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  • Print publication year: 2005
  • Online publication date: August 2009

Case 6 - Tracing

Summary

Case

The facts are as in Case 5, except as detailed below. The following alternatives occur:

Alternative 1

Without authority, Roberto uses all of the money in Simon's account (€1,000) to buy a painting. When Simon learns of this, the market value of the painting has risen to €2,000. Roberto is still solvent. Simon wants to terminate the relationship and take the painting. Can he do this?

Alternative 2

The facts are the same as in Alternative 1. However, before Simon learns of the transaction the painting is destroyed. It is insured for its market value. By the time Simon learns of this, Roberto is personally insolvent. Simon wants to terminate the relationship and take the insurance claim. Can he do this?

Alternative 3

Without authority, Roberto buys a painting with all of the money in Simon's account (€1,000) and €1,000 of his own money. By the time Simon learns of this, the market value of the painting has fallen to €1,000 and Roberto is personally insolvent. Simon wants to terminate the relationship and take the painting. Can he do this?

Alternative 4

Roberto has an unsecured overdraft facility (revolving loan facility/line of credit) with his bank, in his personal capacity. He borrows €100,000 from this facility and uses it to buy a piece of land in his personal capacity. Later, without authority, he uses all of the money in Simon's account (€100,000) to pay the debt he owes to the bank.