Resulting and Constructive Trusts — Which Law Applies?

Adeline Chong (Lecturer in Law, University of Nottingham) has recently published her article entitled The Common Law Choice of Law Rules for Resulting and Constructive Trusts, 54 Int’l & Comp. L.Q. 855 (2005) [link requires Westlaw subscription].  Here is the conclusion to her article:

The common law choice of law rules for resulting and constructive trusts represent an area which has garnered too little attention from private international law lawyers. The common law is very relevant as the choice of law rules set out in the Hague Trusts Convention are inappropriate for resulting and constructive trusts and the Recognition of Trusts Act 1987 fails to extend the Convention’s scope to foreign resulting and constructive trusts.

It has been argued that trusts claims involve a proprietary issue at heart; this is so even for civil law trusts and analogues which prima facie may appear to reject the concept of the ‘beneficiary’ having a proprietary entitlement to the trust property. It has been submitted that one should characterize trusts claims in accordance with their underlying proprietary nature and hence apply the property choice of law rules. It has been demonstrated that such a choice of law rule is practical, jurisprudentially sound, and represents the best option available.

This conclusion has particular repercussions for proprietary restitution in private international law. Claims for proprietary restitution are almost all in equity and will therefore involve trusts claims. As discussed earlier, some have asserted that the unjust enrichment choice of law rules should apply as it is argued that resulting and constructive trusts are imposed to reverse unjust enrichment.  Others would instead argue that proprietary restitution forms a separate category which is independent of unjust enrichment. However, the choice of law rules for proprietary restitution are not clear. In view of all this uncertainty, debates as to the correct cause of action for such claims or taxonomy of the law of restitution should be marginalized when determining the applicable choice of law rules. At the heart of trusts claims is the issue of whether property is impressed with a trust, that is, whether someone has absolute title over property. This is an essentially proprietary issue and should be categorized as such for choice of law purposes. It may well be that upon the application of the property choice of law rules, the lex situs will thereon dictate that unjust enrichment has to be established before a trust arises; but this is an issue to be determined by the lex situs as the lex causae, and should not be an issue at the choice of law stage. The approach suggested here, that is, choosing to characterize the response, has the added advantage of side-stepping the problems caused by the state of flux within the law of restitution.