
Dillon LJ held there was no particular asset into which property could be traced, if an account were overdrawn. He endorsed Vinelott J’s, saying it was ‘at least arguable’ that there would be an equitable charge.
Leggatt LJ held that backwards tracing was impossible. [1]
| “ | there can be no equitable remedy against an asset acquired before misappropriation of money takes place, since ex hypothesi it cannot be followed into something which existed and so had been acquired before the money was received and without its aid. | ” |
Henry LJ concurred.
The House of Lords dismissed the petition to appeal.
Bishopsgate Investment Management Ltd v Maxwell [1993] BCLC 814 is a UK company law case concerning a director's duty to act for proper purposes of the company. This case is an example of what would now be Companies Act 2006, section 171.
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Tracing in English law is a procedure to identify property that has been taken from the claimant involuntarily. It is not in itself a way to recover the property, but rather to identify it so that the courts can decide what remedy to apply. The procedure is used in several situations, broadly demarcated by whether the property has been transferred because of theft, breach of trust, or mistake.
Oldham v Kyrris [2003] EWCA Civ 1506 is a UK insolvency law case concerning the administration procedure when a company is unable to repay its debts.
Foskett v McKeown [2000] UKHL 29 is a leading case on the English law of trusts, concerning tracing and the availability of proprietary relief following a breach of trust.
Vaughan v Barlow Clowes International Ltd [1991] EWCA Civ 11 is an English trusts law case, concerning tracing.
Re Hallett’s Estate (1880) 13 Ch D 696 is an English trusts law case, concerning asset tracing.
Sir Andrew Peter Leggatt, PC was formerly a Lord Justice of Appeal and member of the Privy Council.
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