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PROPRIETARY RESTITUTION AFTER IMPAIRED CONSENT TRANSFERS: A GENERALISED POWER MODEL

Published online by Cambridge University Press:  10 July 2009

Birke Häcker
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The Cambridge Law Journal , Volume 68 , Issue 2 , July 2009 , pp. 324 - 360
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Copyright © Cambridge Law Journal and Contributors 2009

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References

1 P. Birks, “Restitution and Resulting Trusts” in S. Goldstein (ed.), Equity and Contemporary Legal Developments (Jerusalem 1992), reprinted in P. Birks and F. Rose (eds.), Restitution and Equity, vol. 1: Resulting Trusts and Equitable Compensation (London 2000). A precursor is to be found in P. Birks, An Introduction to the Law of Restitution (Oxford 1985) 60–64.

2 A terminological clarification is apposite at this point: the terms “property rights/proprietary interests” are here used interchangeably with “rights/interests in rem”. In accordance with the conventional usage, they are intended to denote rights or interests that relate (whether directly or indirectly) to a physical object and are prima facie binding on the whole world (at common law) or at least potentially binding on anyone acquiring the estate affected by them (in equity). The category of “interests”, including in particular powers, is slightly broader than that of vested “rights” in the narrower sense. Although the present paper will deal primarily with physical objects or “things” (res), it should be borne in mind that the asset concerned may also be intangible, e.g. a chose in action. To this extent, the description of rights or interests as being “in rem” has to be treated with caution, albeit that the core argument applies, mutatis mutandis, to all types of assets (cf. text to notes 7–8 below). The difficulties caused by the “in rem” language have now led B. McFarlane, The Structure of Property Law (Oxford 2008) to distinguish more clearly between genuine “property rights” at common law (rights in a thing: prima facie binding on the whole world) and “persistent rights” in equity (rights to rights: potentially binding on anyone acquiring the right affected). For simplicity of exposition, the present paper adheres to the conventional terminology, yet this should not be taken to indicate a substantive disagreement with McFarlane.

3 See esp. (in chronological order) Birks in Equity and Contemporary Legal Developments (note 1); W. Swadling, “A New Role for Resulting Trusts?” (1996) 16 L.S. 110; R. Chambers, Resulting Trusts (Oxford 1997); R. Grantham and C. Rickett, “Resulting Trusts – A Rather Limited Doctrine” in P. Birks and F. Rose (eds.), Restitution and Equity, vol. 1: Resulting Trusts and Equitable Compensation (London 2000); W. Swadling, “A Hard Look at Hodgson v. Marks” in Restitution and Equity (immediately above); Chambers, R., “Resulting Trusts in Canada” (2000) 38 Alberta Law Rev. 378Google Scholar, reprinted in (2002) 16 Trust Law Int. 104, 138; idem, “Resulting Trusts and Equitable Compensation” (2001) 15 Trust Law Int. 2; idem, “Resulting Trusts” in A. Burrows and A. Rodger (eds.), Mapping the Law: Essays in Memory of Peter Birks (Oxford 2006); W. Swadling, “Explaining Resulting Trusts” (2008) 124 L.Q.R. 72; E. O'Dell, “The Resulting Trust” in C. Rickett and R. Grantham (eds.), Structure and Justification in Private Law: Essays for Peter Birks (Oxford 2008).

4 See text to note 90 below.

5 A fourth possible approach would be to award the claimant transferor a lien over the asset transferred to secure his personal restitutionary claim against the defendant recipient. However, since none of the relevant cases on impaired consent transfers support such a model of proprietary restitution, it will not be specifically considered in this paper.

6 This paper will adopt the traditional “unjust factor” approach to restitution for unjust enrichment, but everything in it is equally compatible with the alternative “absence of basis” approach eventually espoused by P. Birks, Unjust Enrichment (2nd ed., Oxford 2005). Even a legal system which organises its law of unjust(ified) enrichment around the unifying concept of “absence of basis” cannot wholly dispense with unjust factors (such as mistake or duress), albeit that these tend to operate more covertly in the background.

7 Where a conveyance relates to registered land, the relevant legal estate cannot revert to the transferor without an appropriate amendment of the register. Note moreover that, because of the wider availability of specific performance in the context of realty, the argument for the immediate interest (resulting trust) model of proprietary restitution will be much stronger there than in the context of personalty: cf. note 108 below.

8 In the absence of a tangible thing (res), it may then be inappropriate to describe the power as being “in rem”. However, it remains true that the exercise of the power is either effective as against the whole world (if a common law power to revest is at issue) or at least potentially binding on anybody who subsequently acquires the right to which it relates (if the power is merely equitable): cf. note 2 above.

9 Cf. W. Swadling, “Rescission, Property, and the Common Law” (2005) 121 L.Q.R. 123: idem, “Unjust Delivery” in A. Burrows and A. Rodger (eds.), Mapping the Law: Essays in Memory of Peter Birks (Oxford 2006).

10 Swadling in Mapping the Law (note 9) esp. pp. 287–298. Swadling describes this scenario as one of “unjust delivery”, but see comment in note 27 below.

11 It is not entirely clear whether the recipient needs to be aware of the transferor's identity mistake to render the conveyance by delivery ineffective. In the contractual context, such knowledge is required: cf. e.g. Cundy v. Lindsay (1878) 3 App. Cas. 459; Ingram v. Little [1961] 1 Q.B. 31. R. v. Middleton (1873) L.R. 2 C.C.R. 38, the leading case on identity mistake outside the contractual context, seems to point in the same direction.

12 Cf. Duke de Cadaval v. Collins (1836) 4 Ad. & El. 858, 111 E.R. 1006; Grainger v. Hill (1838) 4 Bing. N.C. 212, 132 E.R. 769. In Barton v. Armstrong [1976] A.C. 104, certain deeds signed under threats of physical violence and even death were said to be “void” for duress. However, the point was not argued and their Lordships' reasoning is equally consistent with the deeds being voidable and set aside.

13 See esp. W. Swadling, “Ignorance and Unjust Enrichment: The Problem of Title” (2008) 28 O.J.L.S. 627, and cf. also text to notes 123–129 below.

14 For Swadling's criticism of the Birks/Chambers immediate interest model of proprietary restitution see in particular Swadling (1996) 16 L.S. (note 3); idem “Explaining Resulting Trusts” (2008) 124 L.Q.R. 72; and cf. also text to notes 110–114 below.

15 Swadling (2005) 121 L.Q.R. (note 9) at p. 142. Discussing the example of a fraudulently induced gift of a £20 note, Swadling states that “[a]t common law, your title to that note passes to me and you have no ability to pull it back”.

16 Ibid., at pp. 139–142. The “principle of abstraction” is most closely associated with German private law, where it lies at the heart of the Civil Code (Bürgerliches Gesetzbuch, abbreviated BGB). It has its roots in 19th century Historical/Pandectist jurisprudence and is usually attributed to Friedrich Carl von Savigny. On the effects of abstraction in German law cf. also note 17 immediately below.

17 Note that, in denying the voidability of a conveyance induced by fraud (cf. note 15 above), Swadling actually goes further than the German BGB. Despite the abstract nature of conveyances, German law typically allows victims of fraud or duress to avoid not only their contractual obligations, but also any transfer of ownership made in pursuance of these obligations: §§ 929, 142, 123 BGB (constituting a recognised “apparent” exception to the principle of abstraction).

18 Cf. esp. W. Swadling, “Property and Unjust Enrichment” in J.W. Harris (ed.), Property Problems: From Genes to Pension Funds (London 1997) at pp. 142–145; idem, (2005) 121 L.Q.R. (note 9) at pp. 137–138. On the whole, however, Swadling is sceptical of the value of policy arguments informing the debate: idem, “Policy Arguments for Proprietary Restitution” in S. Degeling and J. Edelman (eds.), Unjust Enrichment in Commercial Law (Sydney 2008) esp. pp. 372–375.

19 See text to note 90 below.

20 See esp. Chambers, R., “Resulting Trusts in Canada” (2000) 38 Alberta Law Rev. 378, at pp. 409–410Google Scholar; reprinted in (2002) 16 Trust Law Int. 104, 138, at pp. 146–147; R. Calnan, “Imposing Proprietary Rights” [2004] R.L.R. 1, at p. 12. For similar reasoning in the context of restitution for wrongs cf. Attorney General of Hong Kong v. Reid [1994] 1 A.C. 324.

21 Cf. now also R. Chambers, “Two Kinds of Enrichment” in R. Chambers, C. Mitchell and J. Penner (eds.), Philosophical Foundations of the Law of Unjust Enrichment (OUP 2009) esp. pp. 252–261, 267–273. Chambers there argues that whenever a defendant's enrichment consists in the acquisition of a right, that right itself has to be given up.

22 It is sometimes suggested that the duty to make restitution in specie (if it exists) applies only to objects other than money. However, while it is true that money passes into currency more readily than other movables, there is no difference in principle between the two cases. As Bankes L.J. pointed out in Banque Belge pour l'Etranger v. Hambrouck [1921] 1 K.B. 321, at p. 326, “the difference between currency and a chattel personal is one of fact and not of law”.

23 See esp. P. Birks, “Restitution and Resulting Trusts” in S. Goldstein (ed.), Equity and Contemporary Legal Developments (Jerusalem 1992); R. Chambers, Resulting Trusts (Oxford 1997) esp. pp. 11–39, 111–142, 171–184; idem, “Resulting Trusts” in A. Burrows and A. Rodger (eds.), Mapping the Law: Essays in Memory of Peter Birks (Oxford 2006).

24 Support for this proposition is drawn from the other traditional category of resulting trusts: the so-called “automatic resulting trust”, which arises when an express trust fails (e.g. for lack of certainty or non-exhaustion), is explained by the fact that the recipient is shown never to have been intended to hold the property outright.

25 In his later work, Birks came close to defending a generalised power model of proprietary restitution for all impaired consent transfer cases: P. Birks (ed.), English Private Law (Oxford 2001), vol. 2, at paras. [15.214]–[15.220], idem, Unjust Enrichment (note 6) at pp. 184, 188–189, 192. Lord Millett, too, has shown some sympathy towards the idea of regarding impaired consent transfers as “voidable”: P. Millett, “Restitution and Constructive Trusts” (1998) 114 L.Q.R. 399, at p. 416. However, he immediately qualified his endorsement of the power model by restricting the availability of proprietary restitution to objects of “special value” (cf. text to note 108 below), and he has since been won over by Swadling's “abstractionist” argument: P. Millett, “Proprietary Restitution” in S. Degeling and J. Edelman (eds.), Equity and Commercial Law (Sydney 2005) at fn. 31 on p. 320. Most recently, an argument which is consistent with the power model of proprietary restitution has been put forward for money cases by D. Fox, Property Rights in Money (Oxford 2008) ch. 6.

26 Chattels can be conveyed in one of three ways. Under a contract of sale, title passes solo consensu when the parties intend it to pass, usually as soon as the contract is concluded: Sale of Goods Act 1979, s. 17 and s. 18 rule 1. Otherwise a traditio of the chattel to the transferee or the execution of a formal “deed” is required to effect the conveyance.

27 The term “unjust delivery”, which Swadling uses to describe transfers that are completely void, e.g. for identity mistake (cf. note 10), is apt to mislead. It would better be reserved for cases in which the transfer is prima facie valid, but voidable at the transferor's instance.

28 For a historical overview see e.g. J. Cartwright, Misrepresentation, Mistake and Non-Disclosure (2nd ed., London 2007) at paras. [4.01]–[4.04]; D. O'Sullivan, S. Elliott and R. Zakrzewski, The Law Of Rescission (Oxford 2008) at paras. [3.01]–[3.54], [4.09]–[4.11], [6.01]; J. O'Sullivan, “Rescission as a Self-Help Remedy: A Critical Analysis” [2000] C.L.J. 509, at pp. 516–525.

29 Cf. the Australian case of Alati v. Kruger (1955) 94 C.L.R. 216, at p. 224: “Of course, a rescission which the common law courts would not accept as valid cannot of its own force revest the legal title to property which had passed, but if a court of equity would treat it as effectual the equitable title to such property revests upon rescission.”

30 (1841) 4 Beav. 115, 49 E.R. 282; aff'd (1841) Cr. & Ph. 240, 41 E.R. 482.

31 Cf. Millett (1998) 114 L.Q.R. (note 25) at p. 416: “Pending rescission the transferee has the whole legal and beneficial interest in the property …”; Barclays Bank plc v. Boulter [1999] 4 All E.R. 513, at p. 518 (Lord Hoffmann).

32 Or better: the relevant title. Note that the exercise of a common law power has erga omnes effect.

33 On the use of the “in rem” terminology in the present paper see note 2 above.

34 On the special questions arising in connection with spontaneous mistakes see below, section IV.D.1 of the present paper (at pp. 354–357).

35 [1965] 1 Q.B. 525.

36 I have argued elsewhere that the protection of innocent third party purchasers for value requires no more than the loss of A's common law power in respect of the original chattel. As such, it is an aspect of the bona fide purchase defence. The intervention of third party rights should, on the other hand, never be a sufficient reason for “barring” rescission of the bargain between the contracting parties: B. Häcker, “Rescission and Third Party Rights” [2006] R.L.R. 21. This view is now also adopted by D. O'Sullivan et al., Law of Rescission (note 28) at paras. [20.01]–[20.22].

37 [1995] 1 A.C. 74.

38 If the metal had been allocated, the claimants would have acquired title: cf. Sale of Goods Act 1979, s. 18 rule 5 for English law. In Re Goldcorp, this would appear to have been the position of the so-called “Walker & Hall claimants”, who could assert a proprietary interest in the bullion held by the company subject to the “lowest intermediate balance” rule: see [1995] 1 A.C. 74, at pp. 107–108.

39 [1995] 1 A.C. 74, at p. 102.

40 (1887) 36 Ch.D. 145.

41 The dissenting judge, Cotton L.J., thought that Miss Allcard had “never effectually parted” with the beneficial interest in the property and therefore treated it as “being held by the [Mother Superior] in trust for her”. This vested equitable interest was not affected by Miss Allcard's delay in seeking restitution: ibid., at pp. 172–175.

42 (1887) 36 Ch.D. 145, at pp. 181, 186–187.

43 Ibid., at p. 181.

44 [1921] 1 K.B. 321.

45 Ibid., at pp. 325 (Bankes L.J.), 332 (Atkin L.J.). Only Scrutton L.J. thought that Hambrouck had “no title” as against the claimant bank: ibid., at p. 329.

46 [1981] Ch. 105.

47 Ibid., at pp. 118–120.

48 [1996] A.C. 669.

49 Hazell v. Hammersmith and Fulham London Borough Council [1992] 2 A.C. 1.

50 Westdeutsche Landesbank Girozentrale v. Islington London Borough Council [1994] 4 All E.R. 890; [1994] 1 W.L.R. 938.

51 The legal position has since changed: see note 53 below.

52 Cf. [1996] A.C. 669, at pp. 676–677.

53 Lord Goff and Lord Woolf dissented on the basis that compound interest should be made more widely available for personal restitutionary claims: ibid., at pp. 684, 690–698, 719–737. This step has now been taken by the House of Lords decision in Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v. Inland Revenue Commissioners [2007] UKHL 34, [2008] A.C. 561.

54 [1996] A.C. 669, at pp. 683–690 (Lord Goff), 703–716 (Lord Browne-Wilkinson).

55 Ibid., at p. 706 (Lord Browne-Wilkinson).

56 Ibid., at pp. 689–690 (Lord Goff), 708–709 (Lord Browne-Wilkinson).

57 Ibid., at pp. 684 (Lord Goff), 703 (Lord Browne-Wilkinson).

58 This is usually expressed in the maxims “qui prior est tempore, potior est iure” and that “where the equities are equal, the first in time prevails”.

59 [1996] A.C. 669, at pp. 703–705.

60 Or at least supposedly: cf. text to notes 148–158 below.

61 [1996] A.C. 669, at pp. 705–706.

62 Ibid., at p. 705.

63 Ibid., at p. 715: “Although the mere receipt of moneys, in ignorance of the mistake, gives rise to no trust, the retention of the moneys after the recipient bank learned of the mistake may well have given rise to a constructive trust.”

64 See text to notes 35–36 above. It is true that the decision in Caldwell is not without its critics. However, most of the concern raised is with the prejudice suffered by innocent third parties as a result of allowing “rescission without notice”: e.g. Law Reform Committee, Twelfth Report: Transfer of Title to Chattels (Cmnd. 2958, 1966) at para. [16]; J. O'Sullivan [2000] C.L.J. (note 28) at pp. 531–533. Courts have therefore sought to limit the effects of the Caldwell doctrine for third parties by a generous application of the provisions governing bona fide purchase from a “buyer in possession after sale” (cf. Factors Act 1889, s. 9, and Sale of Goods Act 1979, s. 25): Newtons of Wembley Ltd v. Williams [1965] 1 Q.B. 560. They are, moreover, unlikely to extend the Caldwell doctrine “rescission without notice” beyond the case of fraud.

65 E.g. Load v. Green (1846) Mees. & W. 216, 153 E.R. 828; Clough v. London and North Western Railway Co. (1871) L.R. 7 Ex. 26; Re Eastgate, ex p. Ward [1905] 1 K.B. 465; Tilley v. Bowman Ltd [1910] 1 K.B. 745; Thomas v. Heelas [1988] C.L.Y. 3175.

66 The section codifies the relevant bona fide purchase defence and reads: “When the seller of goods has a voidable title to them, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller's defect of title.”

67 Cf. Sale of Goods Act 1979, s. 17 and s. 18 rule 1.

68 Swadling (2005) 121 L.Q.R. (note 9) at pp. 125, 135–136, 152.

69 It does therefore not matter for our purposes whether the delivery of goods by a seller to his buyer has any independent conveyancing effect, as Swadling suggests: ibid., at pp. 141–142. Even if it did, the conveyance by delivery could be avoided on the same ground as the sale contract: B. Häcker, “Rescission of Contract and Revesting of Title: A Reply to Mr Swadling” [2006] R.L.R. 106, at pp. 110–111. Cf. now also the discussion by Fox, Property Rights in Money (note 25) at paras. [3.61]–[3.67].

70 Barter may be another. There is no English authority on the issue, but the Irish Supreme Court has held that title to a bartered chattel cannot pass without delivery: Flynn v. Mackin [1974] I.R. 101, esp. pp. 111–112 (Walsh J.). Cf. also O'Regan v. White [1919] 2 I.R. 346, at pp. 362–363, where Ronan L.J. stated that the sale of goods “is, as far as I know, the only case in which a contract passes the legal estate in property … at common law”.

71 [1956] 1 Q.B. 439, at p. 445 (obiter).

72 [1993] 3 All E.R. 717, at p. 734, rev'd on different grounds [1994] 2 All E.R. 685. See also Lonrho v. Al Fayed (No. 2) [1992] 1 W.L.R. 1, at pp. 12–13 (Millett J.); Bank Tejarat v. Hong Kong and Shanghai Banking Corp. (CI) Ltd [1995] 1 Lloyd's Rep. 239, at p. 248 (Tuckey J.); Bristol and West Building Society v. Mothew [1998] Ch. 1, at pp. 22–23 (Millett L.J.); Shalson v. Russo (Tracing Claims) [2003] EWHC 1637 (Ch.), [2005] Ch. 281, at paras. [121]–[127] (Rimer J.).

73 In equity, unlike (supposedly) at common law, it is possible to trace through mixed funds: cf. e.g. Clayton's Case (1816) 1 Mer. 572, 35 E.R. 781; Re Hallett's Estate (1880) 13 Ch.D. 696, esp pp. 708–710 (Jessel M.R.); Sinclair v. Brougham [1914] A.C. 398, esp. pp. 418–422 (Viscount Haldane L.C.); Banque Belge pour l'Etranger v. Hambrouck [1921] 1 K.B. 321, at pp. 327–328 (Bankes L.J.), 330 (Scrutton L.J.), 332–336 (Atkin L.J.); Agip (Africa) Ltd v. Jackson [1990] Ch. 265, at pp. 285–286 (Millett J.), [1991] Ch. 547, at pp. 563–566 (Fox L.J.).

74 See text to notes 37–39 above.

75 Cf. also the discussion in D. O'Sullivan et al., Law of Rescission (note 28) at paras. [16.05]–[16.09], [16.42]–[16.54], who favour a proprietary response for the case of fraud, but not for e.g. non-fraudulent misrepresentation.

76 [1995] 1 A.C. 74, at p. 102.

77 Ibid.

78 Cf. Shalson v. Russo (Tracing Claims) [2003] EWHC 1637 (Ch.), [2005] 2 W.L.R. 1213, at para. [126] (Rimer J.); P. Birks, “Establishing a Proprietary Base” [1995] R.L.R. 83, at p. 88.

79 [1995] 1 A.C. 74, at p. 102. Cf. also D. Hayton, “Ascertainability in Transfer and Tracing of Title” [1994] L.M.C.L.Q. 449, at p. 452.

80 Although equity is able to trace through mixed funds (cf. note 73), it cannot trace through overdrawn bank accounts: Roscoe (Bolton) Ltd v. Winder [1915] 1 Ch. 62; Bishopsgate Investment Management Ltd (In Liquidation) v. Homan [1995] Ch. 211. Note that the defendant council in Westdeutsche Landesbank Girozentrale v. Islington London Borough Council (cf. text to notes 48–63) had also paid the money received from the claimant bank into a mixed bank account and had subsequently overdrawn this account on several occasions, a circumstance which Lord Browne-Wilkinson considered to be of “central importance”: [1996] A.C. 669, at p. 700.

81 Shalson v. Russo (Tracing Claims) [2003] EWHC 1637 (Ch.), [2005] 2 W.L.R. 1213, at para. [126] (Rimer J.), referring to Ayerst (Inspector of Taxes) v. C & K Construction Ltd [1976] A.C. 167. Cf. also P. Watts, “Birks and Proprietary Claims, with Special Reference to Misrepresentation and to Ultra Vires Contracts” in C. Rickett and R. Grantham (eds.), Structure and Justification in Private Law: Essays for Peter Birks (Oxford 2008) at pp. 372–376, who argues that section 127(1) of the Insolvency Act 1986 could be read to have this effect.

82 Load v. Green (1846) Mees. & W. 216, 153 E.R. 828; Re Eastgate, ex p. Ward [1905] 1 K.B. 465; Tilley v. Bowman Ltd [1910] 1 K.B. 745. In Shalson v. Russo (Tracing Claims) [2003] EWHC 1637 (Ch.), [2005] 2 W.L.R. 1213, at para. [126], Rimer J. went on to consider cases in which comparable third party rights had not accrued (where he may have intended to include the case of individual bankruptcy) and observed that the assertion of a proprietary interest “would not involve giving [the rescinding representee] any preferential rights over creditors: it would merely assert his right to recover property in which they can have no interest.”

83 Cf. Birks, Unjust Enrichment (note 6) at p. 181; Swadling in Unjust Enrichment in Commercial Law (note 18) at pp. 372–375.

84 The so-called doctrine of “reputed ownership”, for example, formerly allowed assignees in bankruptcy to sell for the benefit of the bankrupt's creditors any goods of which the bankrupt was the “reputed owner” and which had come into his possession “by the consent and permission of the true owner thereof”: cf. Bankruptcy Act 1825, s. 72.

85 At a conceptual level, exercise of this power in rem is best seen as notionally separate from rescission of the contract in pursuance of which the transfer was effected, at least in those cases where the contract itself did not act as the vehicle of conveyance (i.e. especially in money cases like Re Goldcorp). However, so as to avoid undermining the parties' bargaining relationship, the transferor will usually be estopped from exercising his power in rem so long as the underlying contract remains unrescinded.

86 Chambers, Resulting Trusts (note 23) at p. 171; see also pp. 171–184.

87 E.g. Westdeutsche Landesbank Girozentrale v. Islington London Borough Council [1996] A.C. 669, at p. 716 (Lord Browne-Wilkinson): “when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient”. An immediately vested interest under a trust was also found to exist in Collings v. Lee [2001] 2 All E.R. 332 (the case was actually one of identity fraud and may be better explained on the basis that the conveyance of the relevant freehold estate in registered land to the “transferee” would have been void at common law if personalty had been involved) and in Halley v. Law Society [2003] EWCA Civ 97. The view that the fraudster becomes a trustee immediately upon receipt is now also adopted by McFarlane, Structure of Property Law (note 2) at pp. 301–302.

88 [2003] EWHC 1637 (Ch.), [2005] 2 W.L.R. 1213, esp. paras. [107]–[127].

89 Ibid., at para. [108]. Similarly, in Lonrho plc v Al-Fayed (No. 2) [1992] 1 W.L.R. 1, at pp. 12–13, Millett J. stated that “[a] contract obtained by fraudulent misrepresentation is voidable, not void, even in equity. The representee may elect to avoid it, but until he does so the representor is not a constructive trustee of the property transferred pursuant to the contract”. Cf. also Guinness plc v. Saunders [1990] 2 A.C. 663, at p. 698 (Lord Goff); Bristol and West Building Society v. Mothew [1998] Ch. 1, at p. 22 (Millett L.J.); S. Worthington, “The Proprietary Consequences of Rescission” [2002] R.L.R. 28, at pp. 38–40.

90 R. Chambers, “Resulting Trusts” in A. Burrows and A. Rodger (eds.), Mapping the Law: Essays in Memory of Peter Birks (Oxford 2006) at p. 261. See also idem, “Resulting Trusts and Equitable Compensation” (2001) 15 Trust Law Int. 2, at p. 7; idem (2002) 16 Trust Law Int. (note 20) at pp. 105, 145–147, esp. fn. 31 on p. 147.

91 Even on the traditional “unjust factor” approach to restitution for unjust enrichment, the existence of a valid “legal basis” precludes a personal claim because the transfer then discharges a debt owed to the payee: cf. Barclays Bank Ltd v. W.J. Simms Son & Cooke (Southern) Ltd [1980] Q.B. 677, at p. 695 (Robert Goff J.).

92 The power would be in rem only because exercise of the rescinding party's power in personam (i.e. the avoidance of the “legal basis”) would automatically entail proprietary restitution. Cf. L. Smith, “Unjust Enrichment: Big or Small?” in S. Degeling and J. Edelman (eds.), Unjust Enrichment in Commercial Law (Sydney 2008) at p. 44, and see comment in note 93 immediately below.

93 In effect, the first interpretation of Chambers' concession therefore describes a transfer system which is “abstract” at common law, but “causal” in equity.

94 Emphasis added. See text to note 90 above.

95 In effect, this interpretation entails a transfer system which is “abstract” both at common law and in equity, but which nevertheless leaves much leeway for “apparent exceptions” to the principle of abstraction in cases where the identical defect (e.g. an induced mistake) besets both contract and conveyance: cf. comment in note 17 above.

96 In his contribution to Mapping the Law (note 90), Chambers writes at p. 289 that “[u]njust factors can affect the particular method of proprietary restitution”, and he gives rights to rescind “transactions” induced by fraud, duress, undue influence or innocent misrepresentation as relevant examples.

97 R. Chambers, An Introduction to Property Law in Australia (2nd ed., Sydney 2008) at para. [24.140].

98 See text to notes 40–43 above.

99 Lindley L.J. regarded his view that lapse of time debarred Miss Allcard from recovery as “conformable to the well-established rules relating to other voidable transactions” and cited Clough v. London and North Western Railway Co (1871) L.R. 7 Ex. 26, a contract case (cf. note 65), in support: (1887) 36 Ch.D. 145, at p. 173. The problem would appear to be partly rooted in the fact that the traditional forms of action only catered for “rescission” (proprietary restitution of specific chattels) and “money had and received” (personal value-based claim to restitution in payment cases), but not for personal value-based claims effecting restitution in cases where chattels other than money had been conveyed under a defect of consent.

100 Gifts are sometimes regarded as special non-bargain transactions deserving a similar degree of protection as contracts: cf. e.g. S. Meier, “Unjust Factors and Legal Grounds” in D. Johnston and R. Zimmermann (eds.), Unjustified Enrichment: Key Issues in Comparative Perspective (Cambridge 2002) at pp. 40–54; H.W. Tang, “Restitution for Mistaken Gifts” (2004) 20 J.C.L. 1; Deutsche Morgan Grenfell Group plc v. Inland Revenue Commissioners [2006] UKHL 49, [2007] 1 A.C. 558, at para. [87] (Lord Scott).

101 See text to notes 44–45 above.

102 Banque Belge was exceptional in that no mixed funds were involved. Recourse to the equitable tracing rules was therefore not necessary, though it seems that Scrutton L.J. nevertheless preferred to rely on them: cf. [1921] 1 K.B. 321, at pp. 327–328 (Bankes L.J.), 330 (Scrutton L.J.), 333–36 (Atkin L.J.).

103 See text to notes 193–194 below.

104 E.g. Lysaght v. Edwards (1876) 2 Ch.D. 499, at p. 506 (Jessel M.R.); Walsh v. Lonsdale (1882) 21 Ch.D. 9; Critical: W. Swadling, “The Vendor-Purchaser Constructive Trust” in S. Degeling and J. Edelman (eds.), Equity in Commercial Law (Sydney 2005). The maxim can apparently also apply to a contract for the sale of shares: e.g. Neville v. Wilson [1997] Ch. 144; Michaels v. Harley House (Marylebone) Ltd [2000] Ch. 104. As far as the sale of ordinary goods is concerned, specific performance (meaning a transfer of possession by delivery, given that title to the goods passes solo consensu) will usually be restricted to unique chattels: cf. Sale of Goods Act 1979, s. 52.

105 McFarlane, Structure of Property Law (note 2) at p. 305, therefore defines the recipient's duty more cautiously in terms of an obligation not to use the right acquired (here title to a chattel) for his own benefit.

106 The universality of a personal value-oriented response to unjust enrichment measured by reference to the defendant's wealth as an abstract fund is nowadays widely accepted: e.g. Birks in English Private Law (note 25) vol. 2, at paras. [15.177]–[15.179]; idem, Unjust Enrichment (note 6) at pp. 168–172; A. Burrows (ed.), English Private Law (2nd ed., Oxford 2007) at paras. [18.168]–[18.172] (C. Mitchell). The assumption also underlies the treatment by A. Burrows, The Law of Restitution (2nd ed., London 2002) esp. p. 53; G. Virgo, The Principles of the Law of Restitution (2nd ed., Oxford 2006) esp. pp. 60–61. But contrast Chambers in Philosophical Foundations (note 21) esp. pp. 267–268.

107 Cf. also the actions for quantum meruit and quantum valebat. On the historical lack of an appropriate form of action for personal value-based restitutionary claims triggered by defective conveyances of chattels other than money see note 99 above.

108 P. Millett, “Restitution and Constructive Trusts” (1998) 114 L.Q.R. 399, at p. 416. Critical: Chambers in Mapping the Law (note 90) at p. 259. If it could be said that, because of the special nature of realty, a mistaken transferor of an estate in land always had a claim to specific recovery (as opposed to merely a claim for restitution of its value), then the maxim that “equity regards as done that which ought to be done” would indeed appear to lead to the creation of an immediately vested equitable interest. To this extent, the power model of proprietary restitution would be displaced in land cases.

109 Even a claim in the tort of conversion, by which the claimant asserts a vested common law property right (namely title), normally sounds in damages and allows for delivery up only in exceptional circumstances: cf. Torts (Interference with Goods) Act 1977, s. 3.

110 W. Swadling, “A New Role for Resulting Trusts?” (1996) 16 L.S. 110. The historical starting point is not disputed by Birks and Chambers.

111 [1996] A.C. 669, at p. 689 (Lord Goff) and pp. 703, 708 (Lord Browne-Wilkinson).

112 W. Swadling, “Explaining Resulting Trusts” (2008) 124 L.Q.R. 72, at p. 86.

113 Milroy v. Lord (1862) 4 De G. F. & J. 264, 45 E.R. 1185.

114 Swadling (2008) 124 L.Q.R. (note 112) at pp. 86–88.

115 E.g. Wright v. Vanderplank (1855) 2 Kay & J. 1, 69 E.R. 669; Allcard v. Skinner (1887) 36 Ch.D. 145; Zamet v. Hyman [1961] 1 W.L.R. 1442; Hammond v. Osborn [2002] EWCA Civ 885; Pesticcio v. Huet [2004] EWCA Civ 372. Cf. Royal Bank of Scotland plc v. Etridge (No. 2) [2001] UKHL 44, [2002] 2 A.C. 773, for the most recent comprehensive restatement of the role played by presumptions in the law of undue influence.

116 As in e.g. Allcard v. Skinner (1887) 36 Ch.D. 145; Hammond v. Osborn [2002] EWCA Civ 885; Pesticcio v. Huet [2004] EWCA Civ 372.

117 On such cases of “fundamental mistake” or extreme duress see text to notes 10–12 above.

118 This consideration also brought Millett (1998) 114 L.Q.R. (note 108) close to espousing a generalised power model of proprietary restitution, but see note 25 above on his qualification and later rejection of the power model.

119 Cf. Swadling (1996) 16 L.S. (note 110) at pp. 111–112, 116–117, 131; idem (2008) 124 L.Q.R. (note 112) at pp. 92–93; Westdeutsche Landesbank Girozentrale v. Islington London Borough Council [1996] A.C. 669, at p. 708 (Lord Browne-Wilkinson); Millett (1998) 114 L.Q.R. (note 108) at p. 402.

120 In our mistaken payment example, only a “beneficial” transfer would fulfil A's objective of discharging his (supposed) liability to B.

121 Cf. Robert Goff L.J.'s critical observations in Whittaker v. Campbell [1984] Q.B. 318, at pp. 326–328. Similar: Shogun Finance Ltd v. Hudson [2003] UKHL 62, [2004] 1 A.C. 919, at paras. [6]–[8] (Lord Nicholls).

122 Chambers identifies and describes these two different “kinds of restitution” in Mapping the Law (note 90) at pp. 256–257, but now prefers to speak of one kind of restitution applying to two different “kinds of enrichment”: idem in Philosophical Foundations (note 21). On the universality of the value-based personal claim see note 106 above.

123 The problem is usually discussed under the heading of “ignorance” and “powerlessness” as reasons for restitution and with a focus on the three-party scenario (e.g. B steals A's money and makes a gift of it to C): cf. Birks, Introduction (note 1) at pp. 140–146; Burrows, Law of Restitution (note 106) at pp. 182–210; Virgo, Principles (note 106) at pp. 131–134.

124 On the question of whether B's knowledge is crucial cf. note 11 above.

125 Unfortunately, the action for money had and received is ambiguous as between different causative events. It applies both where B is unjustly enriched at A's expense (restitution for autonomous unjust enrichment) and also where B has interfered with A's common law right to possession of a chattel and A “waives” the tort in order to obtain a gain-based damages award (restitution for wrongs).

126 A's title to the money would be destroyed by bona fide purchase for value or indistinguishable mixing. On the former: Miller v. Race (1758) 1 Burr. 452, 97 E.R. 398. On the latter cf. note 73 and corresponding text, and see also Fox, Property Rights in Money (note 25) at paras. [7.16]–[7.22].

127 Cf. the Australian case of Ilich v. R. (1987) 162 C.L.R. 110, at pp. 140–141 (Brennan J.). Cf. also W. Swadling, “A Claim in Restitution?” [1996] L.M.C.L.Q. 63, esp. p. 65; idem, “Ignorance and Unjust Enrichment: The Problem of Title” (2008) 28 O.J.L.S. 627; R. Grantham and C. Rickett, “On the Subsidiarity of Unjust Enrichment” (2001) 117 L.Q.R. 273, at pp. 291–293; eidem, “Property Rights as a Legally Significant Event” [2003] C.L.J. 717, at pp. 741–744.

128 This is the view advocated by e.g. A. Burrows, “The Relationship between Unjust Enrichment and Property: Some Unresolved Issues” in S. Degeling and J. Edelman (eds.), Unjust Enrichment in Commercial Law (Sydney 2008) at pp. 334–338; idem, Law of Restitution (note 106) at pp. 75–76, 185–186. Similar: Virgo, Principles (note 106) at pp. 134–135. Although Virgo regards claims based on unjust enrichment and claims based on the “vindication of property rights” as in principle mutually exclusive, he would nevertheless appear to allow for the concurrence of A's proprietary interest (his surviving title) with a personal claim to restitution of B's factual enrichment constituted by B's possession of A's chattel.

129 The possibility of so-called “alternative analysis” is explained in this way by P. Birks, “Receipt” in P. Birks and A. Pretto (eds.), Breach of Trust (Oxford 2002) at p. 232, idem, Unjust Enrichment (note 6) at pp. 63–68.

130 Supreme Court of Judicature Acts 1873–75.

131 (1841) 4 Beav. 115, 49 E.R. 282; aff'd (1841) Cr. & Ph. 240, 41 E.R. 482.

132 Chambers avoids this difficulty by shifting his focus from “two kinds of restitution” to “two kinds of enrichment”: idem in Philosophical Foundations (note 21). Cf. note 122 above.

133 It is thus not surprising that the Australian case of ANZ Banking Group Ltd v. Westpac Banking Corp. (1988) 164 C.L.R. 662, which expressly envisaged such a concurrence (at p. 673), concerned a mistaken overpayment. The High Court observed: “The common law right of action [for money had and received] may arise in circumstances which also give rise to a resulting trust of specific property or funds or which would lead a modern court to grant relief by way of constructive trust.” But see also Banque Belge pour l'Etranger v. Hambrouck [1921] 1 K.B. 321, at p. 333, where Atkin L.J. stated: “I am not without further consideration prepared to say that every person who can in equity establish a right to have his money or the proceeds of his property restored to him, can, as an alternative, bring an action against the person who has been in possession of such money or proceeds for money had and received …” (It is unclear whether his Lordship was here thinking of restitution for unjust enrichment or restitution for wrongs: cf. note 125 above).

134 The power in rem is thereby lost. It may be appropriate to regard affirmation as conditional upon fulfilment of the personal restitutionary claim to repayment.

135 The generalised power model espoused here differs from Lord Millett's idea of “specific unperformance” of a transfer (cf. text to note 108 above) in that proprietary restitution is available as of right and does not involve the court exercising any discretion.

136 Of course, a personal value-based claim will arise afresh where A's revested title or equitable interest is subsequently destroyed, e.g. by bona fide purchase, indistinguishable mixing, accession, etc.

137 The problem does not arise where the object itself is damaged or destroyed: here the transferor automatically bears the loss. Where the object is damaged, the transferor's proprietary interest remains unchanged but relates to a less valuable object. Where it is completely destroyed, the proprietary interest, too, is destroyed.

138 For the sake of argument, we will assume that the right to restitution arises irrespective of whether the mistake was spontaneous or induced (but see text to notes 180–181 below) and that the personal claim does not depend on A first “setting aside” the “gift” as an underlying “legal basis” (but see above, notes 99–100 and corresponding text).

139 Cf. G. Virgo in A. Burrows et al., “The New Birksian Approach to Unjust Enrichment” [2004] R.L.R. 260, at p. 278, but contrast now Burrows in Unjust Enrichment in Commercial Law (note 128) at pp. 352–357.

140 Cf. e.g. N.Y. Nahan, “Rescission: A Case for Rejecting the Classical Model?” (1997) 26 U.W.A.L.R. 66, at pp. 72–73; J. Edelman and E. Bant, Unjust Enrichment in Australia (Oxford 2006), at pp. 23, 102; E. Bant, “Restitutio in Integrum and the Change of Position Defence: Lessons from Rescission” [2007] R.L.R. 13, at pp. 15–16; perhaps also G. Jones (ed.), R. Goff and G. Jones, The Law of Restitution (7th ed., London 2007) at paras. [9–001]–[9–053]. Critical: Burrows, Law of Restitution (note 106) at pp. 57–58; L. Smith in Unjust Enrichment in Commercial Law (note 92) at pp. 41–43; Virgo, Principles (note 106) at pp. 28–29.

141 See the discussion by Bant [2007] R.L.R. (note 140) esp. pp. 23–30, who helpfully distinguishes the rendering of the agreed counter-performance (“change in exchange”) from consequential (“defendant-instigated”) changes of position, and contrast Mackenzie v. Royal Bank of Canada [1934] A.C. 468, with certain statements in Spence v. Crawford [1939] 3 All E.R. 271, esp. pp. 282–283 (Lord Thankerton). Cf. also G. Jones, “Some Thoughts on Change of Position” in A. Burrows and A. Rodger (eds.), Mapping the Law: Essays in Memory of Peter Birks (Oxford 2006) at pp. 74–75, 81; Goff & Jones (note 140) at paras. [40–007], [40–015].

142 In the contractual context, many “defendant-instigated” changes of position (cf. note 141 immediately above) will not be referable to – and will thus not be caused in the relevant way by – the receipt as such, but will instead be attributable to the defendant's autonomous decision to restructure his patrimony by substituting one asset for another. This aspect alone would justify imposing on each contracting party not only the ordinary risks connected with “having” the asset acquired, but also the cost of his or her own reliance expenditure. On the defendant-transferee's side, such risk allocation is further bolstered by the fact that he, the defendant, will typically be “responsible” for the defect of consent which allows the transferor to rescind the contract (cf. end of note 143 immediately below).

143 In a gratuitous transaction, it is much easier to argue that the financial risks connected with the transferee's receipt should be borne by the claimant transferor, and that the transferee's “consequential changes of position” (cf. note 141 above) ought therefore to be taken into account. However, the question then arises whether we need to distinguish between cases where the transferor's mistake is spontaneous and those where it was induced. It may well be that a transferee-donee who is an innocent or negligent misrepresentor should be made to bear the costs of his own “consequential changes of position” rather than being able to pass these on to the transferor-donor. If so, then this would also account for the exclusion of “consequential changes of position” where a contract is avoided (cf. note 142 immediately above): rescission of contract is, after all, only possible if the rescinding party's mistake was induced by the other contracting party.

144 Cf. Birks, Unjust Enrichment (note 6) at p. 210, Burrows, Law of Restitution (note 106) at p. 528; idem in Unjust Enrichment in Commercial Law (note 128) at pp. 356–357 (treating vested equitable interests and powers in rem on the same footing).

145 See text to notes 46–63 above, and esp. text to notes 58–62.

146 There is a question whether every demand for repayment should be interpreted as automatically encompassing the exercise of any power in rem the transferor-creditor may have, unless he explicitly confines himself to the assertion of a personal claim. An argument in favour of such an approach would be that it secures for him the “strongest” possible remedy and that it provides maximum legal certainty with regard to the exact moment when the trust arises. On the other hand, however, it reduces the scope for “affirmation” of the conveyance: cf. note 134 and corresponding text. In practice, not much should be required to infer that a power has been exercised, though courts would inevitably have to construe each communication in the light of all the relevant circumstances.

147 [1965] 1 Q.B. 525. See text to notes 35–36 above.

148 [1996] A.C. 669, at p. 706.

149 Cf. esp. ibid., at pp. 701–702, 705–706, 711–716.

150 Ibid., at pp. 706–707.

151 Cf. Millett (1998) 114 L.Q.R. (note 108) at pp. 403–404. In Lonrho v. Al Fayed (No. 2) [1992] 1 W.L.R. 1, at p. 13, Millett J. (as he then was) said: “It is a mistake to suppose that in every situation in which a constructive trust arises the legal owner is necessarily subject to all the fiduciary obligations and disabilities of an express trustee.”

152 P. Matthews, “All About Bare Trusts: Part 1” [2005] Private Client Business 266, at p. 271, argues that this explains why compound interest is (or should be) unavailable to the beneficiary of a bare trust, at least until the trustee learns of the existence of the trust.

153 (1841) 4 Beav. 115, 49 E.R. 282; aff'd (1841) Cr. & Ph. 240, 41 E.R. 482.

154 The conveyance will have to be effected by delivery or deed. It is not self-executing.

155 Unfortunately we cannot be absolutely sure of this. It is unclear whether the strict liability for “breach of trust” is a product of the trustee's interference with the beneficiary's equitable interest, or instead a consequence of breaching the fiduciary (personal) duties he owes to the beneficiary. At common law, liability in the tort of conversion depends on an interference by the defendant with the claimant's (better) right to possession of a movable object, which would appear to bolster the former understanding if we regarded liability for breach of trust as the equitable equivalent of conversion. However, there are two reasons why the parallel is of doubtful utility. First, equitable liabilities do not necessarily mirror those at common law. Second, in Kuwait Airways Corp. v. Iraqi Airways Co (Nos. 4 & 5) [2002] UKHL 19, [2002] 2 A.C. 883, Lord Nicholls questioned whether an innocent converter would actually be held liable for losses exceeding the amount of his gain: ibid., at para. [79].

156 [1996] A.C. 669, at p. 703. His Lordship stated: “If there is a trust two consequences follow: (a) the recipient will be personally liable, regardless of fault, for any subsequent payment away of the moneys to third parties, even though, at the date of such payment, the “trustee” was still ignorant of the existence of any trust: see Burrows, ‘Swaps and the Friction between Common Law and Equity’ [1995] R.L.R 15; (b) [see passage set out in note 159 below]”.

157 Another way would be to regard liability for “breach of trust” as fault-based in the sense of depending on the bare trustee's awareness of the fact that he does not hold title to an asset outright, but for the beneficiary. (Note: adoption of the power model of proprietary restitution would be perfectly compatible with such a restrictive approach towards the wrong of “breach of trust”, though it makes the radical redefinition of the liability threshold less pressing.)

158 In Bristol and West Building Society v. Mothew [1998] Ch. 1, at p. 23, Millett L.J. stated: “[I]t is clear that on rescission the equitable title does not revest retrospectively so as to cause an application of trust money which was properly authorised when made to be afterwards treated as a breach of trust.”

159 The passage from Lord Browne-Wilkinson's speech quoted in note 156 above continues: “(b) as from the establishment of the trust … the original payer will have an equitable proprietary interest in the moneys so long as they are traceable into whomsoever's hands they come other than a purchaser for value of the legal interest without notice.”

160 Cf. Sale of Goods Act 1979, s. 23; White v. Garden (1851) 10 C.B. 919, 138 E.R. 364; Phillips v. Brooks Ltd [1919] 2 K.B. 243; Lewis v. Averay [1972] 1 Q.B. 198.

161 Cf. Miller v. Race (1758) 1 Burr. 452, 97 E.R. 398; Peacock v. Rhodes (1781) 2 Doug. 633, 99 E.R. 402; Wookey v. Pole (1820) 4 B. & Ald. 1, 106 E.R. 839.

162 Cf. Cundy v. Lindsay (1878) 3 App. Cas. 459; Ingram v. Little [1961] 1 Q.B. 31; Car & Universal Finance Co Ltd v. Caldwell [1965] 1 Q.B. 525. The old doctrine of market overt (previously contained in the Sale of Goods Act 1979, s. 22) was abolished in 1994. Despite the impetus given by Newtons of Wembley Ltd v. Williams [1965] 1 Q.B. 560, the rules governing dispositions by buyers in possession (Factors Act 1889, s. 9; Sale of Goods Act 1979, s. 25) do not achieve a generalisation of the bona fide purchase defence at common law.

163 The protection of “equity's darling” is not a true exception to the nemo dat principle, but merely a question of jurisdictional competence: cf. Pilcher v. Rawlins (1872) L.R. 7 Ch. App. 259, at pp. 268–269 (James L.J.); J. Hackney, Understanding Equity and Trusts (London 1987) at pp. 24–25.

164 The Latin equivalent is “qui prior est tempore, potior est iure”: cf. Phillips v. Phillips (1861) 4 De G. F. & J. 208, at pp. 215–216; 45 E.R. 1164, at p. 1166 (Lord Westbury L.C.); Cave v. Cave (1880) 15 Ch.D. 639, esp. pp. 646–647 (Fry J.).

165 Phillips v. Phillips (1861) 4 De G. F. & J. 208, at p. 218; 45 E.R. 1164, at p. 1167 (Lord Westbury L.C.); Cave v. Cave (1880) 15 Ch.D. 639 (Fry J.). Critical: D. O'Sullivan, “The Rule in Phillips v Phillips” (2002) 118 L.Q.R. 296.

166 The payer would only have priority to the extent that he has already communicated his intention to exercise the equitable power in rem to the payee before the latter grants the equitable charge to the third party.

167 McFarlane, Structure of Property Law (note 2) at pp. 299–322, esp. pp. 305–312. At p. 306, McFarlane explains this restitutionary trust as follows: “Where A [in our example B] acquires a right directly from B [in our example A], A's unjust enrichment at B's expense gives B a persistent right [i.e. a right under a trust: cf. note 2 above] if and only if:

  • •

    • There is no legal basis for A to have the benefit of that right; and

  • •

    • A is aware (or ought to be aware) of the facts meaning that there is no legal basis for A to have the benefit of that right.”

168 Ibid., at pp. 150–152, 224–227, 299–303, 308–312, 315–316.

169 Ibid., at pp. 150–152, 224, 299–303. This equation is interesting, but open to the objection that exercise of a common law power in rem automatically and without more leads to a revesting of title, while exercise by a beneficiary of his rights under Saunders v .Vautier (cf. note 153 and corresponding text) does not. In the latter case, the trustee comes under a duty to transfer title to the beneficiary, e.g. by delivery or deed: cf. note 154 above. McFarlane sees this objection and concludes that the beneficiary's right under Saunders v. Vautier is not a power in rem, but a mere power in personam: Structure of Property Law (note 2) at p. 152.

170 Cf. McFarlane, Structure of Property Law (note 2) at pp. 306–307, 309–310.

171 But see comment in note 146 above.

172 A further difficulty with McFarlane's model is the following: McFarlane rightly observes that equitable interests under a trust (which he calls “persistent rights”) are less easily defeated by third party purchasers than “mere equities” (which he calls “powers to acquire a persistent right”): Structure of Property Law (note 2) at pp. 226–227, 250–252. However, since – on McFarlane's view – a third party C who acquires a right subject to a vested equitable interest of A's (e.g. an innocent donee from B) in turn only comes under a “core trust duty” once he knows or ought to be aware of A's “pre-existing persistent right”, it would seem that, at the point of acquisition, A's interest reverts to a mere “power” as far as C is concerned: cf. ibid., at pp. 256–257. This raises the question which set of bona fide purchase rules should prevail C, while still ignorant of the relevant facts, subsequently declares a trust in favour of a fourth party D.

173 The view adopted by McFarlane differs from that which relies on the maxim that “equity regards as done that which ought to be done” (cf. text to notes 20–22) in relation to the extent of the transferee-enrichee's duties. McFarlane regards the transferee-enrichee as being under a “duty not to use [the rights obtained] for his own benefit” (making him into a trustee as soon as he becomes aware of his obligation to make restitution), which turns into a fully-fledged obligation to retransfer title only when the transferor exercises his right under Saunders v. Vautier (cf. note 153 and corresponding text). By contrast, application of the maxim that “equity regards as done that which ought to be done” suggests that the duty to retransfer title arises without more already at the moment of receipt (and that it in fact justifies the trust).

174 The so-called “principle of abstraction” maintains only that the validity of a conveyance does not depend on the existence or validity of an underlying obligation. It does not necessarily exclude the possibility of proprietary restitution, as Swadling's “abstractionist” argument would seem to suggest (cf. comment in note 17 above). In fact, the generalised power model espoused here also depends on regarding conveyances as in principle “abstract” from the underlying obligation, but at the same time it allows for their avoidance in circumstances where the transferor's consent was sufficiently impaired (cf. note 95 above). The power in rem is a consequence of the impairment of consent, not a consequence of any underlying “absence of basis”. Only the immediate interest model of proprietary restitution is “anti-abstractionist” or “causal” in the sense that equity automatically reverses unjust enrichments at the proprietary level (cf. note 93 above).

175 A slightly broader approach along the same lines would be to recognise defects of consent brought about by third parties (through misrepresentation, duress or undue influence), but to require the transferee to have notice of this circumstance.

176 The (legal or equitable) right to rescind a contract and the (legal or equitable) power to avoid a conveyance would then have to be understood as a type of infringement-based restitutionary response (keyword: Eingriffskondiktion). It could perhaps be slotted into “restitution for wrongs”, but only in so far as the latter is seen as a part of the law of unjust enrichment proper: cf. J. Beatson, “The Nature of Waiver of Tort” in idem, The Use and Abuse of Unjust Enrichment: Essays on the Law of Restitution (Oxford 1991); D. Friedmann, “Restitution for Wrongs: The Basis of Liability” in W.R. Cornish et al. (eds.), Restitution Past, Present and Future: Essays in Honour of Gareth Jones (Oxford 1998); T. Krebs, “The Fallacy of ‘Restitution for Wrongs’ ” in A. Burrows and A. Rodger (eds.), Mapping the Law: Essays in Memory of Peter Birks (Oxford 2006). Although not every ground for rescission is a tort or an equitable wrong giving rise to a liability to pay compensation (e.g. innocent misrepresentation or undue influence), such an understanding of rescission might explain why judges frequently refer to the “wrong” of undue influence.

177 A personal claim is, of course, excluded to the extent that the transfer discharges a valid liability: see note 91 above.

178 To the extent that a power in rem arose at all on such a model, the transferor would be estopped from exercising it unless and until he has successfully set aside the contractual obligation pursuant to which the impaired consent transfer was made: cf. note 85 above.

179 [1900] 1 Ch. 354, sub nom. Bamfield v. Rogers.

180 See above, note 100 and corresponding text.

181 Moreover, even those decisions that exemplify a more liberal stance towards restitution for mistaken gifts do not generally distinguish between a donor's personal claim and any proprietary interest he may have: Lady Hood of Avalon v. Mackinnon [1909] 1 Ch. 476; Ellis v. Ellis (1909) 26 T.L.R. 166: University of Canterbury v. Attorney-General [1995] N.Z.L.R. 78; Ogden v. Trustees of the R.H.S. Griffiths 2003 Settlement [2008] EWHC 118 (Ch.), [2008] 2 All E.R. 655.

182 And perhaps subject to the constraint that the transferee needs to be “responsible” for the defect: cf. the foregoing discussion about the availability of proprietary restitution in spontaneous mistake cases.

183 [1993] A.C. 70.

184 In Woolwich, the claimant building society had known or suspected all along that the Inland Revenue's tax demand was ultra vires and had only paid to avoid adverse publicity and under protest. Its consent to the transfer as such (i.e. the conveyance) was therefore neither impaired by mistake nor was there any illegitimate pressure amounting to duress or another recognised form of “compulsion”.

185 The immediate interest model would yield a proprietary response in all cases of “initial failure of basis”: cf. Birks, Unjust Enrichment (note 6) at pp. 185–194; Chambers in Mapping the Law (note 23) at p. 261.

186 This is an area where courts could legitimately take policy considerations into account: contrast text after note 82 above.

187 It seems that, where the legal system disapproves of all dealings with particular goods, the transfer will automatically be void, so that the transferor's title never passes to the transferee: cf. the (then relevant) example of “obscene books” given by du Parcq L.J. in Bowmakers Ltd v. Barnet Instruments Ltd [1945] K.B. 65, at p. 72.

188 A better analysis may be that which emphasises the defendant's interference with a (wealth-allocating) right of the claimant's: cf. the authors cited in note 176 above. Yet this raises a more fundamental question about the relationship between “restitution for wrongs” and the law of “autonomous unjust enrichment”, an issue which the present paper does not seek to address.

189 Indeed, it is very doubtful whether A has even a personal restitutionary claim against C: cf. the discussion of the corresponding two-party scenario in the text to notes 123–129 above.

190 E.g. Birks, Unjust Enrichment (note 6) at pp. 34–35, 198; Burrows, Law of Restitution (note 106) at pp. 78–78; idem in Unjust Enrichment in Commercial Law (note 128) at pp. 338–352; C. Rotherham, Proprietary Remedies in Context (Oxford 2002) at pp. 108–110. But contrast: Foskett v. McKeown [2001] 1 A.C. 102, esp. p. 127 (Lord Millett); P. Millett, “Jones v Jones: Property or Unjust Enrichment?” in A. Burrows and A. Rodger (eds.), Mapping the Law: Essays in Memory of Peter Birks (Oxford 2006); Virgo, Principles (note 106) at pp. 11–17. See also discussion by L. Smith, “Tracing” in Mapping the Law (immediately above) esp. pp. 130–139.

191 Cf. also the discussion by D. Sheehan, “Proprietary Remedies for Mistake and Ignorance: An Unseen Equivalence” [2002] R.L.R. 69.

192 The recipient of stolen cash who acts bona fide and provides valuable consideration in exchange acquires an indefeasible title to it: Miller v. Race (1758) 1 Burr. 452, 97 E.R. 398.

193 Contrast especially L. Smith, The Law of Tracing (Oxford 1997) at pp. 322–326, 332–339, 358–361, with P. Birks, “Mixing and Tracing” (1992) 45 C.L.P. 69, at pp. 89–95; idem, Unjust Enrichment (note 6) at pp. 198–199.

194 Cf. Birks, Introduction (note 1) at p. 394.

195 While it is also perfectly possible to maintain that “ignorance” cases warrant a stronger proprietary response than impaired consent transfer cases, the reverse would be inconsistent. The law cannot respond to “ignorance” scenarios by affording the victim of an unauthorised substitution a mere power in rem and at the same time allow the person who makes an impaired consent transfer to assert an immediately vested (equitable) interest.

196 A. Burrows (ed.), English Private Law (2nd ed., Oxford 2007) at para. [18.211] (C. Mitchell), following Birks' observation in the first edition of English Private Law (note 25) at para. [15.220].