Reanalysing Institutional and Remedial Constructive Trusts

Abstract

It is often said that English law does not impose “remedial” constructive trusts because it is manifestly inappropriate and fundamentally unjustified to impose trusts through the exercise of judicial discretion and with retrospective effect. This paper observes the definitional deficiencies in this understanding, and reanalyses constructive trusts in terms of the rights which they give effect to. This understanding reveals that English law sets its face against the exercise of discretion in relation only to some “remedial” constructive trusts and not others, and that the perceived difficulties with remedial constructive trusts are often exaggerated. It ends by noting some crucial implications of the re-analysis for the future development of the law.

The Api-Api Constructive Trust Test: Coming Out of the Murky Into Dangerous Waters?

“…The application of proprietary claims in a discretionary manner without proper parameters may affect the rules applicable under the law of bankruptcy where the proprietary claim results in the claimant taking priority over the defendant"s general creditors. This has a potentially detrimental effect on such third parties (Liew, 2016). The concept of restitution should be infused into the law so as not to allow for the unjust enrichment of the plaintiff at the expense of the defendant.…”

“…In an institutional constructive trust, the role of the court is to confirm or declare a "pre-existing" trust where the person who is the "constructive trustee" has attempted to deny the interest of the person who is deemed to be the beneficiary. These are commonly understood to be trusts which are imposed without the exercise of judicial discretion (Liew, 2016) and may arise automatically. Presumably based on this spirit, it has been cautioned that the term "constructive" is to be used with care (Hemsworth, 2000).…”

“…A constructive trust in this category "has no prior existence…and the circumstances are such that" (Hingun and Wan, 2013) equity imposes the obligation onto the person, who holds the property, to hold it for the benefit of the rightful owner. In this category also, authorities suggest that the trust comes into play "at the discretion of the judge, who has the liberty to consider whether or not to create new property rights on a case-by-case basis" (Y. K. Liew, 2016). It has also been described as "nothing more than a formula for equitable relief" (Selangor United Rubber Estates Ltd v The Malaysian courts have tended to follow in the footsteps of their English counterparts in that, the preferred approach has been that to hold that the courts role is that to declare the trusts that exists from the beginning (Hingun and Wan, 2013).…”

Proprietary Remedies for Constructive Trusts: A ’Commonwealth Yardstick’ for Malaysian Courts

“…It is a trust where the courts using principles of equity, deem fit to impose an obligation onto the wrongdoing party to hold the property that he has obtained unconscionably for the benefit of the rightful owner. Authorities suggest that in this category of constructive trusts, a trust comes into play -at the discretion of the judge, who has the liberty to consider whether or not to create new property rights on a case-bycase basis‖ (Liew, 2016) as a -judicial remedy‖ (Westdeutsche Landesbank Girozentrale and Islington London Borough Council, 1996) and the imposition of a -trust by way of a remedy‖ (Ultraframe (UK) Ltd and Fielding, 2005). It has been submitted that, therefore, if there is no fiduciary obligation present in the circumstances, the courts will need to use the constructive trust as a ‗remedy' in the form of a remedial constructive trust (Iqbal-Singh et al, 2018).…”

“…The Malaysian Courts have accepted that constructive trust will be imposed as a ‗remedial device' starting from the Court of Appeal decision of Tay et al (2009) (hereinafter referred to as "Tay Choo Foo" followed by the Federal Court decisions of the (RHB Bank Berhad and Travelsight, 2016) (hereinafter referred to as -Travelsight Case‖) and Perbadanan and Properties (2017) (hereinafter referred to as the -Api-Api Case‖ since the subject matter of the case was in relation to a piece of land in the district of Api-Api, Kuala Selangor). It is a well-known fact that a constructive trust when imposed will give rise to a claim which is proprietary in nature which will then have far reaching implications for third parties (Liew, 2016). There is further trepidation of such implications in circumstances where are there are no clear guiding principles given by the courts as seen in the judicial pronouncements above (Iqbal-Singh et al, 2018).…”