Commercial Aspects of Trusts and Fiduciary Obligations

By Ewan McKendrick | Go to book overview

INTRODUCTION

Sir Peter Millett

When I introduced the speakers at the second session of the Oxford Law Colloquium held at St John's College, Oxford, I suggested that the time had come to cease to use the expressions 'constructive trust' and 'constructive trustee' in relation to the recovery of misapplied assets. There are, indeed, powerful arguments for dispensing with the concepts themselves as having no relevance in this context. As Professor Birks demonstrates in Chapter 8, the accessory is not a trustee and his personal liability is not dependent on the existence of any trust; while I have argued elsewhere that the trust which is operating where a restitutionary claim has a proprietary base is a resulting and not a constructive trust. But I was concerned only to make a semantic point: the use of the language of constructive trust has become such a fertile source of confusion that it would be better if it were abandoned. Sometimes it is the necessary foundation for a proprietary claim, sometimes for a purely personal claim.

The use of the phrase 'constructive trustee' is even more confusing. The accessory, charged with 'knowing assistance' in the misdirection of the plaintiff's money, is held to be 'liable to account as constructive trustee'. As Professor Birks points out, the last three words add nothing. But they are worse than superfluous, they are misleading. The accessory is not a trustee, and he may never have received the trust property in any sense, ministerially or otherwise. I have argued elsewhere that the words mean that he is liable to account 'as if he was a constructive trustee (which, strictly speaking he is not)'. The danger is that he may be thought to mean that he is liable to account 'as a constructive trustee because he is one'.

It would help to reduce confusion if in future we were to abandon these phrases in relation to the recovery of the misapplied assets, and distinguish instead between personal and proprietary claims. The phrase 'constructive trust' would not, of course, disappear from our vocabulary. There is still a need for it, for example, in relation to proprietary claims in respect of what are now commonly called 'deemed agency gains'.

-3-

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