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20 1 An Introduction to Equity Sometimes, the claimant may have both property and personal rights arising at the same time. It is then important to determine which right it is better for the claimant to assert. Often, but not always, it will be preferable for the claimant to rely on a right to property that is in the defendant’s hands. Generally, these property rights take one of two forms. First, the claimant may be able to assert a right to recover particular property from the de fendant. Secondly, the claimant may have a right to a security interest in the property. This will be relevant where the defendant owes the claimant a sum of money. So, for example, if the defendant owes the claimant £1,000 and the claimant has a security interest over a particular piece of property owned by the defendant, it follows that, if the defendant has not paid the £1,000 to the claimant, that property can be sold and £1,000 of the purchase price will be paid to the claimant to discharge the debt. Claiming property rights has three significant advantages for the claimant, depending on the nature of the property right that is claimed. First, the claimant’s property right will give them priority over other creditors of the defendant. This will be significant where the defendant is insolvent. If the defendant does not have enough money to pay off all of their creditors, it will be necessary to distribute the defendant’s money according to a priori tized list of creditors. If, however, the claimant can show that the defendant has property in which the claimant has a proprietary interest, then, at least as regards that property, the claimant will rank above all other creditors and will be able to make a claim against the property, either to recover the property itself or to force a sale and recover value where there is a security interest over the property. Secondly, where the claimant has a property right that is not a security interest, if the property in which the claimant has the right has increased in value, the claimant will get the benefit of that increase. So, for example, if the claimant has a proprietary right in shares that are held by the defendant, the claimant will be able to gain both the benefit of any dividends paid in respect of the shares and any increase in the value of the shares. Of course, if the claimant has a property right in shares that have fallen in value, it may be preferable for the claimant to pursue a personal rather than a proprietary claim. So, for ex ample, if the defendant trustee has misappropriated £200,000 from a trust fund which was held for the claimant beneficiary, the claimant will have a proprietary claim against the defendant to recover the £200,000 that was misappropriated and, alternatively, a personal claim for the amount misappropriated. If the defendant used the £200,000 to buy a house, the claimant will be able to claim the house instead of the money. 114 But, if the value of the house has fallen to less than £200,000, it will be preferable for the claimant to rely on the personal claim to recover the amount of £200,000. In reality, in such a case it is unlikely that the defendant will have enough money to repay the claimant in full. The defendant may well be insolvent and so the claimant, who would be treated as an unsecured credi tor as regards their personal claim, will have an equal claim with all the defendant’s other creditors to the defendant’s assets by virtue of their proprietary right. It may, therefore, still be worth pursuing a proprietary claim to recover the value of the house, even though it is less than what the defendant actually owed to the claimant. A third advantage of asserting a proprietary right, which applies where the claimant has a proprietary right which is not a security interest, is that they will be able to assert the right even where the property has been received and retained by a third party without proving that this recipient was aware that somebody else might have a right in the prop erty, save where the recipient had provided some value for the property. 115 © Oxford University Press

114 See further Section 19.5, p. 639.

115 See Section 19.4.1, p. 635.

© Oxford University Press