The role of trusts in cultural property claims.
Claims for the restitution of cultural property are often based upon an assertion that the claimant is the absolute owner of the property in question despite its misappropriation by the defendant, or by a person from whom it has been directly or indirectly received. This is hardly surprising. Cultural property usually takes the form of tangible personality--in other words, chattels--which may be misappropriated in a wide range of circumstances, including theft, trickery, compulsion, illegal excavation and illegal export, to name but a few. Where the claimant's property is taken in such circumstances and found to be in the possession of the defendant, it is quite natural that the claimant should wish to assert absolute ownership of the object. The argument is likely to be that, while the defendant may have acquired possession along the way, the claimant's absolute ownership endures and carries with it a better right of possession than that of the defendant. This is a function of the well-known common law principle nemo dat quod non habet.
Yet there is an alternative way for the claimant to formulate his claim. This is to accept that the defendant has acquired an interest in the property (beyond possessory title) but to assert that the defendant holds that interest on trust for the claimant. In seeking to define a trust, Underhill and Hayton state: (1)
A trust is an equitable obligation, binding a person (called a trustee) to deal with property (called trust property) owned and controlled by him as a separate fund, distinct from his own private property, for the benefit of persons (called beneficiaries or, in old cases, cestuis que trust), of whom he may himself be one, and any one of whom may enforce the obligation.
The essence of a trust is, therefore, that ownership of property, (2) which is vested in the trustee, is held by him subject to an obligation to deal with it for the benefit of the beneficial owner(s).
At first blush it may seem that a claim to an interest under a trust is very much inferior to a claim to absolute ownership. In the first place, why would the claimant wish to give the defendant the psychological advantage of conceding that the defendant has acquired any title to the property at all? Equitable interests are also more vulnerable to extinction than absolute interests and therefore give the claimant a weaker, more precarious form of property. This being so, why bother to claim this lesser form of property?
The short answer is that there are at least two situations when the claimant may have no choice. The first is where, despite having been the original owner of the property, the claimant finds that his legal title has been divested or extinguished as a result of some transaction before he can recover it from the defendant. This might arise in any number of ways. For example, the property may have been subject to a transaction abroad where the lex situs conferred a good title on the transferee or the claimant's title may have been extinguished by limitation or by some legislative act which has vested title to the property in another. In such a case equity may be the claimant's salvation. The law of trusts may allow him to argue that although his legal ownership has been lost, the defendant nevertheless holds the property on trust for the claimant to carry back to him in equity what is rightfully his. The second situation is where the claimant only ever begins with an equitable title. It is difficult to envisage any situation in which such a claimant will be able to argue that his original equitable interest has been 'upgraded' to absolute ownership by misappropriation. His best hope is likely to be that his original equitable interest has not been divested at all or, if it has, again, that a trust has arisen to ensure that he nevertheless remains the beneficial owner of the property.
The purpose of this article is to explore in greater detail how such arguments might be developed. This enquiry will be undertaken in three stages. In Part I, we begin with an overview of the law of transfers of title under English law. This will provide a greater understanding of the circumstances in which the claimant may find that his original legal or equitable title to cultural property has been divested by a transaction governed by English law. In Part II we then consider the circumstances in which English law may find that a claimant whose title has been extinguished may nevertheless be able to claim an equitable interest under a trust arising by operation of law. This involves wide-ranging and complex issues of law which are in many respects uncertain and which are hotly debated by judges, academics and practitioners. It requires, in particular, some appreciation of the (controversial) role of trusts within the law of unjust enrichment and within the law of restitution more generally. Finally, in Part III, we consider how these principles might apply in claims involving cultural property specifically.
It is important to note at the outset that this article considers the position under English law. Many claims involving the misappropriation of cultural property will have a cross-border element and will therefore raise questions both as to the jurisdiction of English courts and choice of law issues. Such matters fall outside the scope of our present enquiry.
I. NATURE AND PERSISTENCE OF THE CLAIMANT'S ORIGINAL TITLE
Identifying the Claimant's Original Interest
As the above introductory remarks make clear, the starting point in any case where the claimant seeks to recover misappropriated cultural property is to identify the precise nature of his original proprietary interest. Only when this has been correctly identified is it possible to see, applying the relevant rules on the transfer of title, whether the claimant's original interest in the property has survived the misappropriation. In this regard, it is vital to have a clear understanding of the range of proprietary interests in cultural property which the claimant may have. In the discussion so far we have already referred to legal and equitable title, absolute and legal ownership and equitable interest. It is convenient to begin by examining these concepts in greater detail. Professor Goode states the position with great clarity. Of ownership, Goode says:
Ownership, one of the most elusive concepts of English law, is conventionally defined as the residue of legal rights in an asset remaining in a person, or persons concurrently, after specific rights over the asset have been granted to others. A person in whom such residue of rights is vested is said to have an absolute interest in the asset. By contrast, one who enjoys merely specific rights, e.g. possession under a pledge, lien or other bailment, has only a limited interest. Interest is to be distinguished from title. A person's interest in an asset denotes the quantum of rights over it which he enjoys against other persons, though not necessarily against all persons ... (3)
The common law recognises two distinct forms of title to ownership: legal and possessory title. The first is the 'best' or 'paper' title of the true owner. This is the best possible title to ownership of the asset in the sense that the claimant has the best claim to be recognised as the owner. His title will prevail over and be enforceable against all others claiming an adverse title including anyone else in possession. The second (lesser) form of title is based upon possession. Essentially, the fact of possession gives rise to a legal presumption that the possessor is the owner and law affords him certain remedies to protect his presumed interest in the goods. It is for this reason that possession is said to 'count as title' or be a 'root of title'. (4)
Turning to equitable ownership, Goode continues:
Equitable title to property (whether land or goods) thus involves divided ownership, legal title being in A and beneficial ownership in B. When A holds legal title primarily for the benefit of B, the relationship is that of trustee and beneficiary. But division of ownership may also occur without a trustee relationship, namely when A holds the legal title primarily for his own interest, as in the case of a mortgage. Divided ownership in one form or another is the essence of equitable title. If both legal and beneficial ownership is vested in the same person, there is no scope for equity to operate on the asset, and no separate equitable interest can be said to exist ... As in the case of legal ownership, it is necessary, when discussing ownership in equity, to distinguish interest and title, interest denoting the quantum of the right to the asset, title the strength of that right as against others ... (5)
A claimant with sole legal ownership of property is presumed to be the beneficial owner and, as Goode observes, in cases of absolute ownership there is no room for a trust. A trust presupposes a division of legal or equitable title but where legal and beneficial ownership are vested in the same person, there is no separate equitable interest. To similar effect, in Westdeutsche Landesbank Girozentrale v. Islington LBC, Lord Browne-Wilkinson observed: (6)
A person solely entitled to the full beneficial ownership of money or property, both at law and in equity, does not enjoy an equitable interest in that property. The legal title carries with it all rights. Unless and until there is a separation of the legal and equitable estates, there is no separate equitable title.
To describe die absolute owner as just the legal owner is not inaccurate as the absolute owner necessarily has legal title, but the description is ambiguous because it fails to convey that the legal owner is also beneficially entitled. Similarly, references to the beneficial owner may be ambiguous insofar as they fail to distinguish the beneficial interest of the absolute owner from that of the equitable owner under a trust. To avoid confusion, it is therefore preferable to speak of: (1) absolute ownership when describing the combined legal and beneficial interest; (2) legal ownership where it is the legal interest specifically that is under consideration (whether that of the absolute owner or trustee); (3) equitable ownership where the relevant interest arises under a trust; and (4) beneficial ownership when the beneficial entitlement, however it arises, is in issue. This is the usage adopted in this article.
Against this background, when considering the effect of the misappropriation on the claimant's interest, it is important to distinguish between a claimant with absolute ownership of the goods and one with equitable ownership only. The absolute owner's first concern will be to see whether his legal ownership has been divested. If not, he will assert it against the defendant. If it has been divested, he will want to see whether he can still claim a beneficial interest in the object. As there was no trust of the property at the outset, it follows that the claimant will need to assert that a trust has arisen so that an equitable interest is created in his favour. The claimant who begins as equitable owner is in a different position. His first concern will be to see whether his original equitable interest can be asserted against the defendant. If so, all is well. If not, he too will want to see whether a trust has arisen to vest him with a newly created equitable interest.
The circumstances in which the law may generate new equitable interests are the subject matter of Part II below. Before coming to this, we must first consider the basic rules on transfer of title, which govern the logically prior question of whether the claimant's original interest has been divested or extinguished in the first place.
The Transfer of Title
The law governing the transfer of title is complex. Any summary of the relevant rules must draw on legal and equitable principles from across the law of property, trusts and agency, which must cater for an infinite variety of factual situations. (7) As a result, it is possible to summarise the law only at the highest level: (8)
1 The cardinal rule is that property passes if and when the parties intend it to pass. (9) This remains so even if the transaction is in some way defective. Thus, property will still pass where there has been a total failure or absence of consideration, where the transaction is illegal, where one or other of the parties lacks capacity owing to minority or institutional incapacity or where the transaction was procured by misrepresentation, undue influence or by exploitation of weakness.
2. The only circumstances in which property will not pass even though the parties intended it to is where the transferor's intention is so seriously impaired that it can be treated as vitiated. (10) Vitiation of intention is exceptional and will arise only in very limited cases. One such case is where the claimant has made a fundamental mistake in respect of the transaction. This is probably limited to a mistake as to the identity or quantity of the property or the identity of the recipient. (11) In all other cases the mistake should probably be characterised as relating to motive, with the result that it is insufficiently serious to vitiate intent. Other cases where title will not pass are where there has been misrepresentation as to a fundamental matter and where the transferor's dispositive intention is the result of compulsion which is so extreme that he has no alternative but to do as the transferee demands. (12) If the transferor has a choice whether to submit to the demand, this will again go to motive and will not vitiate his intent.
3. If the owner does not intend that title should pass, it will not do so. If the claimant is ignorant of the fact that his property has been taken he cannot have intended that ownership should pass. Thus, where property is stolen, title will not pass to the thief. (13) Similarly, if the claimant knows of the transfer, but is powerless to prevent it, he will lack the necessary dispositive intention.
4. Where the defendant receives the claimant's property indirectly from a third party, X, whether or not the disposition is effective to pass title to the defendant will depend upon the precise nature of the claimant's interest, (14) the nature of X's interest and powers (15) and the precise interest granted to the defendant: (16)
(1) The basic rule in transfers of tangible property is nemo dat quod non habet, that is to say, no one can give a title they do not have. Only the legal owner of goods or someone who is authorised or held out by the true owner as entitled to dispose of them can make a disposition which is effective to pass legal title. (17) This means that a thief cannot transfer ownership of stolen goods. (18) It also means that a legal owner whose interest is held on trust cannot transfer an interest free of the equitable interest (although this is subject to the doctrine of bona fide purchaser considered below).
(2) Whether a disposition by X of the claimant's legal property is effective to pass legal title to the defendant therefore depends upon whether X has power to transfer such title. Such power may arise under the law of agency or a recognised exception to the nemo dat principle. (19) If X does not have the power to transfer legal title, it will not pass. If he does, it will pass in accordance with the intention of the parties.
(3) If X is a trustee and disposes of the trust property lawfully, the claimant's equitable interest in the property will be extinguished. If the transfer is a breach of duty the position is more complex: (20)
(a) If the transfer by the trustee is without authority it is void in equity. The precise consequences of this for claimants will vary:
(i) The law prefers a legal interest to an equitable interest with the result that the holder of an equitable interest is subordinated to a bona fide purchaser of the legal interest in good faith without notice of the equitable interest. Consequently, if X has validly transferred legal title to the defendant, although the transfer is void in equity, the defendant who is a bona fide purchaser for value without notice will take free of the claimant's equitable interest. All other defendants will be bound by it.
(ii) If, more unusually, the claimant's equitable interest arises under a sub-trust, so that X is a trustee for the claimant not of the legal title but of an equitable interest under a head trust, X's disposition will be of an equitable interest in the property. The basic rule for determining competing claims to the same equitable interest in tangible property is qui prior est tempore potior est jure, or the first in time prevails. The defendant, even if a bona fide purchaser, will therefore take subject to the claimant's equitable interest. (21)
(b) If X is a trustee and the disposal was within the scope of his authority but was a breach of duty in some way, on his disposal of the chattel ownership of the trust property, legal or equitable, will pass to the defendant but the transaction may however be voidable in equity and liable to be set aside. The power to rescind the transfer is a mere equity and binds purchasers for value with notice of the equity and volunteers with or without notice. However, it does not bind bona fide purchasers without notice, even if the subject matter of the purchase is equitable only.
5. If legal title passes to the defendant, the transaction may nevertheless be voidable at common law. (22) Contracts may be rescinded for fraudulent misrepresentation, duress and mental incapacity. Insurance contracts may also be rescinded for non-disclosure and non-fraudulent misrepresentation. When the claimant rescinds a transaction under which legal ownership has passed, legal title automatically reverts to the claimant. (23)
6. In equity, contracts may be rescinded for fraudulent and non-fraudulent misrepresentation, undue influence, unconscionable dealing and (as indicated above) for breach of fiduciary duty. (24) Gifts may be rescinded in equity for undue influence, misrepresentation and some unilateral mistakes. Rescission in equity cannot accomplish a revesting of the legal title. When the remedy is exercised it creates a trust of the property for the rescinding party. (25)
Drawing the threads together, the claimant with absolute ownership may be able to show that his legal title has not passed to the defendant owing to want of any intention that it should do so or because any such intention was vitiated or because the transfer was effected by a third party who lacked the power to transfer title. Title will however pass whenever such was the claimant's intention or it is transferable by virtue of any relevant third party power. The same rules apply for dispositions of an equitable owner's equitable interests in the goods. (26)
If legal or equitable title has passed it is at this point that the claimant may look to a trust arising by operation of law to protect his beneficial interest. As indicated above, one basis upon which a trust may arise is rescission in equity in respect of a defective legal transfer, but there are others. It is therefore to the generation of equitable interests more generally that we now turn.
II. THE CREATION OF EQUITABLE PROPERTY RIGHTS
Trusts come in different shapes and sizes and can be classified in different ways. However, one central distinction is between express trusts (27) on the one hand and trusts arising by operation of law on the other hand. It is this second group, which can itself be subdivided into resulting and constructive trusts, that is likely to be of greatest significance in claims involving cultural property.
Over recent years the precise circumstances that give rise to both resulting and constructive trusts have been the subject of intense academic debate and controversy. Much of this debate has taken place in the context of a wider discussion about the role of equity, property and trusts in the law of restitution. We will come to the precise facts giving rise to both types of trust shortly but before doing so it is probably worth setting out, in brief terms, the main schools of thought as to the role of the trust as a restitutionary remedy. Some appreciation of these different ideas provides a good grounding for a more detailed consideration of the relevant rules. It may also cast light on the way in which the law may develop in due course.
Unjust Enrichment, Trusts and the Law of Restitution
Much has been written on the law of restitution in recent years. As Virgo explains:
The law of restitution is concerned with the award of a generic group of remedies which arise by operation of law and which have one common function, namely to deprive the defendant of a gain rather than to compensate the claimant for loss suffered. These are called the restitutionary remedies. Whilst there is a great deal more to the subject than this remedial aspect, since it is also vital to determine what circumstances will trigger the award of restitutionary remedies, it is only because there are a group of remedies which have the common function of depriving defendants of gains that we are able to assert that there is an independent body of law which can be called the law of restitution. (28)
It is now widely recognised that a distinction must be drawn between those restitutionary remedies which are awarded to reverse an unjust enrichment to the defendant and those which are awarded to prevent the defendant from profiting from his wrong. Unjust enrichment is an independent cause of action, like contract and tort, which arises wherever the defendant has been enriched at the expense of the claimant in recognised circumstances of injustice and there is no defence available. (29) The categories of injustice giving rise to a claim, or 'unjust factors', can be divided into two groups. (30) First, where the unjust factor means that the claimant's consent to the defendant's enrichment is impaired, qualified or absent. This includes cases of mistake, duress, undue influence, exploitation of weakness, incapacity of the individual, failure of basis, (31) ignorance or powerlessness and a fiduciary's lack of authority. The second group is where there is some other reason why the enrichment is unjust. It includes legal compulsion, necessity, factors concerned with illegality and the unlawful obtaining or conferment of a benefit on a public body. Restitution for wrongdoing has an entirely different juristic basis. Here the aim of any restitutionary remedy is not to reverse an enrichment at the claimant's expense but to strip the defendant of any ill-gotten gain which he has made as a result of a legal or equitable wrong (e.g. breach of contract, tort, or breach of fiduciary duty). (32)
One great question that divides scholars is whether there is, in addition to restitution for unjust enrichment and restitution for wrongdoing, an independent third strand to the law of restitution dealing with the vindication of property rights which have been interfered with. Virgo, a leading proponent of the latter view, holds that restitution to vindicate property rights and restitution for unjust enrichment are distinct:
Where the claimant has a proprietary interest in property which has been received by the defendant, the claimant may seek to obtain a restitutionary remedy to vindicate that right, regardless of whether it previously existed or has been created by operation of law ... It has often been assumed that, where the claimant seeks to recover property in which he or she has a proprietary interest, the recovery of that property or its proceeds can be justified only by reference to the principle that the defendant has been unjustly enriched at the expense of the claimant. But this is only true to the extent that 'unjust enrichment' is used in a trivial, descriptive sense to indicate that the defendant has property which it is just for him or her to return to the claimant. 'Unjust enrichment' in its substantive sense is completely irrelevant in this context, because the action to vindicate property rights forms part of the law of property and has nothing to do with the principle of reversing the defendant's unjust enrichment. Once it has been shown that the defendant has received or retained property in which the claimant has a proprietary interest, nothing else needs to be proved to establish the claimant's cause of action. If the defendant has the claimant's property he or she should return it, or its value, to the claimant, without the claimant first having to establish that the defendant has been unjustly enriched at his or her expense. (33)
Virgo's view derives authoritative support from the decision of the House of Lords in Foskett v. McKeown. (34) In this case Murphy had effected a whole life policy, which was held, together with any moneys paid thereunder, on trust for his wife and children. He paid five premiums, each of 10,220[pounds sterling], before committing suicide. The first two were paid from his own funds, the source of the third was disputed and the fourth and fifth were paid from deposits which Murphy held on trust for the claimants, potential purchasers of plots of land in Portugal. On Murphy's death the insurers paid 1m [pounds sterling] to the trustees of the policy. The House of Lords held that the trustees held the policy monies on trust for the claimants and Murphy's children rateably according to their respective contributions to the premiums paid for the policy. The Court reasoned that the claimants could trace their money into the premiums, into the policy and then into the insurance monies. In coming to this conclusion the House of Lords drew an important distinction between 'following' and 'tracing'. Lord Millett said: (35)
The process of ascertaining what happened to the plaintiffs' money involves both tracing and following. These are both exercises in locating assets which are or may be taken to represent an asset belonging to the plaintiffs and to which they assert ownership. The processes of following and tracing are, however, distinct. Following is the process of following the same asset as it moves from hand to hand. Tracing is the process of identifying a new asset as the substitute for the old. Where one asset is exchanged for another, a claimant can elect whether to follow the original asset into the hands of the new owner or to trace its value into the new asset in the hands of the same owner. In practice his choice is often dictated by the circumstances.
An asset is therefore followed (not traced) where it remains in identifiable form and moves from person to person. By contrast, tracing is a process which takes place where one asset is substituted for another. The value inherent in the claimant's original property is traced through the unauthorised substitution into the final exchange product. The 'law of tracing' is best seen as a body of rules of evidence which the claimant must invoke in order to justify the claim that a particular asset is 'his', in law or in equity, when that asset is the exchange product of his original property. Foskett v. McKeown was itself a claim based upon tracing not following:
In the present case the plaintiffs do not seek to follow the money any further once it reached the bank or insurance company, since its identity was lost in the hands of the recipient (which in any case obtained an unassailable title as a bona fide purchaser for value without notice of the plaintiffs' beneficial interest). Instead the plaintiffs have chosen at each stage to trace the money into its proceeds, viz, the debt presently due from the bank to the account holder or the debt prospectively and contingently due from the insurance company to the policy holders. (36)
The House of Lords was emphatic that the claim was not based upon unjust enrichment:
The transmission of a claimant's property rights from one asset to its traceable proceeds is part of our law of property, not of the law of un just enrichment. There is no "unjust factor" to justify restitution (unless "want of title" be one, which makes the point). The claimant succeeds if at all by virtue of his own title, not to reverse unjust enrichment. Property rights are determined by fixed rules and settled principles. They are not discretionary. They do not depend upon ideas of what is "fair, just and reasonable". Such concepts, which in reality mask decisions of legal policy, have no place in the law of property... (37) A plaintiff who brings an action in unjust enrichment must show that the defendant has been enriched at the plaintiff's expense, for he cannot have been unjustly enriched if he has not been enriched at all. But the plaintiff is not concerned to show that the defendant is in receipt of property belonging beneficially to the plaintiff or its traceable proceeds. The fact that the beneficial ownership of the property has passed to the defendant provides no defence; indeed, it is usually the very fact which founds the claim. Conversely, a plaintiff who brings an action like the present must show that the defendant is in receipt of property which belongs beneficially to him or its traceable proceeds, but he need not show that the defendant has been enriched by its receipt. He may, for example, have paid full value for the property, but he is still required to disgorge it if he received it with notice of the plaintiff's interest. (38)
The Court's rejection in Foskett v. McKeown of an analysis based upon unjust enrichment clearly echoes Virgo's views on proprietary restitution. The case shows that if the claimant can assert beneficial title to the traceable proceeds of his property in the hands of the defendant, the latter cannot be said to have been enriched at the claimant's expense because he has not been enriched by receipt of property at all. Any restitutionary remedy awarded in such circumstances would, in line with Virgo's analysis, be for interference with the claimant's proprietary interests. This led Goff and Jones to observe:
A claim to a benefit received by a defendant may be based upon the claimant's title to property. At one time this text drew a distinction between pure proprietary claims, which belonged to the law of property, and restitutionary proprietary claims which arose by operation of law in order to prevent another's unjust enrichment. However, authoritative decisions suggest that an argument based on this distinction will now almost certainly fail. In particular the House of Lords has now held, in Foskett v McKeown, that all proprietary claims, whether to the original asset or its substitute, form part of the law of property and no part of the law of unjust enrichment. (39)
Although English law on this point must be regarded as settled for the time being, there remains a strong dissenting school of thought that, contrary to the reasoning of Lord Millett in Foskett v. McKeown, if a claimant is entitled to assert a property right in an unauthorised substitute asset, the true explanation is that the claimant is being awarded a new proprietary right to reverse (what would otherwise be) unjust enrichment of the defendant at the claimant's expense. (40) Burrows, a leading advocate of this view, put the matter in the following way:
Virgo's analysis of the tracing cases is that one is concerned with the continuation and vindication of proprietary rights in substitute property and not with unjust enrichment. This is to rely on a fiction of 'persistence'. One is not here concerned with following one's property. There is a difference between following and tracing. One is concerned with the creation of new proprietary rights over property that does not already belong to the claimant but is rather a substitution of property previously owned in equity by the claimant. So, in an unauthorised substitution case, if one is entitled to trace from a pig to a horse to a car, one cannot say, without invoking fiction, that one has proprietary rights in the car merely because one owned the pig that is now represented by the car. The truth is that one's proprietary rights in the pig entitle one to new proprietary rights in the car because the holder of the car has been unjustly enriched at one's expense. (41)
It is important to recognise however that even those scholars who ascribe a wider ambit to the principle of unjust enrichment and argue that proprietary rights in unauthorised substitutes are a restitutionary response to this principle, generally accept that a claim based upon pre-existing title, a 'pure proprietary claim' to adopt the language of Goff and Jones, is outside the field of unjust enrichment. (42) Burrows, for example, writes:
... whether within restitution of an unjust enrichment or restitution for wrongs and whether the restitutionary right is personal or proprietary, the restitutionary right that one is concerned with is a new right created in response to unjust enrichment or wrong. We are therefore not concerned with the protection of pre-existing proprietary rights (other than where that protection is indirectly given through personal restitution in response to unjust enrichments or wrongs). Put another way, we are not concerned with proprietary rights resting on pre-existing title. So we are not concerned with a vindication claim for the return of one's property (for example, for the ejectment from land or for the delivery up of goods or for an order for the transfer of one's equitable property) where that claim rests upon the claimant's pre-existing proprietary right to that property. Therefore the claim, 'That property remains mine and I want it back', is outside the subject matter of this book. This is sometimes referred to as a pure proprietary claim. In contrast, we are concerned with the creation of a new proprietary right--sometimes referred to as a 'restitutionary proprietary claim'--in response to unjust enrichment or ... in response to wrong.
This brings us to an important point. If a claimant (whether an absolute or equitable owner at the outset) is able to assert a continuing beneficial interest to cultural property in the hands of the defendant this is unlikely to be as a remedy for unjust enrichment. It would seem to be, instead, a remedy to vindicate the claimant's pre-existing beneficial interest. Admittedly, against this, it might be said that if the claimant's original legal or equitable title has been lost, then any beneficial interest that he now has must necessarily have arisen under a newly imposed trust arising by operation of law, and that this is a new equitable interest. Indeed, the point is all the more apparent as far as the absolute owner is concerned because at the outset he never had any equitable interest in the property at all. How then, so the argument runs, can it then be said that the claimant is seeking to vindicate any pre-existing title? If his right is indeed a newly created one, then it is possible that it is as a response to an unjust enrichment.
This argument is redolent (or perhaps a specific manifestation) of the question whether an equitable interest under a resulting trust is a newly created interest, which carries beneficial ownership 'back' to the transferor, or the residue of the transferor's beneficial interest once legal title has been transferred away. As a matter of strict legal theory the first of these possibilities seems to be the correct one. An absolute owner cannot transfer away bare legal title while reserving to himself equitable ownership. (43) If the transferor wishes to bring about this result he must dispose of his entire interest in the property, followed by a charge or declaration of trust back by the transferee: as Goode observes, equitable interests must be created by way of grant, not exception or reservation. (44) This suggests that the transferor's interest under a resulting trust is a newly created interest which "cannot be explained as the inertia of a pre-existing beneficial interest", (45) This in turn lends weight to the idea that a claimant whose interest arises under a trust imposed by operation of law is not vindicating a pre-existing title; and if the claimant's beneficial interest is a newly created one, it may very well be that he is in receipt of a restitutionary remedy to reverse an unjust enrichment. (46)
If this argument is pursued to its logical conclusion, however, it means that the only claims which can ever be described as based upon pre-existing title, are the claims of an absolute owner based upon enduring legal ownership or that of an equitable owner against the defendant who has acquired the property subject to the claimant's pre-existing equitable title. Any reliance on a constructive or resulting trust would seem to disqualify the claim from this characterisation. This seems too restrictive an approach bearing in mind that the property to which claimant lays claim is the very property which was taken from him (i.e. it is a case of following not tracing through unauthorised substitutions (47)) and that the essence of the claimant's case is that this property has never ceased to be his beneficially. To say that such a claim does not seek to vindicate pre-existing title because it may depend upon a new trust arising looks unduly restrictive.
The final point to make at this stage is a word of warning. The fact that so much of the discussion about the operation of resulting and constructive trusts has taken place in the context of the law of unjust enrichment, should not blind us to the fact that, traditionally, equity's reach extends well beyond what would now be categorised as cases of unjust enrichment. Indeed, the imposition of a trust to preserve pre-existing beneficial ownership is one example of this. Another is the use of constructive trusts to capture for the benefit of the claimant the fruits of the defendant's wrongdoing. (48) For the claimant who wants to fashion an equitable proprietary right to misappropriated cultural property, there is a rich seam of equitable jurisprudence concerning the defendant's wrongdoing which has nothing to do with the law of unjust enrichment.
With these general observations in mind, we now consider the particular circumstances when a trust imposed by law will arise.
In Westdeutsche Landesbank Girozentrale v. Islington LBC (49) an investment bank transferred money to a local authority under an interest rate swap contract which was intended to last ten years. Five years into the life of the contract a decision of the House of Lords held that any interest rate contract entered into by a local authority was void ab initio because it was ultra vires the local authority. Before judgment, the local authority had paid the monies into its general bank account and dissipated them. The local authority sought to argue that although legal title to the money had passed to the local authority, they retained an equitable proprietary interest in it so as to engage the Court's equitable jurisdiction to award compound interest. One of the arguments that the bank put forward was that an equitable interest arose in its favour under a resulting trust. Lord Browne-Wilkinson held that a resulting trust arises in two sets of circumstances: (50)
1. First, where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which is easily rebutted either by the counter-presumption of advancement or by direct evidence of A's intention to make an outright transfer.
2. The second situation is where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest.
Lord Browne-Wilkinson concluded that the resulting trust argument trust must fail:
Applying these conventional principles of resulting trust to the present case, the bank's claim must fail. There was no transfer of money to the local authority on express trusts: therefore a resulting trust of type (B) above could not arise. As to type (A) above, any presumption of resulting trust is rebutted since it is demonstrated that the bank paid, and the local authority received, the upfront payment with the intention that the moneys so paid should become the absolute property of the local authority. It is true that the parties were under a misapprehension that the payment was made in pursuance of a valid contract. But that does not alter the actual intentions of the parties at the date the payment was made or the moneys were mixed in the bank account.
Where a claimant has gratuitously transferred property to a defendant, there is often evidence as to what he intended regarding the beneficial interest. He may have intended to make a gift, (51) to declare a trust, (52) to make a loan, (53) or to abandon his interest in the property. In such cases the law will give effect to his intention and no question of a resulting trust arises. A resulting trust is imposed only where property is gratuitously transferred and there is insufficient evidence to determine what the claimant intended. It is a device that responds to a lacuna in the evidence. In such cases, the law makes a presumption in the claimant's favour about his intention in transferring the property and failure by the defendant to rebut this presumption leads to the imposition of the trust. The presumption applies to a transfer of both legal and equitable property. (54)
Precisely what intention is being presumed is, however, somewhat unclear. One approach is that the presumed intention is an intention not to make a gift. At one point in his speech in Westdeutsche, Lord Browne-Wilkinson spoke of "a presumption that A did not intend to make a gift to S". (55) Under this approach the resulting trust would arise in any case other than one where the defendant could show that the claimant intended to make a gift of the property to him. This surely cannot be right because, understood in this way, the trust would have arisen in Westdeutsche itself, which it did not. The second approach is that the trust arises in response to the presumed intention on the part of the transferor that the property will be held on trust for him. This would provide a very narrow field of operation: the trust would never arise where there was any evidence that the claimant did not intend the property to be held a trust for himself. This is apparently the view of the law taken by Lord Browne-Wilkinson, who also spoke in Westdeutsche of "a presumption of resulting trust". (56) Finally, it is arguable that the resulting trust does not depend upon the actual (presumed) intention on the part of the transferor at all but upon an absence of any intention on the part of transferor to benefit the transferee. (57) The 'absence of intent' analysis would allow for a trust to be imposed in a wider variety of cases. In particular, it provides an explanation for those cases where a trust was imposed but the claimant did not or cannot have intended property to be held on trust. (58)
Some who endorse the absence of intent theory have argued that the doctrine of resulting trusts provides a coherent basis for proprietary restitution. Chambers, for instance, has suggested that the situations where a transferor is presumed to lack the intention to vest the beneficial interest in the transferee are those where his intention to enrich the transferee is vitiated and which would found an action in unjust enrichment. (59) In Westdeutsche, however, Lord Browne-Wilkinson (60) rejected any general role for the resulting trust as a vehicle for proprietary restitution. Furthermore, Virgo considers Chambers' argument to be flawed. A central objection to Chambers' analysis is that it leads to excessive proprietary protection for claimants. Virgo writes: (61)
Most of the grounds of restitution for the purposes of a claim founded on the defendant's unjust enrichment establish that the claimant's intention to transfer an enrichment to the defendant can be regarded as absent or defective in some way. Birks and Chambers reasoned from this vitiation of intention to conclude that, in many cases of unjust enrichment, the enrichment received by the defendant should be held on resulting trust for the claimant. Where an intention to transfer an enrichment has been vitiated, they conclude that the enrichment received must be held on resulting trust for the claimant who did not intend to benefit the defendant in the circumstances. If this is correct it has significant implications by converting a personal liability to restore value to the claimant into a proprietary claim. This would be especially significant where the defendant is insolvent, for then the claimant's claim will rank above the defendant's unsecured creditors. But why should the claimant be given such priority? The biggest weakness with the 'absence of intent' theory of the resulting trust concerns whether the recognition of such a potentially wide doctrine of resulting trust will give claimants excessive proprietary protection. If the defendant is to be considered to hold property on resulting trust whenever the claimant's intention to benefit the defendant is vitiated, it follows that the defendant will hold property on resulting trust in most cases in which the defendant will have been unjustly enriched since much of the law of unjust enrichment turns on the claimant's intention to benefit the defendant being vitiated, for example by mistake or duress.
Virgo has made the important point that although there is a resemblance between the circumstances in which title to property will not pass and the recognised 'unjust factors' in a claim for unjust enrichment, these things should not be confused:
Also, title will not pass to the defendant either where the claimant lacks and intention that title should pass or where the claimant's intention can be treated as vitiated. Such vitiation of intention will only arise in certain exceptional cases. Analysis of the categories of cases in which the claimant's intention is vitiated suggest that they mirror the recognized grounds of restitution within the action founded on unjust enrichment. But it must be emphasized that these categories have a different function in the context of proprietary restitutionary claims and are consequently defined in a different way from the recognized grounds of restitution. For, in this context, we are concerned not with whether the claimant actually intended to benefit the defendant. Rather, we are concerned with whether the claimant actually intended that title should pass. (62)
With regard to Chambers' argument specifically, Virgo has said:
(1) The resulting trust has nothing to do with the reversal of unjust enrichment, save where that principle is used in a descriptive sense. Rather, since the consequence of recognizing that property is held on resulting trust is that a claimant has an equitable proprietary interest, the resulting trust arises in the context of restitutionary claims to vindicate property rights. Consequently, the analogy should be made with the rules on the passing of legal title rather than with the interpretation of grounds of restitution. That the resulting trust has nothing to do with the unjust enrichment principle is reflected by the fact that Chambers has real difficulty fitting the traditional categories of resulting trusts into the unjust enrichment model. This is because there is no clear ground of restitution which justified the recognition of resulting trusts.
(2) ... It should not follow, however, that the resulting trust will never arise where the claimant's legal intention to benefit the defendant can be considered to be vitiated. Where legal title to property will not pass to the defendant because the nature of the transfer is such that the claimant's intention to transfer the property can be regarded as absent, so too the claimant's intention that the defendant should receive the property absolutely should be considered to be absent, so that the property is held on resulting trust for the claimant. The resulting trust will, however, only be relevant where legal title has passed to the defendant despite the absence of the claimant's intention that property should pass... (63)
It can be argued, then, that the resulting trust has a role to play in restitutionary claims to vindicate property rights but not, as Chambers asserts, in restitutionary claims for unjust enrichment. The trust will arise wherever the claimant did not have the necessary intention to pass legal title to the defendant, but for whatever reason title passes nevertheless. It might be justified either on the basis that the claimant's want of intention to pass legal title should be taken to encompass a lack of intention to pass the property absolutely and the defendant will therefore hold the legal title on resulting trust for the claimant or perhaps on the basis that an intention should be imputed that, in such a case, the property is to be held on trust for the claimant. This argument is highly persuasive. Viewed thus, the resulting trust operates as a device to protect the claimant's pre-existing beneficial interest in property, even if strictly speaking it involves a new equitable interest being granted back to the defendant rather than retained by the claimant.
English law provides no clear and all-embracing definition of a constructive trust. (64) The basic idea, however, is that a constructive trust is one which is imposed on the defendant, rather than by the intention of the parties, (65) in response to unconscionable conduct by the defendant, such that equity will not allow the defendant to assert his beneficial interest in the property and deny the beneficial interest of the claimant. (66) The constructive trust differs from the resulting trust in that, unlike the resulting trust, where the intention of the transferor is relevant, intention is irrelevant to the constructive trust and in that the concept of unconscionability is central to the latter but has no role to play in the law of resulting trusts. The resulting trust is institutional not remedial in the sense that it arises by operation of law in response to certain defined events occurring rather than as a matter of judicial discretion as a remedy wherever the court thinks it just to do so. It is now common to distinguish between two types of constructive trust. (67) First, there are those trusts which arise by reference to a pre-existing trust or fiduciary relationship which predates any breach of trust or fiduciary duty by the defendant. The defendant is a true trustee in that equity treats him as holding property on trust for the claimant. Such trusts arise where the defendant has accepted or assumed the role of trustee independently and before any breach of duty. The trustee does not receive the property in his own right but by a transaction, which is not impeached, and which is intended to create a trust from the start. The second kind of constructive trust is where the trust arises as a response to wrongdoing by the defendant. In some cases equity will make the defendant personally liable to account to the claimant 'as a constructive trustee' either in its exclusive jurisdiction (68) or its auxiliary jurisdiction (69) and in some cases equity will also impose a trust on the defendant of specific property in his hands in consequence of his wrongdoing.
The circumstances in which a constructive trust will arise are many and varied and can be organised in different ways. It is beyond the scope of this article to give a comprehensive description of all such cases. One broad distinction, however, which echoes the division between the two kinds of trust just mentioned, is to distinguish between those trusts which arise in the context of a breach of fiduciary duty and those which arise where there is no pre-existing fiduciary relationship. (70) It is perfectly possible, maybe even likely, that claims in respect of cultural property will involve transactions by false fiduciaries. For example, the property may have been stolen by a corrupt museum employee or exported on the basis of forged or irregular export documentation issued by a corrupt official. However, in the type of claim under consideration, the claimant is following his cultural property, not asserting claims in unauthorised substitutes or seeking to assert a trust over bribes or commissions for wrongdoing. Furthermore, the defendant, into whose hands the property is eventually followed, is unlikely to be a fiduciary of the claimant. Accordingly, we will not examine cases in this first category here and proceed to consider the second type of case, namely where the circumstances are such that the law will impose a constructive trust over property in the absence of a pre-existing fiduciary duty on the part of the defendant. Here, three categories of case may be of particular relevance. The first is where property has been transferred to the defendant by mistake. The second is where the defendant has acquired property by theft or fraud. The third situation is where the transaction under which property passed to the claimant is rescinded in equity.
Turning first to cases of mistake, it is possible to envisage numerous circumstances where the claimant's legal or equitable property may be transferred away on the basis of a transaction which can be impugned for a mistake of some sort or the other. For example, this may include a mistake as to what the property really is (say, a case involving a misattribution of a work of art) or as to its true value. There is some authority that in cases of mistaken payments, the law may impose a constructive trust on the defendant where it would be unconscionable for the defendant to deny the claimant's beneficial interest in the money transferred. The authority usually cited in this context is the difficult case of Chase Manhattan Bank N.A. v. Israel-British Bank London Ltd (71) in which a bank had mistakenly made two transfers of US$2m instead of one by virtue of a clerical error. It was found that the bank knew or should have known of the mistake before it subsequently went insolvent. Goulding J. declared the bank a constructive trustee of the second payment. The trust arose from the moment of receipt.
In Westdeutsche Lord Browne-Wilkinson cast doubt on Goulding J.'s reasoning. Having identified the concept of unconscionability as the touchstone of the trust, he professed himself unable to see how the bank's conscience could be affected. He continued:
However, although I do not accept the reasoning of Goulding J., Chase Manhattan may well have been rightly decided. The defendant bank knew of the mistake made by the paying bank within two days of the receipt of the moneys: see at p. 115A. The judge treated this fact as irrelevant (p. 114F) but in my judgment it may well provide a proper foundation for the decision. Although the mere receipt of the 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... (72)
Thus, for Lord Browne-Wilkinson the case may have been correctly decided, albeit for reasons different from those given by Goulding J. For Lord Browne-Wilkinson once the bank had notice of the mistake, its conscience was affected and a trust arose. (73)
Chase Manhattan remains a controversial decision. One possible justification for it proposed by Virgo (74) is that the claimant's intention to transfer the money was vitiated by a mistake so fundamental (as to the quantum of property) that ought to have prevented title from passing but that, as legal title could not be asserted against the bank, a resulting trust arose in favour of the claimant. This attractive approach justifies the decision in terms which have nothing to do with unconscionability. However, others (including those who accept the absence of basis analysis in respect of constructive trusts) disagree that the case was correctly decided. Lord Millett has written:
I agree with Lord Browne-Wilkinson that Chase Manhattan Bank N.A. v. Israel-British Bank London Ltd was wrongly decided, but it was wrongly decided, not because the defendant had no notice of the plaintiff's claim before it mixed the money with its own, but because the plaintiff had no proprietary interest for it to have notice of ... The fact that the money was paid by a mistake afforded a ground for restitution. By itself notice of the existence of a ground of restitution is obviously insufficient to found a proprietary remedy; it is merely notice of a personal right to an account and payment. It cannot constitute notice of an adverse property right if there is none. (75)
On the other hand, some commentators, who argue that trusts are imposed as a response to unjust enrichment, have expressed the view that the decision, as originally reasoned by Goulding J., is correct. For example, Burrows argues that the mistake vitiated the claimant's consent to the second payment with the result that there was never a time that the bank was entitled to the enrichment, or because the claimant had not taken the risk of the bank's insolvency. (76)
The second sub-category of constructive trust to consider is the trust imposed in the case of theft and fraud. In Westdeutsche Lord Browne-Wilkinson said:
The argument for a resulting trust was said to be supported by the case of a thief who steals a bag of coins. At law those coins remain traceable only so long as they are kept separate: as soon as they are mixed with other coins or paid into a mixed bank account they cease to be traceable at law. Can it really be the case, it is asked, that in such circumstances the thief cannot be required to disgorge the property which, in equity, represents the stolen coins? Moneys can only be traced in equity if there has been at some stage a breach of fiduciary duty, i.e. if either before the theft there was an equitable proprietary interest (e.g. the coins were stolen trust moneys) or such interest arises under a resulting trust at the time of the theft or the mixing of the moneys. Therefore, it is said, a resulting trust must arise either at the time of the theft or when the moneys are subsequently mixed. Unless this is the law, there will be no right to recover the assets representing the stolen moneys once the moneys have become mixed. I agree that the stolen moneys are traceable in equity. But the proprietary interest which equity is enforcing in such circumstances arises under a constructive, not a resulting, trust. Although it is difficult to find clear authority for the proposition, when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity. Thus, an infant who has obtained property by fraud is bound in equity to restore it... (77)
As a matter of strict logic the suggestion that theft gives rise to a constructive trust in favour of the claimant is untenable: a thief obtains no legal or beneficial title to the stolen property and thus has no interest to hold on trust for the claimant. (78) Despite this, the approach has received considerable support. It is, in truth, probably a formula to allow the claimant to take advantage of the more generous tracing rules in equity. (79)
Apart from cases of theft, the question arises as to what types of fraudulent conduct will trigger a proprietary response. It has been said that:
the jurisdiction which is invoked here by the appellant is founded altogether on personal fraud. It is a jurisdiction by which a court of equity, proceeding on the ground of fraud, converts the party who has committed it into a trustee for the party who is injured by that fraud. (80)
However, in Halifax Building Society v. Thomas (81) Peter Gibson L.J. said of this:
But that statement must be read in the context in which it was made, namely the jurisdiction where a secret trust is alleged. It cannot be elevated into a universal principle that wherever there is personal fraud the fraudster will become a trustee for the party injured by the fraud.
Furthermore, in Box and another v. Barclays Bank Plc, (82) Ferris J. said:
The observation of Lord Browne-Wilkinson in the Westdeutsche case only assists the plaintiffs if it is to be treated as a general statement of the law applicable to all cases of fraud. In my view it would be wrong so to treat it. It was a general statement of certain underlying principles instanced by examples two of which concerned transactions which are void, not voidable, and the third of which comes from the field of secret trusts where 'fraud' is referred to in a special sense. I do not think that Lord Browne-Wilkinson can be taken to have been laying down a principle applicable to all cases of fraud when he did not deal with the reasoning in the other cases which 1 have mentioned.
Ultimately, it is probably not possible to predict all of the circumstances in which the fraud principle will apply. Each case will have to be considered on its facts. However, if the defendant has obtained the claimant's property by means which can be described as fraudulent, dishonest, improper or, more generally, unconscionable, the claimant may be able to argue that a trust should be imposed.
The third situation of particular interest where a constructive trust may arise has already been foreshadowed in the discussion on the transfer of title, namely where title has passed to the defendant but the claimant is able to rescind the contract. As has already been noted, while rescission at common law revests legal title in the claimant, equity cannot revest legal title. (83) The resultant trust for the claimant has been described as both a resulting trust (84) and a constructive trust (85) but it is unlikely that anything turns on this.
III. PRACTICAL APPLICATION OF THE LAW OF TRUST IN CULTURAL PROPERTY CLAIMS
We come now to consider how these principles may assist the claimant whose cultural property has been misappropriated.
The Position of the Absolute Owner
If the absolute owner of property finds that his legal title has been divested several options are open to him. The first will be to rescind the transaction at common law. If this remedy is exercised, it will not give rise to a trust, but will vest absolute ownership back in the claimant. We need say no more about it.
The next option is for the claimant to argue that the transaction which carried legal ownership away from him gives rise to a presumed resulting trust. Whether this analysis is possible will depend on the precise facts under consideration. As we have seen one possible approach is to say that if his intention is vitiated for the purposes of a transfer of property, any title which passes at common law will be held subject to a resulting trust.
Suppose for example, that the claimant, the owner of a work of art, is induced to give the work to the defendant pursuant to a fundamental mistake. In a simple case of an oral gift by delivery, there is no need to introduce the concept of a trust. It can be argued that the mistake prevents property from passing to the defendant at common law, with the result that the defendant merely acquired possession of the work while the claimant remained its owner. Matters may be more complicated, however, if there has been a formal conveyance of the property. For example, the gift might be contained in a deed, which vested legal title to the work in the defendant. Revesting title by rescission at common law may not (86) be possible because of the deed. It is at this point that the claimant might pray in aid the doctrine of resulting trusts by arguing that, while legal title has undoubtedly passed to the defendant under the deed, the claimant's want of intention owing to the fundamental mistake means that the property remains his in equity. The might be put on the basis that the defendant holds his legal title to the work on resulting trust for the claimant.
One particular place where a resulting trust analysis might be of special interest is where the defendant derives his title from the operation of a statute. In this regard, the provisions of the Limitation Acts 1939 and 1980 for conversion come to mind. English law never developed any form of proprietary action by which an owner of goods could defend and exonerate his interest. Instead, the primary vehicle through which interests in goods are protected is the tort of conversion. Conversion consists of any act of wilful interference, committed without lawful justification, with any chattel in a manner inconsistent with the right of another, whereby the other is denied the use and possession of it. The combined effect of sections 2 and 3(1) of the Act is that the limitation period for a claim for conversion is six years from the date of the tort. Importantly, section 3(2) provides:
Where any such cause of action has accrued to any person and the period prescribed for bringing that action has expired and he has not during that period recovered possession of the chattel, the title of that person to the chattel shall be extinguished.
Thus, upon expiry of the relevant period the Act not only bars the claimant's right to sue but also extinguishes his 'title' to the goods. (87)
Against this background, consider the following example. Mr Vogue is now a world-renowned dressmaker to the rich and famous but in the 1960s he was just starting out with a few middle-ranking clients. For a couple of years he lodged with Mr Keeper. There is some limited correspondence that Mr Vogue stored some of his early works in boxes in Mr Keeper's loft. It also appears that, after a couple of years, Mr Vogue won a prestigious scholarship to a college of fashion in Paris, packed up his belonging and moved out of Mr Keeper's house in a hurry--but on good terms. It now appears that when Mr Vogue moved out he left some of his old boxes of dresses in Mr Keeper's loft and the latter took hold of these and kept them for himself. In the 1980s Mr Keeper deposited them with a museum on a long-term loan. When Mr Keeper died his will left all his estate to his son, Mr Lucky. The estate was fully administered. Mr Lucky then corresponded with the museum to say that he was happy for the loan to continue. Mr Lucky then died. His executors have corresponded with the museum with a view to terminating the loan and reclaiming the dresses. Now, out of nowhere, Mr Vogue has resurfaced and claimed that the dresses belong to him. He says that he never gave them to Mr Keeper and that he remains their true owner.
In this example, it is clear that Mr Keeper acquired a possessory title to the dresses, which he was capable of passing by will to his son, Mr Lucky. (88) The real question, however, is not whether Mr Keeper (and those claiming through or under him) acquired a possessory title which is good against the world except for Mr Vogue (as true owner), but whether he acquired a title which is good against everyone including Mr Vogue. In other words: the question is whether Mr Keeper acquired not just possession but full legal ownership, meaning that Mr Lucky's executors (89) have now inherited a better title to the dresses than Mr Vogue.
The first port of call for Mr Lucky's executors will be to identify some transfer of title from Mr Vogue to Mr Keeper. However, in the absence of such a transfer, they will need to resort to an argument based upon limitation. The executors will argue that when Mr Keeper took possession of the dresses or at some later point in time, he, or later Mr Lucky, converted the dresses so as to start time running for the purposes of the Limitation Act 1939 or the Limitation Act 1980 and, upon expiry of the relevant six-year period, Mr Vogue's title was extinguished. Mr Vogue's response will surely be, first, to deny that any act of conversion took place, so that time did not begin to run against him under the Limitation Act 1939 and second, to argue that the postponement provisions of section 26 of the 1939 Act should apply here. (90)
One intriguing possibility, however, is whether Mr Vogue might also argue, in the alternative, that even if his legal title to the goods has been extinguished under the 1939 Act, he nevertheless has a surviving beneficial interest in the dresses. Might he argue that a total extinction of any interest of his interest in the dresses would have delivered an unfair windfall to Mr Keeper and that a trust arose by operation of law whereby Mr Keeper held his newly promoted legal title to the dresses on trust for Mr Vogue? Such a trust, not being dependent on any unconscionability on the part of the defendant, could only really be characterised as a resulting trust. It would be a long way removed from a trust arising by a gratuitous transfer of property and would be impossible to justify by reference to any presumed intention that Mr Vogue intended Mr Keeper to hold the work on trust for him. However, if the resulting trust is seen as a trust arising by operation of law wherever there is an absence of any intention to benefit the defendant, the argument does not look quite so unappealing.
For his part, Mr Lucky's executors will say that any suggestion of a trust of Mr Keeper's title is hopeless. One objection may be that Mr Keeper's title was only ever a possessory title, and, as such, cannot be held on trust. (91) This objection loses its force, however, when it is borne in mind that under the Act Mr Keeper acquired a superior legal title to that of Mr Vogue. As between the two of them, the statute effectively converted Mr Keeper into the true owner. A more significant objection to the trust argument, however, is that to say that a resulting trust arose every time the statute extinguished the claimant's title would drive a coach and horses through the Act. The whole purpose of the provision, it will be said, is to clear off the claimant's interest in the goods and quieten title and this can happen only if the defendant's whole title--legal and beneficial--is eclipsed.
There is much to be said for this view, which is really a point of statutory construction about the meaning of the word 'title' in section 3(2). (92) Yet, it is possible to envisage other circumstances where it might be possible to argue that a resulting trust, or some similar device, operates to impress a trust on a title conferred on the defendant by statute.
It is interesting to speculate whether such an argument might be brought to bear in the notorious case of the Parthenon Sculptures. As is well known, the Sculptures were removed by Lord Elgin from the Parthenon and other buildings of the Acropolis in Athens in the early nineteenth century purportedly pursuant to a firman, a written authorisation granted on behalf of the Ottoman authorities (although it has been said that in removing the Sculptures Lord Elgin exceeded any authority that he was granted under this transaction). (93) The collection was transported to England and, in 1816, the British Government paid Lord Elgin 35,000[pounds sterling], this figure having been determined by a special committee of the House of Commons. The collection was vested by statute in the trustees of the British Museum in perpetuity, under the terms of the Local and Personal Acts 56 George III c.99 of 1816, (94) which provided that, upon payment to Lord Elgin, the sculptures "shall be vested in the Trustees for the time being of the ... British Museum and their successors, in perpetuity". That Greece now wishes to recover the Sculptures is well known. Equally familiar is the argument that a statute vesting title in the museum is an insuperable obstacle to the claim under English law. The statute appears to confer an incontrovertible title on the trustees irrespective of whether Lord Elgin, or indeed any other potential claimant, such as the Ottoman Empire or the modern State of Turkey, had prior ownership of the Sculptures.
Yet here, again, the law of trusts might provide a powerful counter argument. It might be argued that even if the statute was effective to vest an overriding legal title in the Trustees of the museum, they hold their legal title on trust for Greece. If Greece (95) was the absolute owner of the sculptures when the statute was enacted (96) then, on the face of it, the statute worked a compulsory or mandatory transfer of title to which Greece did not consent and/or which it was powerless to prevent. As we have seen, under the rules on the passing of title no property passes in cases of ignorance or powerlessness for want of any dispositive intent. Of course, the statute, as an Act of Parliament, prevails over any such principle of private property law but it is arguable that the state of affairs brought about by the Act is similar to the state of affairs produced where, under the rules on the passing of title, property should not pass at all but for whatever reason legal title ends up with the defendant. The suggested response to this is a resulting trust. By parity of reasoning, might it then be said that even though the Act vested incontrovertible title to the Sculptures in the Trustees of the Museum, their title is held on some form of resulting trust? (97) As with the example of the Limitation Act 1980, this might be presented as an argument about the true meaning of the word 'vest' in the Act and this might require the court to adopt a purposive approach when construing the statute and to consider precisely what nature of interest was vested and whether it is consistent with the existence of the suggested trust. It might be said with some force that, unlike with the Limitation Act 1980, where the whole point of section 3(2) is to strike out claims based upon stale titles, there is nothing in the policy of Act vesting the Sculptures in the Trustees which requires the court to hold that the legal title of the Trustees and the beneficial interest of Greece cannot co-exist in the Sculptures.
So much for resulting trusts. What arguments may be open to the absolute owner under the law of constructive trusts? Here, the possibility of a trust arising as a result of mistake or fraud will be at the forefront of the claimant's mind. The imposition of a constructive trust on a thief in cases of outright theft is a powerful tool for the claimant. This effectively converts the claimant's absolute ownership into equitable title for the purposes of tracing. Provided the claimant's property has not passed through the hands of a bona fide purchaser for value without notice he will be able to assert title against the defendant in whose hands they are located. At this stage he might put forward a claim based upon absolute ownership but he might equally continue with the language of constructive trusts and assert that the defendant was, like the thief and any successors in title, a constructive trustee for the claimant under the principle nemo dat quod non habet. Aside from cases of theft or surreptitious abstraction, it is possible to think of any number of hypothetical examples where the claimant is persuaded by trickery or fraud to part with his property either by way of a formal conveyance or simply by delivery. (98) Either way, the claimant might assert that the conscience of the transferee is bound and again seek to assert either absolute ownership or a constructive trust against the defendant as the last possessor in the chain, applying the nemo dat principle. (99)
The Position of the Equitable Owner
As we have seen, where the claimant starts life with only an equitable ownership, his interest in the goods is much more vulnerable to extinction than that of the absolute or legal owner. Again, the first task for the claimant will be to determine whether his equitable interest has survived the various transactions which may have engulfed it along the way.
The options open to a claimant with an equitable ownership only are inevitably more limited than those which are open to a claimant with absolute ownership. The doctrine of resulting trusts applies equally to transfers of equitable property as legal property, so this will provide some comfort to an equitable owner whose equitable interest has been transferred in some way. For example, suppose a trustee holds legal title to a valuable collection of artwork on trust for the claimant and the claimant assigns his interest to the defendant. If his intention is uncertain the law may impose a resulting trust under which the defendant then holds the equitable interest in the collection on sub-trust for the claimant.
However, there would seem to be far less scope for the operation of the doctrine of constructive trusts based upon unconscionability. This is inevitable given that what usually causes the equitable interest to be extinguished in the first place is that a bona fide purchaser third party has acquired legal title to the trust property. This, being so, it is hardly likely that the law will generate a new equitable interest in the property under a constructive trust to carry the beneficial title back to the claimant. So, continuing the example of the collection held on trust for the claimant, if the trustee of the collection, in breach of trust, transfers legal title to the artwork to the defendant, the question is whether the defendant was a bona fide purchaser for value without notice. If not, the defendant will be bound by the claimant's interest, not under a constructive trust but because, under the rules on the passing of equitable title, the claimant has not lost his original equitable title at all. However, if the defendant is such a purchaser the claimant's equitable interest will be extinguished and there is plainly no scope for arguing that a new trust has arisen based on unconscionability.
Claimants whose cultural property has been misappropriated will often base their claims for recovery on full legal and beneficial ownership; but in some circumstances this will not be possible, either because legal title has passed to the defendant or because the claimant only ever had an equitable interest in the property at the outset. Here, the law of trusts can provide a fertile source of argument. The trust is an infinitely malleable device, which arises wherever one person is bound in conscience to hold his interest in property on behalf of another. Given the inherent flexibility in the very concept of unconscionability which lies at the heart of the equitable jurisdiction, the range of arguments that might be developed in cases of misappropriation is endless.
Luke Harris, Barrister, 5 Stone Buildings, Lincoln's Inn.
(1) David Hayton, Paul Matthews and Charles Mitchell Underhill and Hayton. Law of Trusts and Trustees. (Butterworths Law, 2010) para. 1.1.
(2) While it is common to speak of the trustee as being the legal owner of, or having legal title to the trust property and the beneficiary as the equitable owner with equitable title, it is important to recognise that trust property can itself be equitable property. Here, the trustee cannot be the legal owner of the trust property because the property exists only in equity. If the trust property is an interest under a trust the trustee will be the equitable owner of the trust property under the head trust, but will hold his equitable interest on sub-trust for his own beneficiary as ultimate equitable and beneficial owner of that interest.
(3) Roy Goode, Commercial Law. 5th edn (Penguin, 2016) para. 2.20.
(4) Legal ownership is not the only legal property interest in chattels. One view is that the limited interest of a bailee with possession of goods is also a form of limited, legal interest (and indeed the only form of legal interest apart from ownership). The possessory title to goods may at any given time, depending on the intention of the possessor, be either title to an absolute (ownership) interest or title to a limited interest of a bailee. By contrast, others argue that rights of possession also qualify as legal proprietary interests in goods: see for example, Norman Palmer, Palmer on Bailment 3rd edn (Sweet & Maxwell, 2009), ch. 24, which contains a full discussion of the issue.
(5) Goode, above, note 3, paras 2.34 and 2.36.
(6)  A.C. 669, at 706.
(7) These will involve both bilateral transactions, such as gifts and sales, and multi-party transactions where the parties are in interconnecting relationships (contractual, fiduciary, agency, bailment, trust etc.).
(8) It is beyond the scope of this article to provide a comprehensive summary of the whole of English law on the transfer of title. In seeking to provide a summary of such a large topic there is a very real danger of inaccuracy by omission. It should also be noted that this summary is concerned solely with dispositions of legal and equitable ownership. It does not consider dispositions of limited interest. It is also assumed that the necessary formalities have been complied with.
(9) See Halsbury's Laws, Vol. 77, Mistake, paras 26 and 27, and the cases cited there.
(10) See the discussion by Sir Anthony Mason, 'Exploiting the Weaker Party' in Recovery of Stolen Art ed. Norman Palmer, (Kluwer and Institute of Art and Law, 1998) 109.
(11) Property will not pass and the contract will be void where the property owner does not know what he is being alleged to transfer: R v. Davies 1982 All E.R. 513, Johnson v. Simmons Times 25 Nov. 1953, See Palmer on Bailment above, note 4, para. 35-013.
(12) Cf: Bakwin v. Eire International Trading Company Inc, (2005) 1 Arbitration Law Reports and Review 83, per Master Rose.
(13) The principle nemo dat quod non habet provides an alternative route to the same conclusion.
(14) Principally, whether it is legal or equitable.
(15) X may have a proprietary title because he is trustee of the legal or equitable interest in the property for the claimant and/or may have possessory title (e.g. as trustee, thief, agent, finder, bailee), or he may have no title at all (e.g. an agent without possession). His power to transfer title will depend upon a combined effect of the incidents of his proprietary interest (if any), the general law of agency and statue.
(16) Again, principally whether it is legal or equitable.
(17) The rule receives statutory recognition under s. 21(1) of the Sale of Goods Act 1979, which provides: "Subject to this Act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell."
(18) The nemo dat principle is a fundamental tenet of the common law and pre-dated the Sale of Goods Act 1897. For example, in Cundy v. Lindsay (1878) 3 App. Cas. 459 at 463-464 Lord Cairns observed: "with regard to the title to personal property ... the purchaser of a chattel takes the chattel as a general rule subject to what may turn out to be certain infirmities in the title ... If it turns out that the chattel has been stolen by the person who has professed to sell it, the purchaser will not obtain a title". A non-owning possessor can, of course, transfer bare possessory title.
(19) In the circumstances under consideration X has no legal title to the claimant's property (beyond possibly a bare possessory title). Any power to dispose of the claimant's title will arise under the general law of agency or by statute. Thus at common law an agent may make dispositions of his principal's property when acting within the scope of his actual or ostensible authority and under the so-called doctrine of apparent ownership: see generally Bowlsead & Reynolds on Agency (20lh edn), ch. 8, s. 2. There are also a statutory attenuation of the nemo dat principle in respect of the following: (1) sale under voidable title within s. 23 of the Sale of Goods Act, (2) a disposition by a mercantile agent within s. 2 of the Factors Act 1889, (3) the consignee's lien under s. 7 of the Factors Act 1889, (4) a disposition by a seller remaining in possession under s. 8 of the Factors Act 1889 and s. 24 of the Sale of Goods Act 1979, (5) transfers by a buyer of a document of title to goods which are subject to a seller's right of lien or stoppage in transit under section 10 of the Factors Act 1889 and s. 47 of the Sale of Goods Act 1979, (6) a disposition by a buyer obtaining possession under s. 9 of the Factors Act 1889 and s. 25 of the Sale of Goods Act 1979 (7) certain dispositions under Part III of the Hire-Purchase Act 1964. Previously, there was a further statutory exception to the nemo dat rule where goods were sold in market overt according to the usage of the market but this was abolished by the Sale of Goods (Amendment) Act 1995, s. 1.
(20) See generally John McGhee, Snell's Equity, 33rd edn, (Sweet & Maxwell, 2015) 10-004. The trustee's power to dispose of trust property lawfully is composed of two elements: an incident of his title to the trust assets and any provision which authorises him to deal with the property without committing a breach of trust. As owner of the trust property the trustee has the power to dispose of it as a natural incident of his title, not as a result of any principle of trusts law. However, a trustee who exercises his powers as owner without proper authorisation, whether under the general law or under the trust instrument, commits a breach of trust. A trustee who steps outside of his authority to deal with trust assets, but still deals with them, is in breach of duty. The exercise of his power is void.
(21) There are, however, exceptions to this proposition: see L. Tucker et al., Lewin on Trusts, 19th edn (Sweet & Maxwell, 2016) para. 33-014.
(22) Note, however, that s. 23 of the Sale of Goods Act provides that 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.
(23) There is an exception to this where legal title has passed as a result of a formal conveyance.
(24) It is noteworthy that there is no jurisdiction in equity to set aside contracts for common mistake or unilateral mistake known to the other party. A contract can be set aside on the ground of mistake only if the mistake is such as to render the contract void at common law.
(25) Until the contract has been rescinded the claimant does not have an equitable interest in the property but a 'mere equity' to have it set aside. There is some authority that a contract which is induced by fraudulent misrepresentation so serious as to vitiate the claimant's intention to transfer property to the defendant should be treated as a nullity from the outset with the result that a trust of the property is created from the moment of transfer: see for example, Halley v. Law Society  W.T.L.R. 845. These decisions should be treated with caution on the point. Cf Bakwin v. Eire International Trading Company Inc, Master Rose, above, note 12.
(26) Where the disposition is by his trustee to a bona fide purchaser for the value without notice of the legal interest it is more accurate to say that his title has been extinguished rather than that it has passed to the purchaser: the purchaser simply takes free of the equitable interest.
(27) An express trust is created when a settlor or testator intentionally constitutes a trust by declaration of trust, by will or by the transfer of property to trustees to hold on trust.
(28) Graham Virgo, The Principles of the Law of Restitution, 3rd edn, (Oxford University Press, 2015) p. 3.
(29) See Banque Financiere de la Cite v. Parc (Battersea) Ltd  1 A.C. 221, 227per Lord Steyn. It was only in the 1991 decision of the House of Lords in Lipkin Gorman (a firm) v. Karpnale Ltd  2 A.C. 548 that the law finally recognised that relief could be awarded based upon an independent principle of avoiding unjust enrichment. At a liability stage unjust enrichment is not concerned with the conduct of the defendant (although personal liability in equity for knowing or unconscionable receipt of trust property is perhaps an anomalous exception). However, the defendant's state of mind and conduct will be highly relevant to the question of any defences (e.g. good faith change of position). The remedy for unjust enrichment is always restitutionary in nature. By contrast, where the cause of action is a wrong (e.g. breach of contract, tort, or breach of fiduciary duty) the remedy might be compensatory or restitutionary.
(30) Andrew Burrows, A Restatement of the English Law of Unjust Enrichment, (Oxford University Press, 2013) s. 3, pp. 30-35. Some of the unjust factors have developed at common law (e.g. failure of consideration (i.e. failure of basis)) and some in equity (e.g. undue influence). An alternative approach to identifying specific grounds for restitution in the form of 'unjust factors' would be to look at whether there was any valid legal basis for the enrichment; restitution would be awarded wherever there was an 'absence of basis'. There are differences of academic and judicial opinion as to whether English law should in future adopt a similar approach. See for example, Paul McGrath, Commercial Fraud in Civil Practice, 2nd edn, (OUP Oxford, 2014) and Goff and Jones: The Law of Unjust Enrichment, 7th edn, (Sweet & Maxwell Ltd, 9th edn 2016), para. 1-023.
(31) Where the claimant transfers a benefit to the defendant pursuant to a transaction which is subject to a condition, known as basis, and this condition has not been satisfied, there has been a total failure of the basis for the transfer of the benefit. Traditionally this ground for relief was called failure of consideration, but this term is potentially misleading given the particular meaning of 'consideration' in the law of contract. The expression 'failure of basis' is now often preferred.
(32) This is as an alternative to any compensatory remedy which might otherwise be awarded to compensate the claimant for loss suffered as a result of the wrong.
(33) Virgo, above, note 28, pp. 11-12.
(34)  1 A.C. 102.
(35) Ibid., at 127.
(36) Ibid., at 127per Lord Millett.
(38) Ibid, at 129 per Lord Millett.
(39) Goff & Jones. The Law of Restitution, T edn, (Sweet & Maxwell, 2009), 1-011.
(40) For those who argue that a proprietary interest may be granted to prevent or reverse an unjust enrichment, the challenge is to identify precisely when the remedy should issue. A key theme running through much of the literature is that there should not be 'too much' proprietary restitution lest it undermine the security of receipts under transactions or unsettle the law of insolvency (the point is made in Goff and Jones above, note 39 at pp. 37-12). Unfortunately, perhaps, there is no consensus among the commentators. Indeed, it has been said that there is no theory which can explain when they should be awarded in a way that reconciles the results in all of the cases (Goff and Jones, above, note 39 at pp. 37-24.) However, it is generally accepted that in the first place the claimant must establish a 'proprietary base' to his claim. This term was coined by Peter Birks in An Introduction to the Law of Restitution, (Oxford University Press UK, 1989) revised edn, pp. 375-385; Peter Birks, 'Establishing a Proprietary Base'  Restitution Law Review 83. In other words, the claimant previously owned the property in which he now claims an ownership or security interest, or else that the defendant acquired this property or enrichment in exchange for property that was previously owned by the claimant or something of else of value originating from the claimant. Some also suggest that awarding a proprietary remedy must not be inconsistent with the law of insolvency. For example, Andrew Burrows argues that the law can justifiably create proprietary rights where, analogously to a secured creditor, the unjust enrichment claimant has not taken the risk of the defendant's insolvency. Robert Chambers and Peter Birks take a different approach. They suggest that the availability of proprietary remedies turns on whether the enrichment was freely at the defendant's disposal before the claimant's right to restitution arose. If the right to restitution arises at the time when the defendant is enriched (for example in cases in cases of mistake, duress, undue influence, and immediate failure of basis) then a proprietary remedy is available. On the other hand, if it only arises later (for example, on a subsequent failure of basis) then a proprietary remedy will be awarded only when the asset was never at the defendant's free disposal owing to some contractual or equitable restriction.
(41) While Burrows disagrees with the reasoning of the House of Lords in Foskett v. McKeown he supports the result. His analysis is that the claimants were awarded a new proprietary right in the insurance proceeds to reverse unjust enrichment. The unjust factor was 'ignorance' (p. 178 fn. 45) or presumably the fiduciary's lack of authority: see Burrows, above, note 30, s. 8.
(42) Burrows says of Virgo: "His supposed third fundamental principle of the law of restitution--'the vindication of property rights with which the defendant has interfered '--cuts across, and is partly-absorbed by. his 'reversal of unjust enrichment 'and 'prevention of wrongful profit principles "': Andrew Burrows, The Law of Unjust Enrichment, 3rd edn (Oxford University Press, USA, 2011), p. 169. Presumably, that part of Virgo's third principle which is not absorbed by his other two principles to be the vindication of pre-existing title.
Burrows' willingness to exempt pure proprietary claims from the law of unjust enrichment is curious in light of his view the retention of title by the claimant does not preclude the defendant from being enriched at the claimant's expense (pp. 194-198). William Swadling has argued that where C retains legal title in property transferred to D, there can be no claim by C for unjust enrichment because D has not been enriched at C's expense: Swadling, 'A Claim in Restitution?'  Lloyd's Maritime and Commercial Law Quarterly 63 (and note a similar idea underpins the reasoning of the House of Lords in Foskett v. McKeown). Burrows critcises Swadling's view on the basis that enrichment in the law of unjust enrichment is assessed factually, not in terms of legal entitlement. But if Burrows is correct, why should a claim for unjust enrichment not lie based upon the defendant's receipt of property to which the claimant has a pre-existing title?
(43) Re Bond Worth Ltd  3 All E.R. 919. Westdeutsche Landesbank Girozentrale v. Islington LBC  A.C. 669, 706per Lord Browne-Wilkinson.
(44) Goode, above, note 3, para. 2.34.
(45) Robert Chambers, 'Resulting Trusts in Canada' (2000) 38 Alberta L.R. 379, p. 389 (reprinted (2002) 16 Trust Law International 104 and 138). There is an interesting discussion of whether the resulting trusts requires a preceding transfer of property to come into existence in Geraint Thomas and Alistair Hudson, The Law of Trusts, 2"d edn (Oxford University Press, 2010), 26.08 et seq. It is suggested that it is not at all clear that all forms of resulting trusts do in fact return property rights to their previous owners and that instead there are situations in which it would appear on closer analysis that no rights ever leave the claimant and "therefore that the resulting trust is. in truth, vindicating the continued presence of property rights in the hands of the defendant". The authors wisely observe: "The answer to the question whether or not any property rights do in fact return to the claimant is an equivocal and contextual one which demonstrates that some resulting trusts do involve a return of property rights and that others do not.'" With this in mind we may observe that here, as always, it is important to consider why the question being posed actually matters.
(46) Although note the warning below: equity has traditionally awarded trust-based remedies outside the field of unjust enrichment.
(47) As noted above, 'following' involves following the asset as it moves from hand to hand. At the end of the process it leads to a claim in respect of the very asset which the claimant lost. By contrast, 'tracing' involves tracing value through unlawful substitutions of the claimant's property for other property. Any proprietary claim in respect of a substitute asset is, of course, a claim to a different asset from the one which the claimant originally legal or beneficially owned. The point is that it looks odd to describe a claim to an asset that has been followed (not traced) into the hands of the defendant other than as one that vindicates pre-existing title just because it depends upon principles of resulting or constructive trusts.
(48) Restitution for wrongdoing in the current parlance. It will be often be case the same facts could found both a claim for unjust enrichment and a claim in equity in respect of a civil wrong.
(49)  A.C. 669.
(50) Ibid, at 708. See also Lord Goff at 689.
(51) Where the parties are in a special relationship there is sometimes a presumption that the transferor intends to make a gift of the property. This rival presumption of advancement ousts the presumption of resulting trust. The Equality Act 2010, s. 199, abolishes the presumption of advancement with prospective effect only but the section has not yet been brought into force.
(52) For example, Chernev v. Neuman  EWHC 2156 (Ch.) at Henderson J.
(53) For example, Blue Sky One Ltd. v. Blue Airways LLC  EWHC 3314 (Comm.) at  per Beatson J. However, the fact that a transaction is one of loan does not necessarily exclude a trust: see Quitsclose Investments Ltd. v. Rolls Razor Ltd. 11970] A.C. 567, Twinsectra v. Yardley  A.C.I 64.
(54) Vandervell v. IRC (No. 2) 1 Ch. 269, 294 per Megarry J.
(55)  A.C. 669, 708.
(56) Ibid. See also Timely v. Milligan  1 A.C. 340, 341 per Lord Browne-Wilkinson.
(57) Peter Birks, 'Restitution and Resulting Trusts' in Stephen Goldstein (ed.), Equity and Contemporaiy Legal Developments', (Harry and Michael Sacher Institute for Legislative Research and Comparative Law, the Hebrew University of Jerusalem, 1992); Robert Chambers, Resulting Trusts, (OUP Oxford, 1997) esp. pp. 21 and 66; P. Millet, 'Restitution and Constructive Trusts' in William R. Cornish et al. (eds). Restitution: Past, Present & Future (Hart Publishing, 1998).
(58) See for example: Air Jamaica Ltd. v. Charlton  1 W.L.R. 1399 where the claimant cannot have intended any trust; Vandervell v. IRC [ 1967] 2 A.C. 291 where the transferor of shares structured the transaction precisely to avoid retaining any beneficial interest in the shares; Re Vinogradoff  W.N. 68, where the transferor could not have intended one of the joint transferees to be a trustee because she was only seven years old; El Ajou v. Dollar Land Holdings Plc (No. 1)  3 AU E.R. 717 where the company could not have intended a trust to arise over property which was stolen from it.
Interestingly, Graham Virgo has recently changed his view on the proper doctrinal basis for the resulting trust. Previously he wrote that, while the arguments were finely balanced, the absence of intent analysis of the resulting trust was preferable: Virgo, The Principles of the Law of Restitution, 2nd edn, (Oxford University Press, 2006), p. 598. More recently, however, he has denounced the absence of intention theory. Speaking of the presumed resulting trust Virgo writes "The presumption is preferably analysed as being that, where the claimant has voluntarily transferred property to the defendant or paid the purchase price for property held by the defendant, the claimant intended the property to be held on trust for him or herself;" and, of the automatic resulting trust, "It is possible, however, to explain the recognition of automatic resulting trusts without referring to either presumed intent or absence of intent. Rather, the automatic resulting trust should be considered to arise by operation of law imputing an intention that, in the circumstances which happened, a trust would be declared for the claimant. This imputed intention does not purport to reflect what the claimant did intend, but rather what the claimant would objectively be considered to have intended if thought had been given to the possibility of the express trust failing"'. Virgo, The Principles of the Law of Restitution, 3rd edn, (Oxford University Press, 2015), pp. 583 and 584 respectively. Thus, Virgo now concludes: "the preferable view of the resulting trust is that it does not respond to an absence of intent, but to a presumed or imputed intention that the property should be held on resulting trust for the claimant, and there is no reason why such an intention should be imputed or presumed simply because the defendant has been unjustly enriched at the expense of the claimant": Virgo, above note 28, p. 587.
(59) Chambers, above, note 57, p. 127.
(60)  A.C. 669, 708-9.
(61) Virgo, above, note 28, p. 585.
(62) Virgo, above, note 28, p. 572.
(63) Virgo, The Principles of the Law of Restitution, 2nd edn (Oxford University Press, 2006), pp. 603604. These passages do not appear in the most recent, third, edition of the text. This is, certainly so far as the second paragraph is concerned, consistent with Virgo's more recent repudiation of the absence of intent basis for the resulting trust. Nevertheless, it is reasonable to suppose that Virgo might still be prepared accept the resulting trust as the law's response to the situation where property has passed to the defendant but the claimant's legal intention to benefit the defendant can be considered to be vitiated. Arguably such a case resembles the situation where an express trust fails, giving rise to a presumed resulting based upon (so Virgo now argues) an imputed rather than presumed intention that there should be a trust for the claimant: see note 61 above. By parity of reasoning it might therefore be thought that where property passes but the claimant's legal intention is vitiated the claimant should also be imputed with an intention to create a trust. Admittedly, however, it is not clear whether Virgo would actually endorse this analysis. His discussion of the proprietary effects of rescission strongly suggests that he would strictly confine the automatic resulting trust based upon imputed intention to the case of the failed express trust and that, where such cases arise, his view is that a resulting trust must be based only on a presumed intention on the part of the claimant to create a trust: Virgo, above, note 28, pp. 587-588. Furthermore, it seems that, even if the claimant's legal intention to transfer property to the defendant might be vitiated, Virgo would still give that intention legal effect in determining whether or not the presumption of resulting trust arises in the first place and, if so, whether it has been rebutted.: see Virgo, above, note 28), p. 587. On this approach, it cannot be said that just because the claimant's intention to transfer legal title has been vitiated, there will necessarily be a presumed resulting trust for the claimant.
(64) Carl Zeiss Stiftung v. Herbert Smith & Co. (No.2)  2 Ch. 276 at 300, CA.
(65) Air Jamaica Ltd. v. Chariton  1 W.L.R. 1399, 1412 per Lord Millett.
(66) For judicial definitions (or descriptions) of the trust see: McGrath, Commercial Fraud in Civil Practice, see above, note 30, para 6.11.
(67) See, generally, Lewin on Trusts above, note 21, ch. 7; Paragon Finance plc D.B. Thakerar & Co.  1 All E.R. 400 at 409b-c, C.A.; Williams v. Central Bank of Nigeria  UKSC 10;  2 W.L.R. 355 at -[l 1], , Lewin observes that the distinction is mainly of importance in relation to questions of limitation under the Limitation Act 1980: 7-012.
(68) Liability for knowing receipt of trust property and dishonest assistance in a breach of trust.
(69) To award compensation for fraud at common law.
(70) This categorisation is helpfully suggested by McGrath, Commercial Fraud in Civil Practice, see above, note 30, ch. 6. Into the first category McGrath puts: (1) trusts imposed on assets which are held on express trust for the claimant and which are misappropriated by the trustee, (2) trusts imposed on assets which are the traceable proceeds of assets held on trust for the claimant, (3) trusts imposed in respect of corporate opportunities and (4) trusts of bribes and secret commissions. Into the second category, McGrath puts (1) mistaken payments, (2) fraudulent misrepresentation and rescission, (3) stolen property, and (4) unconscionable conduct in commercial ventures.
(71)  Ch. 105.
(72)  A.C. 669, 715.
(73) It is fair to say that Lord Browne-Wilkinson's alternative reasoning has not found much favour with commentators. In particular, it leaves open what the status of the money was before notification to the bank. It seems odd to say that the bank had absolute ownership of the funds. More importantly, on this alternative reasoning Sinclair v. Brougham  A.C. 348 was correctly decided--but the case was overruled by the House of Lords in Westdeutsche. It has been argued that where a person comes into possession of property belonging to another there may be a duty at common law to identify and seek out the person who is entitled to possession: see Norman Palmer, 'Unclaimed Art and the Duty of Active Pursuit: Cornelius Gurlitt and the Hidden Hoard' (2014) XIX Art Antiquity and Law 41.
(74) Virgo, above, note 28, p. 598.
(75) Sir Peter Millett, 'Restitution and Constructive Trusts' in Cornish above, note 57.
(76) Burrows, above, note 42, p. 235-236.
(77)  A.C. 669, 716.
(78) The point is made by Rimer J. in Shalson v. Russo  Ch. 81, para. 110. It has been suggested that the thief may hold his possessory title on trust for the claimant: John Tarrant, 'Property Rights to Stolen Money' (2005) 32 UWAL Rev. 234; 'Thieves as Trustees: In Defence of the Theft Principle' (2009) 3 Journal of Equity 170. In response it has been said: "The argument makes little sense: the victim already has a better right to possession than the thief so the trust achieves nothing; and equity has to date not recognized trusts of possessory interests--it is quite difficult to define in practical terms what rights such a trust might generate in the beneficiary": Michael Bridge et al., The Law of Personal Property, (Sweet & Maxwell, 2013) 15-091, fn. 226. See also the interesting discussion on this issue in the context of the Gweagal Shield in Elizabeth Pearson, 'Old Wounds and New Endeavours: The Case For Repatriating the Gweagal Shield From The British Museum' (2016) XXV Art Antiquity and Law 201, 216-220.
(79) The law still insists on a fiduciary relationship before the claimant is able to trace in equity. If this requirement is strictly insisted upon it leads to a counter intuitive state of affairs whereby a claimant with equitable title only is given greater protection than an absolute owner because, while the equitable owner can point to a trust of the property giving rise to fiduciary relationship to start the tracing exercise, the absolute owner cannot. Characterising the thief as a constructive trustee gets around this problem. See also Bankers Trust Co. v. Shapira  1 W.L.R. 1274.
(80) McCormick v. Grogan (1869) L.R. 4 H.L. 82, 87 per Lord Westbury.
(81)  Ch. 217.
(82) (1998) The Times, 30 April 1998. See also Rimer J. in Shalson v. Russo  Ch. 81, para.  who said, with regard to Lord Browne-Wilkinson's proposition, "I respectfully regard the authorities he cites as providing less than full support for it".
(83) Presumably, if the subject matter of the transfer is equitable property, there is no requirement to make the defendant a trustee of the equitable interest. Equity can automatically revest equitable title (semble unless the transfer involved a formal conveyance). Cf the position at common law: see note 19, above.
(84) Lonrho v. Faxed (No. 2)  1 W.L.R. 1, per Millett J.
(85) El Ajou v. Dollar Land Holdings plc  3 All E.R. 717, 734 per Millett J.
(86) It is not certain whether a deed can be rescinded at common law or just in equity: Dominic O'Sullivan et al, The Law of Rescission, 2nd edn (OUP Oxford, 2008), para. 29.65. This article assumes rescission is not possible, but this is for the convenience of the example only.
(87) If the chattel is outside the jurisdiction of England and Wales when time expires under the Act there is an interesting debate to be had about the extent to which s. 3(2) of the 1980 Act will achieve its stated effect.
(88) An interesting aspect to the case is that Mr Lucky has never had possession of the dresses, which were lodged by his father with the museum before the latter's death. It might be argued that as Mr Lucky has never had possession he has no possessory title at all. However, if the museum attorned to Mr Lucky in the correspondence between them, this would give Mr Lucky constructive possession of the dresses.
(89) When Mr Keeper died his estate (including such title to the dresses as Mr Vogue had) vested in his personal representatives. As noted in the text, Mr. Keeper's estate was fully administered. This means, for the purpose of this example, Mr. Keeper's personal representatives can be taken to have formally vested that title in Mr. Lucky. Now that Mr. Lucky has died, his title to the dresses has similarly vested in his personal representatives (the executors of his will) to administer as one of the assets of his estate. Any claim by or against the executors in respect of the dresses must, ordinarily, be brought against or by the executors as the representatives of the estate rather than the beneficiaries of Mr Lucky's estate who stand to inherit the dresses under his will.
(90) If the facts of the example were changed so that the relevant limitation provisions were those of the Limitation Act 1980, rather than the Limitation Act 1939, Mr Vogue would have the additional argument that Mr Keeper's original conversion was (perhaps) an act of theft so as to prevent time from running against him under the special provisions of the 1980 Act for theft. In short, these provide that if the conversion is a theft or a 'conversion related to a theft' it does not start time running: s. 4(1). The claimant is therefore able to sue the thief, anyone who re-steals the goods and anyone who commits a further conversion 'related to the theft'; and the claimant does not lose his title after six years. What sets the clock running in the case of theft is a good faith purchase of the goods.
The Limitation Act 1980, s. 32, contains similar postponement provisions to those of the Limitation Act 1939, s. 26 (although there are important differences).
(91) See note 70, above.
(92) Ultimately, it is hard to see how any argument that Mr Vogue remains the beneficial owner of the dresses can be squared with the express wording of the Limitation Acts that title to the chattel shall be extinguished.
(93) See B.F. Cook, The Elgin Marbles (British Museum Publications, 1984), Hon. E. Gough Whitlam 'Pericles, Pheidias and the Parthenon' (2000) V Art Antiquity and Law 355; William G. Stewart, 'The Marbles: Elgin or Parthenon' (2001) VI Art Antiquity and Law 37.
(94) 'An Act to vest the Elgin Collection of Ancient Marbles and Sculptures in the Trustees of the British Museum'.
(95) It will be readily appreciated that the position of the Sculptures gives rise to enormous legal complexity. One very important point, which this potted argument does not address, is that the modern State of Greece did not exist at the time of the relevant events. Greece's right to claim as a successor in title to the original ownership interest in the Sculptures therefore gives rise to issues of public international law which it is beyond the scope of this paper to consider. This article simply assumes for present purposes that Greece can be identified as the original owner of the Sculptures.
(96) It is important to point out that the satisfaction of this condition would depend on the effect of transactions which occurred abroad, for example, the proprietary effect of the firman granted to Lord Elgin on Greece's title. Under English law this document might have no proprietary effect at all, or it might have vested Lord Elgin with a title which was liable to rescission at common law or in equity. While it is interesting to speculate on these points, crucially, these matters would not be determined by English law but probably under the lex situs. The present text is specifically addressed at the effect of an English law statute on any surviving ownership of Greece in England.
(97) It would perhaps be better to say the trust was sui generis rather than a resulting trust.
(98) A claim based upon mistake rather than fraud raises the problematic issue of whether Chase Manhattan Bank N.A. v. Israel-British Bank London Ltd, above, note 71, is good law and, if so, whether the trust constructive imposed for mistake requires the defendant to know of the error.
(99) The argument based upon a constructive trust might provide an alternative route for arguing that any title conferring on the defendant by statute is held on trust for the claimant. For example, might it be argued that, if the Trustees of the British Museum were or should have been aware of any defect in Lord Elgin's title to the Parthenon Sculptures, or any impropriety in the manner in which he obtained them, they took their statutory title under the Act on trust for Greece or (applying the approach of Lord Browne-Wilkinson in Chase Manhatten, above, note 71) that their title, though originally absolute, became that of a trustee once the relevant facts came to their attention?
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|Publication:||Art Antiquity & Law|
|Date:||Apr 1, 2017|
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