LAW AND COMMERCE
‘Judge-Driven in a Vehicle of Discretion’: Is the Road Blocked Off to Remedial Constructive Trusts in Singapore? Herman Lin Yao Ahmad, University of Oxford
Introduction The remedial constructive trust remains one of the many perennial difficulties in equity jurisprudence, and like most of trusts law, has been confounded by conflicting case law and academic writing. Since the distinction between institutional and remedial constructive trusts was first articulated by American legal scholar Roscoe Pound in the Harvard Law Review in 1920,1 it has since been interpreted and brought into English law (and consequently Singapore law) through legal writing2 and the common law.3 A century later, the remedial trust seems to have been condemned in English law, with the courts choosing to limit findings of constructive trusts to an orthodox institutional constructive trust analysis.4 However, its position in Singapore jurisprudence is less certain. This article therefore seeks to explore the status of the remedial constructive trusts in Singapore de lege ferenda by considering, first, the key differences between institutional and remedial constructive trusts de lege lata; second, the status of the remedial constructive trust in the United Kingdom and in Singapore; and third and most importantly, the central issues at stake when choosing whether or not to accept this doctrine. Ultimately, it is submitted that these issues can be condensed into one singular dilemma which lies in the heart of equity. With this in mind, this article then suggests that the Singapore courts should embark on an overhaul of constructive trusts so as to achieve muchneeded legal coherence and certainty.
The Distinction Between ‘Institutional’ ‘Remedial’ Constructive Trusts
and
The meaning of a remedial constructive trust, as opposed to an institutional constructive trust,5 has helpfully been clarified by the English courts.6 Lord Browne-Wilkinson’s explanation in Westdeutsche Landesbank Girozentrale v Islington LBC (“Westdeutsche”) is instructive: Under an institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past. The consequences that flow from such trust having arisen (including the possibly unfair consequences to third parties who in the interim have received the trust property) are also determined by rules of law, not under a discretion. A remedial constructive trust, as I understand it, is different. It is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court.7
1 Roscoe Pound, ‘The Progress of the Law – Equity’ (1919-20) 33 Harv L Rev 420, 420-421.
Summarily, the distinction boils down to two matters of judicial discretion and retrospectivity,8 namely: (a) that an institutional trust arises by operation of law, while a remedial trust is a judicial remedy arising under an exercise of judicial discretion; and (b) the corollary of the first matter) that an institutional trust must arise from the date of the circumstances which give rise to it, while a remedial trust may operate retrospectively from the date of the court order.
2 Ronald Maudsley, ‘Proprietary Remedies for the Recovery of Money’ (1959) 75 LQR 234, 237; Donovan W M Waters, The Constructive Trust (Sweet & Maxwell 1964). While much writing has been devoted to arguing that Pound’s writing was misinterpreted, it is undoubtable that the distinction between institutional and remedial constructive trusts has since been entrenched into orthodoxy through case law (see n 3).
5 It is acknowledged that terminology of ‘institutional’ and ‘remedial’ might not be accurate, as argued by the likes of Peter Birks and William Swadling. This is discussed subsequently, but for the immediate purposes of laying out the law as it stands, these terms will be adopted and explained accordingly.
3 Hussey v Palmer [1972] 3 All ER 744, 747; Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391, 478-480; El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, 733-734; Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 714-716; Re Polly Peck International Plc (No 2) [1998] 3 All ER 812, 823-827, 830-831. 4 Re Polly Peck (No 2) (n 3) 823-827, 830-831 (noted Peter Birks, ‘The End of the Remedial Constructive Trust’ (1998) 12 TLI 202).
6 This has been accepted and applied by the Singapore courts: see for example Ching Mun Fong v Liu Cho Chit (No 2) [2001] SGCA 36, [2001] 1 SLR(R) 856. 7 Westdeutsche Landesbank Girozentrale (n 3) 714-715 (emphasis added). 8 Birks (n 4) 203; London Allied Holdings v Lee [2007] EWHC 2061 (Ch), [2007] All ER (D) 153 (Sep) [273]; Crossco No 4 Unlimited v Jolan Ltd [2011] EWCA Civ 1619, [2012] 2 All ER 754 [84].
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