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Articles
Constructive trusts and equitable
proprietary relief: Rethinking the essentials
Elise Bant and Michael Bryan*
It has long been recognised that constructive trusts fulfil a variety of remedial
aims. But it is less often realised that several different models of constructive
trust fulfil identical remedial objectives. This article focuses on the
constructive trust as a proprietary remedy in cases of unjust enrichment and
equitable wrongdoing. It examines different models of constructive trust
applied in the cases or advocated in academic writing, and identifies the
advantages and disadvantages of each model. While not recommending the
adoption of any particular model the article draws attention to the
inconsistencies and uncertainties that arise from the application of different
models to common fact patterns.
1 Introduction
This is the first of two articles that examine the interplay between constructive
trusts and other modes of equitable proprietary relief. Its particular
contribution is to the ongoing debate on the criteria for the award of the
constructive trust as a proprietary remedy1 for unjust enrichment or equitable
wrongdoing. Its purpose is relatively modest. It is to identify and compare the
different models of proprietary constructive trusteeship either found in the
cases or advocated in academic writing. It is not our aim to argue for any one
model of constructive trusteeship; on close inspection they all have their
bright and dark sides. Instead, the article attempts to tease out some of the
implications of adopting each model. Our central argument is that the law of
constructive trusts has become fragmented — an entirely different proposition
from saying that it is discretionary or remedial — and that each fragment
applies a different model of constructive trusteeship. The conclusion suggests
that it is timely to consider whether certainty and consistency would be better
served by adopting one model of proprietary constructive trust relief. More
radically, would our understanding of proprietary relief be enhanced if the
terminology of constructive trusts were to be entirely discarded? This second
and forward-looking enquiry is the focus of a later article, which will seek to
* Elise Bant BA, LLB (Hons) (UWA), BCL, D Phil (Oxford) is Associate Professor of Law
at the University of Melbourne. Michael Bryan MA, BCL (Oxford), PhD (London) is
Emeritus Professor of Law at the University of Melbourne. The authors thank Robert
Chambers for his very helpful comments on an earlier draft of this article. All errors remain
the authors’.
1 The meaning of the word ‘remedy’ is notoriously protean. For the most part, we adopt the
definition developed by R Zakrzewski, Remedies Reclassified, OUP, Oxford, 2005, Ch 1,
namely, that a remedy is the rights that arise from a court order that replicates a pre-existing
right, but see further discussion below at note 65.
171
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2 Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; 157 ALR 414; [1998]
HCA 59; BC9804991 at [42] per Gaudron, McHugh, Gummow, Hayne and Callinan JJ;
Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473; [1999] HCA 10; BC9901018 at
[4]; John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd; Walker Corp Pty Ltd v
White City Tennis Club Ltd (2010) 241 CLR 1; 266 ALR 462; [2010] HCA 19;
BC201003368 at [128].
3 Scott v Scott (1963) 109 CLR 649 at 661; [1964] ALR 946; (1963) 37 ALJR 345;
BC6300470.
4 John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd; Walker Corp Pty Ltd v White
City Tennis Club Ltd (2010) 241 CLR 1; 266 ALR 462; [2010] HCA 19; BC201003368 at
129.
5 See S Elliott and C Mitchell, ‘Remedies for Dishonest Assistance’ (2004) 67 MLR 16
at 20–3 on the liability of a knowing assister to account for her profits.
6 Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473; [1999] HCA 10; BC9901018 at
[4]; Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; 260 ALR 71; [2009] HCA 44;
BC200909276 at [48].
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7 Gusdote Pty Ltd v North Queensland Land Development Pty Ltd [2011] FCA 202;
BC201101061 at [26] per Emmett J (3 March 2011).
8 Evans v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82; BC200401304; The
Uniting Church of Australia Property Trust (NSW) v Vincent [2009] NSWSC 375;
BC200903812.
9 R Chambers, Resulting Trusts, Clarendon Press, Oxford, 1997, pp 220–1; W Swadling,
‘Explaining Resulting Trusts’ (2008) 124 LQR 72 at 72.
10 See Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567 at 580–2 per Lord
Wilberforce; [1968] 3 All ER 651; 3 WLR 1097; Salvo v New Tel Ltd [2005] NSWCA 281;
BC200506365 at [76]–[78] per Handley J.
11 R Chambers, ‘Constructive Trusts in Canada’ (1999) 37(1) Alberta L Rev 173.
12 Equitable wrongdoing for this purpose means breach of fiduciary obligation and liability for
knowingly receiving property in breach of fiduciary obligation. On breach of confidence see
Lac Minerals Ltd v International Corona Resources Ltd (1989) 16 IPR 27; 61 DLR (4th) 14;
[1989] 2 SCR 574; (1989) 44 BLR 1.
13 Rescission of a contract for breach of fiduciary obligation is arguably an exception. The
constructive trust imposed over property transferred under the voidable contract, by the
exercise of election, can be analysed as restitution for equitable wrongdoing.
14 E Bant, The Change of Position Defence, Hart Publishing, Oxford, 2009, pp 204–9.
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remedy’ will be awarded are not limited to those discussed in the unjust
enrichment cases.
Four models of constructive trusteeship have been applied in unjust
enrichment cases and a fifth has been extensively discussed in the academic
literature. As the following analysis demonstrates, each has its considerable
limitations and difficulties, not the least of which is how each model relates to
the others.
failed and the payee had not at the moment of receipt become the full
beneficial owner of the payment).23 Perhaps the most significant application of
the immediate constructive trust, conceptually if not in terms of frequency of
application, is the trust imposed over stolen money.24 Robert Chambers has
explained that a trust over stolen property is unnecessary25 because the victim
of the theft retains title to the property unless one of the exceptions to the
‘nemo dat’ principle applies.26 The victim cannot, however, rely on her
original title if she claims the traceable proceeds of the theft. The thief, and
any recipient from the thief, will have obtained title to the proceeds. In this
case the constructive trust supplies the victim with the equitable machinery for
claiming the proceeds. The trust could be rationalised as a constructive trust
arising from wrongdoing27 and defended on the basis that immediate trusts are
more easily justified in cases of wrongdoing than in unjust enrichment claims.
But although the imposition of the trust requires proof of theft the recipient
against whom the claim is brought may be an innocent volunteer. Such a
defendant cannot be described as a wrongdoer without straining ordinary
language.28 The trust is better characterised as one that reverses unjust
enrichment.
support for imposing trusts on this basis in the authorities,31 and recent
decisions imposing a trust over the proceeds of stolen money have
characterised the trust as resulting on the ground that the victim had no
intention of passing title to the thief.32 But while cases of theft and fraud can
be analysed in these terms, cases where the intention to confer a benefit is
vitiated, for example, for undue influence or misrepresentation, may not be
susceptible to this analysis.33 In these cases the transferor intends to pass title
to property, albeit the intention was defective. Moreover, an objection to the
imposition of an immediate trust in these cases it is that, as we will see, it is
inconsistent where other models of constructive trust have been applied. In
particular, the power model of the constructive trust has been applied
principally, but not exclusively, where a contract has been vitiated on all of
these grounds.34 We expand on this point later in the article.
Another analysis that seeks to explain the incidence of proprietary
restitution in claims of unjust enrichment has recently been advanced by
Professor Chambers.35 Chambers argues that unjust enrichment claims
encompass two forms of enrichment — rights and value — but only one type
of restitution. If the benefit received by the defendant was a proprietary right,
then restitution requires return of that right. The precise form of restitution
(proprietary or personal) thus follows the nature of the benefit. While
Chambers’ thesis offers a tantalisingly simple and very elegant solution to the
problem of availability and justification of proprietary restitution, it has yet to
attract any judicial consideration and is not a close fit with the existing law.36
In particular, Chambers’ analysis shifts the focus of the claim in unjust
enrichment from ‘value received’ to ‘value surviving’, thereby altering the
points at which the cause of action is complete and collapsing change of
position back into the primary claim.
A final difficulty with an analysis of the immediate constructive trust model
based on the reversal of unjust enrichment is that in some of the cases it is
impossible to identify a legally recognised ‘unjust factor’. The ‘stolen money’
31 Nelson v Nelson (1995) 184 CLR 538 at 549 per Deane and Gummow JJ; 132 ALR 133; 70
ALJR 47; BC9501517.
32 Evans v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82; BC200401304;
MBF Australia Ltd v Malouf [2008] NSWCA 214; BC200807869; The Uniting Church of
Australia Property Trust (NSW) v Vincent [2009] NSWSC 375; BC200903812.
33 See, eg, Swadling, above n 9, at 88.
34 A ‘road map’ through the proprietary restitution case law that provides a means of
reconciling the trust and election models is offered by J Edelman and E Bant, Unjust
Enrichment in Australia, Oxford University Press, Melbourne, 2006, pp 74–5. On that
analysis, an immediate vested trust right arises in most non-contractual cases of unjust
enrichment (the chief exception being certain cases of failure of basis); an election-based
model applies in contractual cases and a lien is appropriate for all other cases where a
personal right to restitution arises, the right relates to some asset held by the defendant and
the plaintiff has not taken the risk of insolvency. This analysis accepts and is predicated on
the view that the immediate trust and power models cannot justifiably co-exist with respect
to the same transaction, as is currently the case.
35 R Chambers, ‘Two Kinds of Enrichment’ in R Chambers, C Mitchell and J Penner (Eds),
Philosophical Foundations of the Law of Unjust Enrichment, Oxford University Press,
Oxford, 2009, p 267.
36 For an extended discussion of the thesis, see E Bant, ‘Rights and Value in Rescission’ in
D Nolan and A Robertson (Eds), Rights and Private Law, Hart Publishing, Oxford, 2011,
Ch 21.
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(d) Ramifications
The immediate trust model has been described as the most durable and
intrusive of equitable proprietary remedies.41 As Chase Manhattan
exemplifies, trust assets do not form part of the personal estate of the trustee
available for distribution in the event of the trustee’s bankruptcy or
insolvency.42 And although a plaintiff’s proprietary rights are defeated if the
trust asset is sold to a good faith purchaser of the legal title to the asset for
value and without notice of the trust,43 they will survive against donees, or
purchasers aware of the trust, or third party purchasers who take only an
equitable interest in the trust asset. Third, statute apart,44 it is doubtful whether
the beneficiary’s right to vindicate his or her interest in identified trust
property is subject to any defence of change of position, except to the extent
that the change affects the identification of the original asset or its substitute.45
Finally, vested trust rights clearly constitute caveatable interests under the
Torrens system.46 The combination of these characteristics makes the
immediate trust model the most plaintiff-friendly form of constructive trust.
47 [1996] AC 669 at 705; [1996] 2 All ER 961; [1996] 2 WLR 802; [1996] NLJR 877.
48 (2007) 63 ACSR 429; 25 ACLC 809; [2007] NSWSC 589; BC200704438. For the complex
interplay between the mistaken payment cases applying this model, the stolen money
constructive trust cases applying the immediate trust model, and the power model see Bant,
above n 41.
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I do not see why, in principle, a constructive trust arising from the retention of
moneys known to have been paid by mistake, and for which there was no
consideration, would not arise from the time the payee acquired such knowledge, if
the moneys paid could still be identified at the time such knowledge was acquired.49
49 Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429; 25 ACLC 809; [2007] NSWSC 589;
BC200704438 at [42].
50 Ibid, at [44]. The defendant was allowed reasonable time to investigate the circumstances of
the payments: ibid, at [47]. Investigation time is of practical importance to banks:
Fitzalan-Howard v Hibbert [2009] EWHC 2855 (QB).
51 Baden v Société Générale [1992] 4 All ER 161 at 242–3; [1993] 1 WLR 509; Farah
Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; [2007] HCA
22; BC200703851 at [174].
52 Manchester Trust v Furness, Withy & Co Ltd [1895] 2 QB 539 at 545 per Lindley LJ;
Hermann v Pitt (1890) 11 NSWLR (Eq) 294.
53 There are many undue influence cases where the decision to transfer was ‘spontaneous’ on
the part of the plaintiff, in the sense that it was not initiated or sought by the defendant,
although made as a result of the defendant’s influence: see, eg, Quek v Beggs (1990) 5 BPR
11,761; BC9001679; Hartigan v International Society for Krishna Consciousness
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(d) Ramifications
In the simple case of a mistaken payment to a solvent payee there is no
practical difference between an immediate constructive trust and the
knowledge-based version. The payer is entitled to a personal claim to
restitution and comparisons between different models of constructive trust are
usually pointless. But where the payee, before learning of the mistake, directs
the payment to a third party donee who also has no knowledge of the mistake
both the payee and the donee will be protected under the knowledge-based
version. To this extent the knowledge-based model has an in-built change of
position defence. Under the immediate trust model the donee will of course be
liable as a trustee because she or he is not a good faith purchaser.
The position will also be different if the payee becomes bankrupt before
becoming aware of the mistake since the payer will have only a personal claim
provable in the payee’s bankruptcy. Similarly, if the payee dies before
realising the payment was mistaken the payer will only have a personal claim
against the payee’s estate. Most important of all, the position of the payer is
weakened by the fact that the onus of proof rests on the payer to prove that the
payee had the requisite degree of knowledge of the mistake. Under the
immediate trust model, on the other hand, the payer must prove that the
payment was made under a mistake but proof of defences such as change of
position and good faith purchase rests on the payee or third party recipient
from the payee.54 In summary, the payer’s entitlement to a constructive trust
is more uncertain under the knowledge-based constructive trust than under the
immediate trust model since it depends on matters which are not under her or
his control and which are harder for the payer to establish. The knowledge
requirement is a trade-off between, on the one hand, the proprietary claim of
a payer who never intended to make the payment and, on the other, innocent
third parties from the payee and, in a bankruptcy context, the payee’s creditors
who have an interest in maximising the value of the bankrupt’s estate. But, as
discussed below, other models offer trade-offs which offer greater certainty
and arguably a more equitable balancing of the relevant interests.
A final point concerns the validity of Lord Browne-Wilkinson’s assumption
in the Westdeutsche case, and accepted in the Wambo decision, that the basis
of all trusts in notions of ‘conscience’ necessarily means that the equitable
obligations of a trustee will only be imposed on a holder of the legal interest
in property who is aware that he or she holds the property for another. The
assumption sits uneasily with the proposition that someone can be appointed
a trustee without her or his consent, albeit that they can disclaim the
trusteeship once they become aware of the purported trust.55 An express trust
is defeasible upon acquiring knowledge of the trust, not constituted upon
Incorporated [2002] NSWSC 810; BC200205275 at [28] per Bryson J; Reid v Reid
(unreported, NSW SC, Beach J, 30 November 1998). There are similarly cases where
transactions procured by undue influence have been set aside against defendants who were
not in the position of influence and were not aware of the vitiation of the transferor’s consent
by a third party: see, eg, Bridgeman v Green (1757) Wilm 58; 97 ER 22; Giarrantano v
Smith (1985) NSW ConvR 55-267; BC8500459.
54 Barclays Bank plc v Boulter [1999] 4 All ER 513; [1999] 1 WLR 1919 at 1924–5 per Lord
Hoffmann.
55 Mallott v Wilson [1903] 2 Ch 494.
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56 Halpern v Halpern [2008] QB 195; [2007] 3 All ER 478; [2007] 3 WLR 849; [2007] EWCA
Civ 291 at [69]–[74] per Carnwath LJ (Waller and Sedley LJJ concurring).
57 B Häcker, ‘Proprietary Restitution after Impaired Consent Transfers: A Generalised Power
Model’ (2009) 68 Cambridge LJ 324 at 329–31. See also Bant, above n 41; M Balen, ‘What
is the Status of a Restitutionary Power to Revest Title in Bankruptcy?’ (2011) 22 Kings LJ
85.
58 Allcard v Skinner (1887) 36 Ch D 145; [1886–90] All ER Rep 90; (1887) 56 LJ Ch 1052;
(1887) 57 LT 61.
59 Car & Universal Finance v Caldwell [1965] 1 QB 525; [1964] 1 All ER 290; [1964] 2 WLR
600.
60 See S Worthington, ‘The Proprietary Consequences of Rescission’ [2002] Restitution L Rev
28 at 35–46.
61 (1955) 94 CLR 216; [1955] ALR 1047; (1955) 29 ALJR 512; BC5500350.
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effect to it and make appropriate consequential orders: see Abram Steamship Co Ltd
v Westville Shipping Co Ltd [1923] AC 773. The difference between the legal and the
equitable rules on the subject simply was that equity, having means which the
common law lacked to ascertain and provide for the adjustments necessary to be
made between the parties in cases where a simple handing back of property or
repayment of money would not put them in as good a position as before they entered
into their transaction, was able to see the possibility of restitutio in integrum, and
therefore to concede the right of a defrauded party to rescind, in a much wider
variety of cases than those which the common law could recognise as admitting of
rescission. Of course, a rescission which the common law courts would not accept
as valid cannot of its own force revest the legal title to property which had passed,
but if a court of equity would treat it as effectual the equitable title to such property
revests upon the rescission.62
On this model the trust takes effect from the date of the plaintiff’s election,
subject to the imposition of any terms which might defer the plaintiff’s
acquisition of equitable title.63 A complication, however, is that it is unclear
whether the model applies outside fraud and duress where equity acts in
support of legal rights. Where equity acts in its exclusive jurisdiction there is
also authority for analysing rescission as the act of the court.64 On this
analysis, the right to rescind is simply a right to supplicate the court for
rescission, including proprietary relief. If this view is correct, rescission
provides a leading example of a form of remedial constructive trust.
The learned authors of The Law of Rescission conclude that the authorities
on this point are impossibly incoherent.65 Their preferred view is that
equitable rescission (except, perhaps, in the case of fraud, where equity acts
in aid of the plaintiff’s common law rights) is always an act of the court.66 This
may well be correct. For present analytical purposes, however, the alternative
view is adopted as correct, namely, that plaintiff election operates to vest
equitable title to the transferred asset in the plaintiff from the moment of
election.
(b) Rationale
A principled argument for the election model of proprietary restitution can be
made by focusing on the role of plaintiff election.67 In the contractual context
the plaintiff’s election to rescind a voidable contract revokes the plaintiff’s
consent to the contract, and both effectuates and justifies her or his right to
obtain restitution of benefits transferred under the contract. The legal efficacy
(c) Ramifications
First, prior to election the plaintiff has no vested proprietary interest such as
the beneficiary obtains under an immediate constructive trust.69 This in turn
has a number of important ramifications. First, an unexercised power to
rescind in equity, being a ‘mere equity’ rather than a vested equitable interest,
is defeated by the sale of the asset to a bona fide purchaser of a legal or
equitable interest in the asset.70 Second, although the matter is not free from
doubt, there is authority to indicate that a plaintiff cannot caveat a ‘mere
equity’.71 Third, since the impugned transfer is valid until election the
68 Barclays Bank plc v Boulter [1999] 4 All ER 513 at 518 per Lord Hoffmann; 1 WLR 1919.
69 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 390 per Brennan J (Wilson J
agreeing); 65 ALR 193; 60 ALJR 371; BC8601425; Wickham Developments Ltd v Parker
[1995] QCA 281; BC9505952; Greater Pacific Investments Pty Ltd (in liq) v Australian
National Industries Ltd (1996) 39 NSWLR 143 at 152–3; BC9601416 per McLelland AJA
(Priestly and Meagher JJA concurring); Hancock Family Memorial Fund Foundation Ltd v
Porteous (2000) 22 WAR 198; 156 FLR 249; [2000] WASCA 29; BC200000343
at [173]–[206]. Daly was cited with approval and applied in Barclays Bank v Boulter [1999]
4 All ER 513 (HL) at 518 per Lord Hoffmann; [1999] 1 WLR 1919 and Lonrho v Fayed (No
2) [1991] 4 All ER 961 at 971 per Lord Millett; [1992] 1 WLR 1. See also Bristol and West
Building Society v Mothew [1998] Ch 1 (CA) at 22–3 per Millett LJ; [1996] 4 All ER 698;
[1998] ANZ ConvR 271; [1997] 2 WLR 436; Shalson v Russo [2005] Ch 281; [2003] All ER
(D) 209 (Jul); [2005] 2 WLR 1213; [2003] EWHC 1637 (Ch) at [108] per Rimer J. Cf
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 at 716 per Lord
Browne-Wilkinson; [1996] 2 All ER 961; [1996] 2 WLR 802; [1996] NLJR 877.
70 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1966] ALR
775; (1965) 39 ALJR 110; BC6500350.
71 Taking this view are Re Pile’s Caveat [1981] QD R 81; Swanston Mortgage Pty Ltd v Trepan
Investments Pty Ltd [1994] 1 VR 672; ANZ ConvR 176; (1994) 68 LIJ 69; (1993) V ConvR
54-487 (SC Vic, App Div); Wickham Developments Ltd v Parker [1995] QCA 281;
BC9505952; Tanzone Pty Ltd v Westpac Banking Corporation (2000) 9 BPR 17,287; (1999)
ATPR 46-195; (1999) NSW ConvR 55-908; [1999] NSWSC 478 (rev’d on other grounds in
Westpac Banking Corporation v Tanzone Pty Ltd (2000) 9 BPR 17,521; (2000) NSW ConvR
55-939; [2000] NSWCA 25; BC200000542); Global Minerals Australia Pty Ltd v Valerica
Pty Ltd (2000) 10 BPR 18,463; [2000] NSWSC 1143; BC200007612; Commonwealth Bank
of Australia v Kyriackou (2003) V ConvR 54-674; [2003] VSC 175; BC200302844; Vasiliou
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defendant is entitled in the interim to deal with the asset for his or her own
benefit. A later election to rescind by the plaintiff cannot retroactively convert
what was a lawful act into a breach of duty.72 Moreover, rescission
accommodates broad change of position considerations by virtue of the
restitutio in integrum requirement.73 To that extent it offers a model of
proprietary restitution that is more responsive to defendant interests than the
immediate interest model. Fourth, the model is more sympathetic to the
interests of third parties than either of the preceding models. Election requires
(in general) an unequivocal overt act on the part of the plaintiff.74 We have
seen that, prior to election, third parties dealing with the asset in good faith
have the opportunity to obtain an interest unfettered by the plaintiff’s claim.
Moreover, it is no doubt easier for third parties to become aware of a plaintiff’s
election (or at least ascertain whether it occurred) and take the election into
account in their subsequent dealings with the asset, than it is to know of a
defendant’s subjective state of mind. Taken together with the extended bona
fide purchase rules, these features of an election-based model go a
considerable way to meeting the concerns about commercial certainty raised
by Lord Browne-Wilkinson in Westdeutsche.
Finally, an election–based model provides a principled means of curtailing
the problem of what has been termed ‘geometric multiplication’.75 A striking
corollary of the immediate trust model is that it permits a plaintiff
83 Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429; 25 ACLC 809; [2007] NSWSC 589;
BC200704438 at [40] (White J: ‘The remedial constructive trust is part of the law of
Australia’).
84 H A J Ford and W A Lee, Principles of the Law of Trusts, looseleaf, Thomson Lawbook Co,
Sydney, at [22060]. Cf C Rickett, ‘The Classification of Trusts’ (1999) 18 NZULR 305
at 325: ‘the term “institutional constructive trust” is an attempt to corral all those cases we
call “constructive trusts”, and which have some historical pedigree, which we cannot avoid,
and with which we essentially feel happy’.
85 Black v S Freedman & Co (1910) 12 CLR 105; 17 ALR 541; BC1000004.
86 Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29; BC8701827.
87 Cf the role of the constructive trust, or alternatively the principle that equity will not allow
a statute to be used as an instrument of fraud, as a step to implement an oral contract to
exchange an equitable interest in land for units in a unit trust in Halloran v Minister
Administering National Parks and Wildlife Act 1974 (2006) 229 CLR 545; 224 ALR 79;
[2006] HCA 3; BC200600335.
88 Re Polly Peck (No 2) [1998] 3 All ER 812 at 825. See also Liggett v Kensington [1993] 1
NZLR 257 at 281 per Gault J; Rotherham, above n 80, pp 16–18.
89 Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347
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(Sinclair Investments), followed in Cadogan Petroleum Plc v Tolley [2011] EWHC 2286
(Ch) at [27] per Newey J; both not applying Attorney-General (Hong Kong) v Reid [1994]
1 AC 324; [1994] 1 All ER 1; [1994] 1 NZLR 1; [1993] 3 WLR 1143. See also Gwembe
Valley Development Co Ltd v Koshy (No 3) [2003] All ER (D) 465; [2004] 1 BCLC 131;
[2003] EWCA Civ 1048; Halton International Inc v Guernroy [2006] EWCA Civ 801.
90 Muschinski v Dodds (1985) 160 CLR 583 at 615 per Deane J; 62 ALR 429; 60 ALJR 52;
BC8501051.
91 Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498; BC9401589. See generally P O’Connor,
‘Happy Partners or Strange Bedfellows: The Blending of Remedial and Institutional
Features in the Evolving Constructive Trust’ (1996) 20 MULR 735 at 745–51.
92 Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473; [1999] HCA 10; BC9901018.
93 There is a possible link between this definition and the definition discussed in the previous
section in that it might be argued that there is no problem in recognising a constructive trust
prior to curial judgment if it is practically certain that a court will impose a proprietary
constructive trust in such a case: Ford and Lee, above n 84, at [22060].
94 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669
at 714 per Lord Browne-Wilkinson; [1996] 2 All ER 961; [1996] 2 WLR 802; [1996] NLJR
877 (HL). See also Parsons v McBain (2001) 109 FCR 120; 192 ALR 772; [2001] FCA 376;
BC200101460 at [10]–[18] and Fortex Group Ltd (in rec & liq) v MacIntosh [1998] 3 NZLR
171 (CA) at 172 per Tipping J.
95 Ibid, at 714–15.
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on trusts, as being a trust ‘construed’ from the circumstances of the case and
not ‘constructed’ by court order.96 But the terminological muddle which
characterises the whole topic of remedial constructive trusts is underscored by
the fact that Lord Browne Wilkinson’s definition of an institutional
constructive trust was for Scott the definition of a remedial constructive trust.
Focusing on the date on which the constructive trust takes effect arguably
confuses the criteria for the award of a trust with the consequences of applying
the criteria. Emmett J has recently drawn attention to an analysis of the
constructive trust which recognises that it is remedial because it operates as an
in personam remedy attaching to property:
On one view, a constructive trust is not created by an order of a court. Rather, such
a trust arises immediately, when circumstances exist in respect of which equity
would construe a trust. Thus, there does not need to have been a curial declaration
or order before a court of equity will recognise the prior existence of a constructive
trust. The trust attaches upon the acquisition of the relevant property (see
Attorney-General (Hong Kong) v Reid [1993] UKPC 3; [1994] 1 AC 324).
Nevertheless, the constructive trust is predominantly remedial, in that it is an in
personam remedy attaching to property. Accordingly, where competing common law
or equitable claims are or may be involved, a declaration of constructive trust by
way of remedy can properly be so framed that the consequences of its imposition are
operative only from the date of judgment or formal court order or some other
specified date (Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 at 615).
For example, care must be taken to avoid undermining the principles of pari passu
distribution that underlie the policy of insolvency laws (see Daly v Sydney Stock
Exchange Ltd [1986] HCA 25; (1986) 160 CLR 371 at 379).97
A number of consequences flow from acceptance of the analysis of the
constructive trust as an ‘in personam’ remedy attaching to property. One, on
which this passage focuses, is that the court enjoys a discretion, exercisable in
accordance with equitable principle, to determine the operative date from
which the remedy takes effect. A second is that a court has a discretion to
award personal relief instead of a proprietary order. A third is that a court can
impose terms and conditions upon the imposition of a constructive trust in
much the same way that conditions are often imposed upon the award of
rescission of a contract or gift. The insolvency dimension, adverted to in the
final sentence, is of course relevant to all these aspects of awarding a
constructive trust.
The best known example of a ‘date of judgment’ constructive trust is the
trust imposed by the High Court in Muschinski v Dodds.98 But it has rarely
been imposed in practice precisely because of an understandable judicial
reluctance to interfere with actual or potential interests creditors may have in
96 A Scott and W Fratcher, The Law of Trusts, 4th ed, Little Brown, New York, 1987, §462.4.
Contrast G and C Bogert, The Law of Trusts and Trustees, 2nd ed, West Publishing Co,
Minnesota, 1977, ss 461–472. Scott’s analysis was approved in Muschinski v Dodds (1985)
160 CLR 583 at 614 per Deane J; 62 ALR 429; 60 ALJR 52; BC8501051. See also Parsons
v McBain (2001) 109 FCR 120; 192 ALR 772; [2001] FCA 376; BC200101460 at [10].
97 Gusdote Pty Ltd v North Queensland Land Development Pty Ltd [2011] FCA 202;
BC201101061 at [26]. The analysis applies to constructive trusts the ‘in personam’ analysis
applied by Maitland to all trusts: F W Maitland, Lectures in Equity, Cambridge University
Press, Cambridge, 1929, p 30.
98 (1985) 160 CLR 583 at 615; 62 ALR 429; 60 ALJR 52; BC8501051.
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the subject-matter of the trust. It is only a slight exaggeration to say that the
‘date of judgment’ constructive trust has been imposed only in cases where its
proprietary characteristics turn out to be irrelevant.99
Muschinski v Dodds itself demonstrates that prospective constructive trust
relief is often superfluous. The plaintiff and defendant, a de facto couple,
purchased land as legal tenants in common with the intention of converting a
cottage on the land into an arts and crafts centre. The plaintiff had paid
10-11ths of the cost of the conversion project by the time it had been
abandoned. Abandonment was due to the refusal of the council to grant
planning permission, as well as to the breakdown of the parties’ relationship.
A majority of the High Court, Brennan and Dawson JJ dissenting, held that the
plaintiff was entitled to relief in addition to the half-share in the property
which she enjoyed by virtue of the tenancy in common. Mason and Deane JJ
imposed a constructive trust for the benefit of both parties ‘to repay to each her
or his respective contributions and as to the residue for them both in equal
shares’.100 The constructive trust took effect prospectively, from the date of the
publication of the High Court’s reasons ‘[l]est the legitimate claims of third
parties be adversely affected’.101 Gibbs CJ saw no necessity for imposing a
constructive trust. He held that the plaintiff was entitled to an equitable
contribution for the amount in excess of half the purchase moneys she paid
secured by a charge over the defendant’s half-share of the property.
Muschinski v Dodds illustrates how the availability of a proprietary remedy
is influenced by the characterisation of the ground for awarding the remedy.
The dispute concerned family property, albeit a property that the couple hoped
would generate their principal source of income. In family property cases
statute and judicial decision generally favour the award or reallocation of
proprietary interests in order to give effect to the expectation that the parties
in a personal relationship will share their resources.102 In commercial cases,
on the other hand, the usual expectation is that the parties will deal with each
other on the basis of self-interest and that a contract between them will define
the limits of cooperation. Muschinski v Dodds was analysed as a family
property case, even though the couple were pursuing commercial and family
objectives.
But the decision can just as convincingly be analysed as an example of an
award of a proprietary remedy for unjust enrichment, the ‘unjust factor’ being
the failure of the basis upon which they had purchased the property, namely,
99 Possible exceptions are Re Sabri (1996) 21 Fam 213 (where the wife’s constructive trust
taking priority to her husband’s bankruptcy was justified by reference to Muschinski v
Dodds: she would arguably have been entitled to priority even without reference to remedial
constructive trusts); Re Osborne (1989) 25 FCR 547; 91 ALR 135 (disapproved by the Full
Federal Court in Parsons v McBain (2001) 109 FCR 120; 192 ALR 772; [2001] FCA 376;
BC200101460.
100 Muschinski (1985) 160 CLR 583 at 623–4 per Deane J; 62 ALR 429; 60 ALJR 52;
BC8501051.
101 Ibid, at CLR 623.
102 The preference for proprietary relief in family home cases is not unique to Australia. See
D Pacciocco, ‘The Remedial Constructive Trust: A Principled Basis for Priorities over
Creditors’ (1989) 68 Canadian Bar Review 315 at 325 (‘In those family cases where there
has been a finding of unjust enrichment the constructive trust is all but the automatic
remedy’.)
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103 (1985) 160 CLR 583 at 618; 62 ALR 429; 60 ALJR 52; BC8501051.
104 The authorities relied upon by Deane J, ibid, at CLR 618, on frustration of contract and
dissolution of partnership are recognised cases of failure of consideration. That contractual
failure of basis is identical to the failure of a joint venture discussed by Deane J in
Muschinski v Dodds was expressly recognised in Roxborough v Rothmans of Pall Mall
Australia Ltd (2001) 208 CLR 516; 185 ALR 335; [2001] HCA 68; BC200107592 at 525 per
Gleeson CJ, Gaudron and Hayne JJ. Cf the ‘windfall equity’ line of authority that tends to
analyse Muschinski and its descendants, at least in a familial context, as arising from the
unconscionable retention of a benefit by the defendant: eg, Young v Lalic (2006) 197 FLR
27; [2006] NSWSC 18; BC200600453; Taylor v Streiche [2007] NSWSC 1006;
BC200707683; WMJ Attractions Pty Ltd v Ireland [2008] QSC 140; BC200805057;
Tasevska v Tasevski [2011] NSWSC 174; BC201101513. The extent to which this analysis
differs in substance from the unjust enrichment analysis remains uncertain.
105 John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; 266 ALR
462; [2010] HCA 19; BC201003368 at [129].
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difficult and an order enforcing the account can be adequately secured by the
award of a charge or lien.
(d) ‘Remedial’ in the sense of conferring an option to
award personal relief
All constructive trusts are potentially remedial in the sense that a court could,
in theory, elect to award personal relief as an alternative to the imposition of
a proprietary constructive trust. If the criteria for an award of the trust have
been met, or would have been met but for the absence of identifiable trust
property, a personal remedy could be awarded instead of the proprietary order.
This is commonly, though not always, done in a wide variety of constructive
trust contexts, as is discussed further below.
The converse however is not true. In cases where the constructive trust is
an equitable formula for the award of a personal remedy a proprietary
constructive trust will not, and arguably cannot, be ordered. Constructive
trusteeship imposed in cases of knowingly assisting a breach of fiduciary
obligation, for example, only entitles a successful plaintiff to personal
remedies and never entitles the successful plaintiff to a proprietary order.106
The relationship between proprietary and personal relief in the law of
constructive trusts is not, however, straightforward. A prerequisite to the
award of any proprietary remedy is the existence of defined property to which
equitable obligations can be attached.107 Once this prerequisite is satisfied the
alternative of a personal remedy is better established for some types of
constructive trust than for others. Personal relief is, for example, a
well-established alternative to the award of a proprietary interest in estoppel
and family home constructive trust cases.108 It is also awarded in rescission.109
In other cases, for example where a fiduciary acting in breach of obligation
has received a bribe, there is an ongoing debate as to whether a proprietary
constructive trust should be preferred to a personal account of the bribe.110 In
yet others, such as cases of mutual wills and knowingly receiving property in
breach of fiduciary obligation, personal relief is almost never explored if there
is ascertainable property to which a proprietary remedy can be attached.
A possible explanation of these differences is that adverse third party
interests, including creditor interests, are more commonly found in some types
of constructive trust cases than others. Nevertheless, there seems little
106 Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473; [1999] HCA 10; BC9901018
at [4]. Equitable compensation is the usual personal remedy awarded in ‘knowing
assistance’ cases. But exceptionally an account of profits may be awarded. See Elliott and
Mitchell, above n 5. Whether a proprietary remedy can be awarded with respect to the
proceeds of bribes obtained in breach of fiduciary duty remains an open question in
Australia: see discussion above at p 16 and immediately below.
107 Re Goldcorp Exchange Ltd [1995] 1 AC 74; [1994] 2 All ER 806; [1994] 3 NZLR 385;
[1994] 3 WLR 199.
108 Guimelli v Giumelli (1999) 196 CLR 101; 161 ALR 473; [1999] HCA 10; BC9901018.
109 As in Hartigan v International Society for Krishna Consciousness Incorporated [2002]
NSWSC 810; BC200205275. The widespread availability and nature of monetary awards
consequent on rescission are examined in detail in Bant, above n 36, Ch 21.
110 Contrast Attorney-General (Hong Kong) v Reid [1994] 1 AC 324; [1994] 1 All ER 1; [1994]
1 NZLR 1; [1993] 3 WLR 1143 with Sinclair Investments (UK) Ltd v Versailles Trade
Finance Ltd [2010] EWCA Civ 347.
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(e) Conclusion
Judicial and extra-judicial endorsements of the remedial constructive trust are
not hard to find.111 But the elasticity of the concept is no excuse for lack of
definitional rigour. Authority for all the meanings of remedial constructive
trust discussed in this section can be found in the cases. It is almost invariably
left to the reader of a judgment to deduce the correct meaning from the context
in which the term is employed. Criteria determining when a proprietary
remedy will be preferred to personal relief, and, if a proprietary remedy is to
be awarded, fixing its operative date, can be intuited from the cases. But they
have never been reduced to clearly expressed principles. Moreover, the
relationship of the remedial constructive trust to the election model, discussed
above, has not yet been properly worked out.
111 Robins v Incentive Dynamics Pty Ltd (2003) 202 ALR 24; 47 ACSR 128; [2003] FCA 955;
BC200305187 at [57]; K Mason, ‘Deconstructing Constructive Trusts in Australia’ (2010) 4
J Eq 98.
112 See W Swadling, ‘Policy Arguments for Proprietary Restitution’ in S Degeling and
J Edelman (Eds), Unjust Enrichment in Commercial Law, Lawbook Co, Sydney, 2008,
pp 359, 376–7, for criticism of the formulation that the trust gives priority to the beneficiary
in the trustee’s bankruptcy.
113 Dicta supporting the approach include Space Investments Ltd v Canadian Imperial Bank of
Commerce Trust Co (Bahamas) Ltd [1986] 3 All ER 75 at 76–7 per Lord Templeman; [1986]
1 WLR 1072; Lord Naper & Ettrick v Hunter [1993] AC 713 at 737 per Lord Templeman;
[1993] 1 All ER 385; [1993] 2 WLR 42.
114 D Pacciocco, ‘The Remedial Constructive Trust: A Principled Basis for Priorities over
Creditors’ (1989) 68 Canadian Bar Rev 315; E Sherwin ‘ Constructive Trusts in Bankruptcy’
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taken into account from either the payer’s or the payee’s perspective. An
example of adopting the payee’s perspective can be found in the recently
published Third Restatement of Restitution.115 Paragraph 55(1) provides:
If a recipient is unjustly enriched by the acquisition of legal title to specifically
identifiable property at the expense of the claimant or in violation of the claimant’s
rights, the recipient may be declared a constructive trustee, for the benefit of the
claimant, of the property in question and its traceable product.
This basic provision, which authorises the declaration of a constructive trust
in cases of restitution for unjust enrichment and for wrongs, is qualified by
other provisions which distinguish between ‘two party’ constructive trust
claims, involving no claims by creditors, and ‘three party’ claims where the
claims of creditors are in issue. In a ‘three party’ case, for example, para 61(1)
provides that a claimant will not be permitted to obtain a profitable recovery
in restitution, in the sense of recovering more than her or his loss, at the
expense of adequate provision for creditors and dependants of the recipient.
By being deprived of any profit accruing on the enrichment, the claimant is in
effect remitted to the remedy of the equitable lien unless she or he can show
that they have made adequate provision for their creditors and dependants.
The objection to the Restatement’s distinction between ‘two party’ and
‘three party’ claims is that every ‘two party’ claim is potentially a ‘three party’
claim. A constructive trust which provides appropriate relief ‘inter partes’ can
be rendered inequitable by the fact that creditors have claims to the disputed
property which have not been identified in the course of the constructive trust
litigation.
Distinctions between ‘two party’ and ‘three party’ constructive trust claims
are only workable if adjectival procedures are put in place that enable all
parties interested in the award of the constructive trust to be identified and
given standing in the litigation. The decision of the High Court of Australia in
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd116 attempts to
establish a boundary between the two types of case by imposing procedural
requirements on constructive trust claimants which are designed to flush out
the existence of third party interests. Any person who will be affected by the
making of the proprietary order is a ‘necessary party’ who must be joined to
the litigation.117 Moreover, where for any reason any third party has not been
joined to the litigation, that party has standing to have the constructive trust
order set aside.118 Whether these requirements are sufficient to identify all
relevant interested parties and whether they will succeed in preventing the
inappropriate imposition of constructive trusts remains to be seen.
(b) Rationale(s)
A number of schemes have been proposed for taking into account whether, in
paying money or transferring property, the plaintiff took the risk of the
[1989] University of Illinois L Rev 297; Edelman and Bant, above n 34, pp 71–2; A Burrows,
The Law of Restitution, 3rd ed, Oxford University Press, Oxford, 2011, pp 176–9.
115 American Law Institute, Restatement (Third) of Restitution and Unjust Enrichment,
American Law Institute Publishers, St Paul, 2011 (Reporter: Andrew Kull).
116 (2010) 241 CLR 1; 266 ALR 462; [2010] HCA 19; BC201003368.
117 Ibid, at [131].
118 Ibid, at [137].
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trust fails to comply with the rules against perpetuity,127 or functional in the
sense that the purpose for which the trust has been constituted fails, such as
a marriage settlement which fails because the marriage does not take place.128
Since the trustee does not obtain beneficial title to the trust property the trust
money is returned to the settlor, the resulting trust providing the proprietary
machinery for reversing the trustee’s unjust enrichment. A similar analysis
applies where a surplus remains after the purpose for which the trust was
created has been carried out.129
(c) Ramifications
The risk analysis places the plaintiff and her or his choices at front and centre
of the enquiry, an approach which has some interesting consequences. For
example, a distinction is sometimes drawn between ‘initial’ failures of
consideration, which entitle the payer to a proprietary remedy, assuming that
the payment is identifiable, and ‘subsequent’ failures of consideration which
do not entitle the payer to a proprietary remedy.130 The risk model suggests the
distinction is misleading because it focuses on the moment of time at which
the purpose of the payment failed and not on the terms on which the payment
was made. For example, debates as to whether Westdeutsche Landesbank
Girozentrale v Islington London Borough Council,131 where payments made
under a void contract were held not to entitle the payer to a proprietary
remedy, was a case of an initial or subsequent failure of consideration are
irrelevant to the question as to whether the leader took the risk of the
borrower’s insolvency. Given that the lending banks did not take any security
from the local authority borrowers, was the money intended to be at the free
disposal of the borrowers? Since the local authorities could apply the money
for any lawful statutory purpose the banks took the risk of borrower
insolvency. A similar analysis, though leading to a different conclusion, can be
applied to the Quistclose trust where money is lent on terms that it is to be
applied by the borrower exclusively for purposes specified by the lender.132
The trust has been analysed as an exceptional case where a proprietary remedy
is awarded for a subsequent failure of consideration, the borrower’s failure, or
inability, to apply the loan for the stipulated purpose after receipt constituting
the failure of consideration. But the critical question is whether the borrower
received unrestricted title to the loan.133 In the case of the Quistclose trust the
borrower does not receive unrestricted beneficial title; the whole point of the
127 Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 (PC). In the case of an express trust the rule
may be either the rule against remoteness of vesting or the rule against excessive duration:
Ford and Lee, above n 84, Ch 7.
128 Re Ames’ Settlement [1946] Ch 217; [1946] 1 All ER 689.
129 Re Abbott [1900] 2 Ch 326; Re Gillingham Bus Disaster Fund [1959] Ch 62.
130 Birks, above n 16, pp 185–98.
131 [1996] AC 669; [1996] 2 All ER 961; [1996] NLJR 877; [1996] 2 WLR 802.
132 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567; [1968] 3 All ER 651;
[1968] 3 WLR 1097 (HL); Twinsectra Ltd v Yardley [2002] 2 AC 164; [2002] 2 All ER 377;
[2002] 2 WLR 802; [2002] UKHL 12 (HL).
133 The question conceals a number of proprietary and contractual variations. For a full
discussion see R Chambers, ‘Restrictions on the Use of Money’ in W Swadling (Ed), The
Quistclose Trust: A Critical Analysis Hart Publishing, Oxford and Portland, Oregon, 2004,
p 77.
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arrangement is that the lender has not taken the risk of borrower insolvency.
A lender who has not taken collateral security and who has not imposed
restrictions on the borrower’s title to the loan has not protected herself or
himself against borrower default. Equity will not help lenders who have failed
to help themselves.
The risk analysis also highlights the role of intention in characterising the
transaction the parties have entered into, even in cases of trusts imposed by
operation of law. Thus the Quistclose trust illustrates the practical difficulty
sometimes encountered in drawing the important conceptual distinction
between consensual security and security imposed by operation of law.134 The
cases demonstrate substantial disagreement as to whether the trust is express
or resulting in character.135 On an express trust analysis the borrower holds the
loan on express trust for the lender subject to a duty or power to apply it for
the purpose specified by the lender. Such a trust is a consensually created
security; it differs from the typical security interest in that under a Quistclose
trust a (very limited) form of security is taken over the loan itself and not over
collateral property provided by the borrower or a third party.136 On this
analysis the trust no more belongs to a discussion of proprietary remedies for
unjust enrichment than any other express trust. If on a proper construction of
the loan agreement the parties have allocated the risk of borrower failure a
court has no business imposing on them its own assumptions as to
risk-sharing.
One objection to the judicial adoption of any form of risk analysis is that it
is ‘consequentialist’, meaning that the availability of the constructive trust is
determined not by deductive reasoning but by a consideration of the principal
consequence of the award, namely, the immunity of the trust assets from claim
by the trustee’s unsecured creditors.137 While it is appropriate for the
legislature to consider the consequences of adopting specific rules, and where
necessary to require courts to consider these consequences, it is not
appropriate for judge-made rules to be based on an assessment of the
consequences of applying the rule. Other matters aside, judges in private law
litigation have no special insight into these consequences.
Any assessment of the role of consequentialist objection to risk analysis
depends on the view taken by the assessor of the proper limits and
responsibilities of the judicial function. The objection raises fundamental
questions relating to judicial method in the adjudication of private law
disputes. Concerns about consequentialism may well explain why risk
analysis has not been judicially adopted as the touchstone for the award of
constructive trusts and remains, for the time being, in the realm of academic
speculation.138 A judge adjudicating a claim to a constructive trust clearly has
no special competence to assess the impact of constructive trust claims on the
bankruptcy process. But this is not what a judge applying risk analysis is
required to do. The critical question in a constructive trust dispute is whether
this plaintiff assumed the risk of the defendant’s insolvency. Such an inquiry
resolves itself into an evaluation of the claimant’s situation and conduct at the
time when the legally relevant conduct occurred. To hold, for example, that a
claimant who paid money under duress did not take the risk of the payee’s
insolvency is not to make a statement about the consequences of the
claimant’s actions; it is, rather, a statement about the situation in which the
payer found herself or himself. Consequentialism is not a decisive argument
against the application of risk analysis.
7 Conclusion
Constructive trusts have always been a fragmented part of the law of trusts. Its
divisions reflect different categories of constructive trust (breach of fiduciary
obligation, the common intention constructive trust, mutual wills and so on)
which in turn reflect the remedial aims of the different categories (the
enforcement of expectations, remedying wrongdoing, reversing unjust
enrichment, the perfection of imperfect or incomplete transactions).139 What is
more disconcerting than these established divisions is the fragmentation that
occurs among constructive trusts which fulfil an identical aim. This article has
focused on constructive trusts to reverse unjust enrichment. Five different
models of constructive trust have the reversal of unjust enrichment as their
remedial objective. With the exception of the ‘risk analysis’ constructive trust,
which enjoys academic but so far no judicial endorsement, all attract a
respectable body of judicial support. Each model balances the interests of
claimants, recipients and creditors in different ways.
The rational development of the law of constructive trusts has suffered from
a silo mentality: each model has been allowed to develop without reference to
the others. What is the relationship, one might ask, between the election
model, which is well established in (though not limited to) cases of rescission
of voidable contracts and the immediate trust and the remedial trust models?
Should proof that the defendant has unsecured creditors afford grounds for
imposing a remedial constructive trust or for remitting the claimant to a
personal remedy? It is not the purpose of this article to answer these questions
but they certainly need answering. It is currently impossible to distil a
coherent law of constructive trusts from the authorities, taking a purely
internal perspective, which will provide consistent answers to these
fundamental questions.
Indeed, in view of the demonstrated instability of the constructive trust
concept, it is arguably both desirable and necessary to identify the criteria and
138 Consequentialism may be more acceptable in the United States where trial judges enjoy
broad discretion in formulating constructive trust relief: C Saiman, ‘Restitution and the
Production of Legal Doctrine’ 65 (2008) Washington & Lee L Rev 993 at 1017–23.
139 Chambers, above n 12, p 10; G Elias, Explaining Constructive Trusts, Clarendon, Oxford,
1990.
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