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Essay question
‘[a]ll resulting trusts effect restitution of what would otherwise be the unjust enrichment of the recipient’, Robert Chambers, Resulting Trusts, (Oxford: OUP, 1997)
Critically discuss this statement.
Guide answer
The statement asserts that in every case in which a resulting
trust is properly enforced against a defendant, the absence of the
resulting trust would result in the unjust enrichment of the
defendant. The statement is uncontroversial as a description of
the outcome of any case in which a resulting trust solution is
improperly overlooked, but the statement is controversial if it
means to suggest that resulting trusts are enforced because
they reverse what would otherwise be an unjust enrichment
of the defendant. The reality is that resulting trusts are
enforced to ensure that the defendant returns an asset
belonging to another. It is the fact that the defendant is
holding an asset properly belonging to another which renders
“unjust” the continued holding of it by the defendant. In order
to defeat the claim made against him, it is no defence for the
defendant to say that he has not been unjustly enriched; his
only defence is to show that he has better title to the
property than the claimant. He will succeed in showing this if
he can demonstrate that the claimant has made an effective
disposition of the disputed asset in the defendant’s favour by
way of gift, or because the asset is held by the defendant as
part of a contract, loan or other arrangement to which the claimant has directly or indirectly consented.
Against this, Chambers asserts that ‘[t]he resulting trust is not merely the passive preservation of the provider’s pre-existing property interest, but is one of equity’s active responses to non-voluntary transfer’. Taken on its face, this statement is perfectly orthodox. To return assets to a donor whose disposition of those assets has been technically ineffective or otherwise unsuccessful as a matter of property law is not wholly passive response, for it fulfils the implied intentions of the donor. The donor might have intended to dispose of the assets, but if he was unsuccessful in his attempt, we can be sure that his secondary intention would be to recover the assets rather than to see them pass to the Crown as ownerless assets (bona vacantia). However, if this statement is read in conjunction with the assertion that ‘[a]ll resulting trusts effect restitution of what would otherwise be the unjust enrichment of the recipient’, the thesis appears to be that when equity’s active response takes the form of a resulting trust, it is an active response to the unjust enrichment of the defendant and not an active response to the implied intentions of the donor. This thesis adds an unnecessary and over-elegant gloss on the traditional property-basis for the resulting trust. It isolates the resulting trust within a novel restitutionary remedial framework and thereby severs the resulting trust from orthodox property law. So long as rights in assets vary between the legal and the equitable, it is inconceivable that all rights in assets should be regarded as simple homogenous “enrichment”, and without a simple homogenous idea of enrichment and an authoritative idea of “unjust”, a resulting trust that is merely the remedial reversal of unjust enrichment can never adequately fit the within the wider picture of orthodox property law.
Very often the language of unjust enrichment is simply out of place. Suppose, for example, that B had transferred property to A on trust for C ‘for so long as C shall live’, but had failed to direct for whom the property should be held on C’s death. The resulting trust that arises in favour of B when C dies is in no sense a response to the possibility that A will be personally unjustly enriched. A is fully aware that he has taken the property on trust and if he is unaware that B retains an interest in the property entitling him to retake possession when C dies, A should seek the directions of the court. At no point will A appear, or claim, to own the property beneficially—so he will never be unjustly enriched—and if he does claim the property beneficially he will have breached his trust and will have to account to B. It is artificial, and takes insufficient account of the nature of the office of trustee, to suggest that when a trustee accounts to trust beneficiaries he is merely acting in a negative way to prevent his own unjust enrichment, rather than acting in a positive way to discharge his trust in accordance with the best interests of the beneficiaries. Supporters of the restitution school acknowledge that:
The sanctity of property and its immunity to discretionary ‘adjustment’ is deeply rooted in legal thought. It is dictated by respect for the individual and individual preferences and by the fear of prejudicing third parties.
Bur the fear remains that certainty of proprietary title will be undermined if the current focus of the law of trusts, which aims to give effect to beneficiaries’ proprietary rights, is refocused on the reversal of the unjust enrichment.