“Trustee cannot claim benefit of doubt when mixing trust funds with own money”
Mr Hallett, a solicitor acting as trustee, wrongfully mixed trust money belonging to Mrs Cotterill with his own funds in his personal bank account. He subsequently made various withdrawals from the mixed account before his death, leaving a balance insufficient to cover the full amount of trust money taken.
Whether a beneficiary can trace and recover trust money that has been wrongfully mixed by a trustee with the trustee's own funds in a bank account.
The beneficiary was entitled to trace the trust money and claim against the mixed fund. Where a trustee mixes trust money with their own, any withdrawals are presumed to be from the trustee's own money first, leaving the trust money in the account.
This case established the foundational tracing rules in equity and remains the leading authority on how beneficiaries can recover trust property that has been wrongfully mixed with other funds. It created the 'first in, first out' rule that protects beneficiaries when trustees breach their fiduciary duties.
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OSCOLA Citation
Re Hallett's Estate (1880) 13 Ch D 696 (CA)
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