Re HallettâÂÂs Estate (1880) 13 Ch D 696 is an English trusts law case, concerning asset tracing.
Mr Hallett, a solicitor, held bonds for Mrs Cotterill worth ã2,145 until he wrongfully sold them and put the proceeds in his current bank account, with WinningâÂÂs Bank, mixed with his own money. When he died the account had ã3,000.
Fry J was concerned with whether Mr Hallett had a fiduciary relation, given he held as a bailee, and not a trust, strictly speaking. He held the first in first out rule applied, following Pennell v Deffell (1853) 4 De GM&G 372, so that a large proportion of Mrs CotterrillâÂÂs money was in fact already paid out.
Sir George Jessel MR held that there was a fiduciary relationship, and the proceeds of the sale of the bonds could be traced. It then went back to determine how much could be traced. A trustee cannot say trust money is merely lost. He reversed Fry J and held that the claimants were entitled to an equitable charge of ã2,145 over the fund. There was a presumption that a fiduciary is acting honestly and therefore intends not to dissipate the beneficiaryâÂÂs money rather than his own.
Baggallay LJ concurred.
Thesiger LJ dissented, arguing they were bound by Pennell v Deffell.
The Court also held that in the case of a mixture of trust funds with the trustee's own money, only an equitable lien would be available as a remedy. This has since been overruled by Foskett v McKeown [2001] 1 AC 102, where the House of Lords held that the beneficiary has the option of choosing an equitable lien or a constructive trust in the case of a mixed fund. A constructive trust would allow a claim in the new asset in proportion to the contribution of the beneficiary's trust fund.