What three defences can a defendant subjected to a tracing process may forward?

Question

Quizplus · Accepted Answer

The Answer is In the context of civil litigation, particularly in cases involving the recovery of misappropriated assets or funds, a defendant subjected to a tracing process may put forward several defenses to challenge the plaintiff's claim. Tracing is a legal process used to identify and follow the path of an asset or funds that have been wrongfully taken or transferred, with the aim of recovering them or obtaining compensation. Here are three common defenses that a defendant might use:

1. **Bona Fide Purchaser for Value Without Notice**: A defendant may claim to be a bona fide purchaser for value without notice, meaning they purchased the assets in question for a fair price and without knowledge of any claims against those assets. If the defendant can prove they acquired the assets in good faith, without notice of the original owner's rights, and provided valuable consideration for them, this defense can prevent the original owner from reclaiming the assets.

2. **Change of Position**: The change of position defense is available to a defendant who has received assets in good faith and has since changed their position in reliance on the validity of the receipt. For example, if the defendant spent the money or assets on living expenses or other commitments under the belief that the assets were legitimately theirs, they may argue that it would be inequitable to require them to repay or return the assets. This defense is based on principles of equity and aims to protect those who might suffer an injustice if the assets were to be recovered.

3. **Overreaching**: This defense is applicable when the tracing claim overreaches the equitable interest of the claimant. For instance, if the assets have been mixed with other funds and the defendant has dealt with them in a way that cannot be easily unwound without causing disproportionate harm, the defendant may argue that the tracing claim is overreaching. This defense is particularly relevant when the assets have been used in a manner that makes it difficult to distinguish the claimant's property from that of the defendant or third parties.

It is important to note that the availability and success of these defenses depend on the specific facts of the case, the jurisdiction, and the applicable law. Defendants facing a tracing process should seek legal advice to determine the best course of action based on their circumstances.

What Three Defences Can a Defendant Subjected to a Tracing