Foskett v McKeown [2001] 1 AC 102

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  • A man, Mr Murphy, was entrusted with money to invest overseas.
  • Murphy used £20,440 of that money to pay for the premium on a life insurance policy.
  • He committed suicide.
  • His children were paid the £1,000,000 under the insurance policy. Mr Foskett and the other investors sued the children, claiming a 40% share in the policy monies.
  • The beneficiaries wanted the life insurance policy.  They argued that they had a proprietary interest in the insurance monies: the insurance policy had been purchased using a proportion of misapplied trust funds.
  • The children argued against it because they said they had not done anything wrong.


  • Were the investors able to trace their funds through to the pay out?


  • Investors and children held in the proportions that they had paid the policy.
  • The purchasers could clearly trace the money.
  • Mixed funds belong proportionately to those who contributed,
  • You can either follow the asset or the value.
  • Tracing is a process establishing a proprietary right; it is not a claim or a remedy.
  • Can make a claim against trustee for breach of trust to restore; or asset ownership over the property representing the funds taken.


The process of ascertaining what happened to the plaintiffs’ money involves both tracing and following. These are both exercises in locating assets which are or may be taken to represent an asset belonging to the plaintiffs and to which they assert ownership. The processes of following and tracing are, however, distinct. Following is the process of following the same asset as it moves from hand to hand. Tracing is the process of identifying a new asset as the substitute for the old. Where one asset is exchanged for another, a claimant can elect whether to follow the original asset into the hands of the new owner or to trace its value into the new asset in the hands of the same owner. In practice his choice is often dictated by the circumstances. In the present case the plaintiffs do not seek to follow the money any further once it reached the bank or insurance company, since its identity was lost in the hands of the recipient (which in any case obtained an unassailable title as a bona fide purchaser for value without notice of the plaintiffs’ beneficial interest). Instead the plaintiffs have chosen at each stage to trace the money into its proceeds, viz. the debt presently due from the bank to the account holder or the debt prospectively and contingently due from the insurance company to the policy holders.”

(Lord Millett at pages 126-245)

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