Tara, a Tee of the Adams family T and of the Khan family T, improperly withdraws £20,000 from the Adams T and deposits it in her bank account, raising the balance to £30,000. She then withdraws £15,000 from the account to buy shares which have since doubled in value. She then, in breach of T, adds to the same account £40,000 from the Khan family T, raising the balance to £55,000. She then spends £10,000 on shares which have also doubled in value, and then £25,000 on a title to a car now worth half that amount, and later £15,000 on her general living expenses. She then adds £20,000 of her own money, raising the balance to £25,000.
involving tracing between a wrongdoer and two innocents. As between the innocents themselves, the rules governing tracing between innocents apply, and as between the innocents, whether singly or together, and the Tee, the rules dealing with wrongdoers apply. The first transaction following mixing is the purchase of the shares; here only the Adams T and the Tee are involved, and the T will choose to say that the entire purchase was funded with T money, for the shares have doubled in value. The Khan money is now added, so the account stands £10,000 to the Tee, £5,000 to the Adams T, £40,000 to the Khan T. First, assume the 'first in, first out' rule for innocents is applied. The innocents will want to claim the value of the second share purchase, as, like the first, it has risen in value. The £5,000 Adams T money is spent first under the rule, plus £5,000 of the Khan money to make up the purchase price. The account now stands £10,000 to the Tee, £35,000 to the Khan T. There is no more mixing of the innocents' moneys. The car has declined in value, some money has been expended on traceable proceeds, and £5,000 of money which might represent T money remains in the account; under the lowest intermediate balance rule the Khan T cannot benefit from Tara's addition of her own £20,000 at the end, unless there is evidence she did so to restore the T, and there is no such evidence. The Khan T will require all of the £5,000 in the balance to represent T money, £25,000 of the money spent on the car to have been T money (though it has declined in value, the only other alternative is the money spent on living expenses which generated no traceable proceeds) and £5,000 of the T money to have been dissipated on general living expenses. All of Tara's £10,000 is treated as having been dissipated. If we apply the proportionate share rule, the Adams T will have a 1/9 share, the Khan T an 8/9 share in the £45,000 of T money in the account immediately after mixing. They will then apply the rules together against Tara, taking proportionate shares in the entire value of the second share purchase, in the £5,000 balance in the account, in the entire value of the car, and £5,000 of the money dissipated.