Roscoe v Winder [1915] 1 Ch 62

Facts

• A trustee misappropriated trust funds and deposited them into a personal bank account.
• The account was used for both personal and trust transactions, resulting in fluctuating balances due to multiple deposits and withdrawals.
• At times, the account balance fell below the amount of the misappropriated trust funds.
• The claimant, representing the trust beneficiaries, sought to recover the misappropriated funds from the mixed account.
• The dispute centered on whether the claimant could recover the full amount or was limited to a lesser sum based on account fluctuations.

Issues

1. Whether the claimant’s right to recover misappropriated trust funds from a mixed bank account could exceed the lowest balance in that account after the misappropriation.
2. Whether subsequent deposits, unrelated to the original misappropriated funds, could increase the amount recoverable by the claimant.
3. How equitable tracing principles should be applied when the misappropriated funds have been commingled with other monies.

Decision

• The court held that a claimant’s recovery from a mixed account is limited to the lowest intermediate balance in the account after the misappropriation.
• The claimant could not recover more than the minimum amount present in the account after the misappropriated funds were deposited, even if later deposits increased the balance.
• Subsequent unrelated deposits were not considered traceable to the original misappropriated funds and could not increase the claimant’s recovery.
• The lowest intermediate balance rule was applied to prevent unjust enrichment and to maintain fairness in tracing remedies.

Legal Principles

• The lowest intermediate balance rule restricts recovery to the minimum balance that the account reached after the initial misappropriation, ensuring recovery does not exceed what remains traceable.
• Tracing in equity allows beneficiaries to follow and reclaim trust property, but is limited when funds are commingled and later spent, as only the remaining funds are attributable to the claimant.
• Claimants bear the burden of providing accurate evidence of account transactions to establish the lowest intermediate balance.
• The rationale prevents claimants from benefiting from subsequent unrelated deposits and avoids unfair prejudice to other creditors or beneficiaries.

Conclusion

Roscoe v Winder [1915] 1 Ch 62 established that claimants seeking to recover misappropriated funds from a mixed account are limited to the lowest intermediate balance present after misappropriation, ensuring recovery is proportionate to actual traceable loss and supporting equitable principles of fairness and proportionality.