LAW AND COMMERCE
creditors would otherwise reap a windfall and be unjustly enriched at the claimant’s expense.52 The second response relates to the underlying concern of this issue – the protection of innocent third parties. A criticism against the remedial trust on this basis is unfounded given that the remedial trust actually allows greater protection to third parties than the institutional constructive trust. As recognised by Lord BrowneWilkinson in Westdeutsche,53 the remedy granted can be nuanced such that innocent third parties would not be prejudiced. Restitutionary defences like change of position, not recognised in the institutional constructive trust, can also be given effect to. It is crucial to note that unlike the institutional constructive trust in lex lata, the remedial trust is an option at the disposal of the courts. It therefore further strengthens the protection of third parties: when a court thinks that, on the facts, personal remedies are sufficient and a constructive trust is unnecessary or unduly detrimental to third parties, it can always refuse to give a proprietary remedy. On this reading, the doctrine ensures that the remedial trust is only used when absolutely necessary (akin to the availability of specific performance in contract law). This is therefore a non-issue. (ii) The Development of Institutional Constructive Trusts It has been argued by Lord Millett, writing extra-judicially, that instead of recognising the remedial trust, there exists a more viable alternative in developing the existing law of the institutional constructive trust: ‘There is neither room nor need for the remedial constructive trust… We need to be more ready to categorise wrongdoers as fiduciaries and to extend the situations in which proprietary remedies are made available, but we can do all this while adhering to established principles.’54 This argument purports that once developed, the institutional constructive trust can reap the same benefits of the remedial trust, such as greater protection for innocent third parties, whilst avoiding the problems the remedial trust brings. This is however erroneously idealistic if we adopt the understanding of the institutional constructive trust in lex lata and view it as a vindication of property rights.55 On this understanding, the institutional constructive trust is inherently and inevitably rigid. 52 See generally Craig Rotherham, Proprietary Remedies in Context (Hart Publishing 2002); cf William Swadling, ‘Policy Arguments for Proprietary Restitution’ (2008) 28 LS 506. This ‘bankruptcy puzzle’ is briefly summarised by Tang (n 23) [44]-[46].
This is evident from the Singapore case of PP v Intra Group,56 discussed briefly above. On the facts, Mr Chotirmall and the defendant attempted to create an express trust on a property, which turned out to be illegal and void. Mr Chotirmall later sold the property without the consent of the defendant. The defendant argued that despite the failure of the express trust, it was still the beneficiary of a constructive trust of the proceeds of sale. Yong Pung How CJ roundly rejected this argument, saying that if legislature does not permit the defendant’s claim ‘to bite on the property, neither can it bite on the proceeds. A proprietary claim premised on a constructive trust cannot… “lay dormant”: it either exists or it does not.’57 Given that the institutional constructive trust is based on a property law analysis, its application is stringent: it either exists, to the possible detriment of third parties, or it does not exist, to the possible detriment of the claimant. Ownership is a right good against the world; restitutionary defences like change of position cannot serve to undermine or transfer ownership. It is hard to see how, barring an overhaul of constructive trusts as a whole, any development of the doctrine can change the stringency of a property analysis and reap the benefits of flexibility that the remedial trust can. It is noted that the aforementioned defences of the remedial trust are heavily centred on the benefits of flexibility that arises from granting discretion to the court in determining the appropriate remedy. But several critics are wary of this judicial discretion. It is therefore to this issue that we now turn. B. Judicial Discretion and Legal Uncertainty Does the operation of judicial discretion in remedial trusts engender legal uncertainty? This seems the case, given that the courts can elect to impose a remedial trust as and when they see fit. This concern is especially worrying given that trusts are widely used in the commercial world, and any uncertainty might stifle commercial transactions. It is this fear of ‘palm-tree justice’ that caused Lord Neuberger to remark that ‘the remedial constructive trust represents an unnecessary weapon in the judiciary’s armoury, a book too many in equity’s library, and a discretion too many in a Chancery judge’s locker.’58 In fact, it could even be argued that recognising the remedial trust would bring the law of equity close to Lord Denning’s ‘new model’ of constructive trust (wherein a trust will arise ‘wherever justice and good conscience require it’),59 a model that has since been condemned for 56
(n 24).
53 Westdeutsche (n 3) 716.
57
ibid [26].
54 at19.
58
Lord Neuberger (n 45).
Lord Millett, ‘Equity: the road ahead’ (1995-1996) 6 KCLJ 1
55 Foskett v McKeown (n 9) 109.
59 Hussey v Palmer (n 3) 1290; Eves v Eves [1975] EWCA Civ 3, [1975] 1 WLR 1338, 1341-1342.
57