Introduction

Tracing is not a remedy. It is the process of identifying a new asset as the substitute for the old. Its relevance to equity and trusts can be illustrated by the following example. Suppose a trustee misappropriates $10 000 and pays it into his personal account, which had previously been $20 000 in credit. He later withdraws $25 000 to buy a car. Tracing enables the beneficiaries to identify how the chose in action representing the trust money came to be substituted by a car. The tracing rules also determine how much of the beneficiaries’ money remains in the trustee's bank account and how much is represented by an interest in the car. What is traced is not the trust property. The beneficiaries’ equitable title to the money will be lost once the car has been bought. It is the value of the beneficiaries’ property in the hand of a recipient that is traced.