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Fiduciary duty and tracing law

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  1. Introduction
  2. The report of the fraud consultant
  3. Issues relating to money laundering
  4. The scope of equitable tracing as a remedy
    1. The potential advantages for Baliol in making a claim under equitable tracing
  5. The case of Barlow Clowes International (in liq) v Vaughan
  6. Yardley's breach of employment contract
    1. The funds in Yardley's accounts
  7. Knowing assistance and knowing receipt
  8. Conclusion
  9. Bibliography

Yardley was employed as wages and personnel manager for BALIOL between 1994 and 2007. One of his jobs each month was to prepare for payday when the staff was paid in cash on the last day of the month. He would cash the check at the LBSC and sort the cash into brown envelopes for each of the employees, with their pay slip. BALIOL'S arrangement with LSBC meant that its cheques would only be honored if signed by Yardley or countersigned by any member of BALIOL's governing body. Between 1994 and 2004, the size of the cheques rose from £300k per month to £500k per month.

In January 2005, the cheque was £1m and in June 2007 Yardley went missing and BALIOL became suspicious of fraud. In January 2008, Yardley was arrested at Johannesburg airport flying in from the Comoros Islands. He pleaded guilty to criminal deception and is now in prison. He confessed to forging cheques and spent the money.

[...] Money Laundering Law and Regulation. Oxford University Press. Lionel Smith (1999) The Law of Tracing. Oxford University Press. Ibid. R J Smith, (2003) Property Law. 4th Edition Longman. Ibid. (1815) 3 M & S 562. [1991] CH 547 [1994] 1 NZLR 1 Lionel Smith (1999) op.cit. [1994] op.cit. [2001] AC 102 Lionel Smith, op.cit. (1816) 1 Mer Millet, PJ (1991) Tracing the Proceeds of Fraud Law Quarterly Review 71. Todd and Wilsons (2007). Textbook on Trusts 8th Edition. Oxford University Press Ibid. [...]

[...] Furthermore, due to his position as Wages and Personnel manner, the case of Green & Clara Pty Limited v Bestobell Industries Limited[29] indicates that senior employees will owe a fiduciary duty to the company they work for. As such, the fiduciary duty imposes the highest duty of care and an essential limb of this duty is not to have a conflict of interest and a prohibition on profiting from the position without consent[30]. Accordingly, in misappropriating the funds through forgery and directly profiting from this, Yardley was in breach of fiduciary duty to BALIOL. [...]

[...] 4th Edition Cambridge University Press. Hatton (2001). The Law of Trusts and Equitable Remedies. 11th edition Sweet& Maxwell Millet, P J (1991). Tracing the Proceeds of Fraud Law Quarterly Review 71. Lionel Smith (1999) The Law of Tracing. Oxford University Press. R J Smith, (2003) Property Law. 4th Edition Longman. Smith, LD. (1995). Tracing in Taylor v Plumer: Equity in the Court of King's Bench [1995] Lloyds Maritime and Commercial law Quarterly 240. Todd and Wilsons (2007). Textbook on Trusts 8th Edition. [...]

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