Tracing of trust funds into insolvency assets excludes trust property from distribution; remaining issues were remanded for decision.

Trust money received and retained by an insolvent firm was held traceable into the firm's mixed assets, so property impressed with the trust was excluded from the divisible estate in insolvency. The court applied the principle that trust funds may be followed into business assets even where the money was entered in the firm's books as trust money and its retention with the firm had been authorised. On the facts found, the firm acted as trustee through its agent. The matter was remanded for determination of the remaining issues, including whether the trust was public charitable, whether the applicant had locus standi, and whether the trust money had been properly identified.

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Issues: Whether money received and retained by an insolvent firm as trust funds could be traced into the firm's assets and excluded from the divisible estate in insolvency, and whether the matter should be remanded for determination of the remaining undecided questions.

Analysis: The money collected on behalf of the charity was entered in the firm's books as trust money and was allowed to remain with the firm for use in its business with the approval of the persons managing the trust. On the facts found, the firm itself was a trustee and the agent acted on its behalf. The doctrine of tracing was held applicable even though the money had been invested with the firm in the name of the trust and even though the investment was authorised. The governing principle applied was that trust money can be followed into mixed or business assets, and property held on trust is excluded from the assets divisible among creditors. The remaining questions, including whether the trust was a public charitable trust, whether the applicant had locus standi, and the identification of the trust money, were left to be considered by the trial Court on remand.

Conclusion: The trust fund was traceable and the beneficiary was entitled to claim it against the insolvent estate, but the case was remanded for decision of the unresolved issues.

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