Backwards Tracing – Perhaps It Exists After All

The Privy Council has for the first time validated, albeit cautiously, the existence of the doctrine commonly known as 'backwards tracing'. The doctrine operates in certain cases of fraud or breach of fiduciary duty, where the victims seek to trace and recover the proceeds of the fraud or breach, but where no direct connection can be established between the funds lost by them and the funds or other assets which are then found in the hands of the perpetrators.

The judgment in Federal Republic of Brazil et al v Durant International Corporation et al [2015] UKPC 35, was handed down on 3 August 2015 and concerned an appeal from the Court of Appeal of Jersey. The facts were no longer in dispute by the time the matter reached the Privy Council. Essentially, the proceedings concerned a claim brought by the Municipality of Sao Paulo against two BVI incorporated companies (Durant and Kildare) which held bank accounts with financial institutions in Jersey. The companies