Hostname: page-component-76fb5796d-dfsvx Total loading time: 0 Render date: 2024-04-26T00:05:08.143Z Has data issue: false hasContentIssue false
  • English
  • Français

Distributive justice and proprietary remedies over bribes

Published online by Cambridge University Press:  02 January 2018

Katy Barnett
Katy Barnett*
Affiliation:
University of Melbourne
*
Katy Barnett, Senior Lecturer, University of Melbourne, University Square, 185 Pelham Street, Carlton, 3053 Victoria, Australia. Email: k.barnett@unimelb.edu.au
Get access Rights & Permissions [Opens in a new window]

Abstract

It is often said that distributive justice has no place in private law. However, distributive justice considerations feature strongly in cases involving the remedies imposed over bribes gained in breach of fiduciary duty. This paper argues that courts should exercise structured discretion, guided by principles of distributive justice, in ascertaining the appropriate remedy. The distributive factors of desert, needs and equality should inform the determination of what remedy is apposite to provide justice in the circumstances.

Type
Research Article
Information
Legal Studies , Volume 35 , Issue 2 , June 2015 , pp. 302 - 322
Copyright
Copyright © Society of Legal Scholars 2015

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

I received the Allan Myers Oxford–Melbourne Faculty Exchange grant, which allowed me to present earlier versions of this paper to the Oxford Obligations Group on 23 January 2013, to the LSE Private Law Group on 30 January 2013 and to the Cambridge Private Law Centre on 1 February 2013. I also presented it at the Trusts Law Conference at Melbourne Law School on 5 December 2013 and to La Trobe Law School on 14 March 2014. I received very helpful feedback from these presentations. I thank John Gardner, Matthew Harding, Steve Hedley, Pauline Ridge and Jamie Glister for comments on earlier versions, Bill Swadling for hosting me in Oxford and my wonderful research assistant Angela Kittikhoun. I also thank the anonymous reviewers, whose comments were very helpful. The usual disclaimer applies.

References

1. Attorney General for Hong Kong v Reid [1994] 1 AC 324 (‘Reid’) (PC).

2. Lister v Stubbs (1890) 45 Ch D 1 at 15 per Lindley LJ; Sinclair Investments (UK) Ltd v Versailles Trade Finance Limited [2011] EWCA Civ 347 at [80] per Lord Neuberger (‘Sinclair’) (CA). Cf FHR European Ventures LLP v Mankarious [2014] UKSC 45 (‘FHR v Mankarious’) (UKSC). This case recently overruled Lister v Stubbs and Sinclair in England and Wales.

3. Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296, [2012] FCAFC 6 (‘Grimaldi’) (FCA).

4. Swadling, W ‘Constructive trusts and breach of fiduciary duty’ (2012) 18 Trusts and Trustees 985 CrossRefGoogle Scholar at 985; Calnan, R ‘Imposing proprietary interests in insolvencies’ (2013) 24 J Banking & Fin L & Prac 18 at 18Google Scholar.

5. See Mautner, M ‘ “the eternal triangles of the law”: toward a theory of priorities in conflicts involving remote parties’ (1991) 90 Mich L Rev 95 at 95CrossRefGoogle Scholar.

6. See eg Birks, P ‘Property in the profits of wrongdoing’ (1994) U W Aust L Rev 8 Google Scholar at 16; Goode, R ‘Ownership and obligation in commercial transactions’ (1997) 103 L Q Rev 433 Google Scholar; Watts, P ‘Bribes and constructive trusts’ (1994) 110 L Q Rev 178, 179Google Scholar; Crilley, D ‘A case of proprietary overkill’ [1994] RLR 57 Google Scholar; Goode, R ‘Proprietary restitutionary claims’ in Cornish, Wr et al. (eds) Restitution – Past, Present and Future (Oxford: Hart Publishing, 1998) p 63 Google Scholar; Watts, P ‘Constructive trusts and insolvency’ (2009) 3 J Equity 250 at 279–284Google Scholar; Swadling, W ‘Constructive trusts and breach of fiduciary duty’ (2012) 18 Trusts and Trustees 985 CrossRefGoogle Scholar at 992–993. Cf Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 at [89] per Lawrence Collins J; Halliwell, M ‘The ghost of Lister & Co v Stubbs ’ [2005] Conveyancer 88 Google Scholar at 92; Millett, P ‘Bribes and secret commissions’ [1993] RLR 7 Google Scholar; Millett, P ‘Proprietary restitution’ in Degeling, S and Edelman, J (eds) Equity in Commercial Law (Pyrmont: Law Book Co, 2005) p 309 Google Scholar.

7. Finch, V and Worthington, S ‘The Pari Passu principle and ranking restitutionary rights’ in Rose, F (ed) Restitution and Insolvency (London: Mansfield Press, 2000) pp 1, 19; Calnan, above 5.Google Scholar

8. A Duggan ‘Constructive trusts from a law and economics perspective’ (2005) 55 U Toronto L J 217 at 229.

9. Keech v Sanford (1726) Sel Cas Ch 61; Boardman v Phipps [1967] 2 AC 46.

10. Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at [42] (HCA); Giumelli v Giumelli (1999) 196 CLR 101 at [10] per plurality (HCA); John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [128]–[129] (HCA).

11. Nozick, R Anarchy, State and Utopia (Oxford: Blackwell, 1974) pp 155–160.Google Scholar

12. [2014] UKSC 45 (UKSC).

13. The case has been argued to fall within all of the three categories. Chambers has argued that it is a case of appropriation of property belonging to the claimant: R Chambers ‘Constructive trusts and breach of fiduciary duty’ [2013] Conv 73.

14. Sinclair [2011] EWCA Civ 347 at [80] per Lord Neuberger; J Penner ‘The difficult doctrinal basis for fiduciary's proprietary liability to account for bribes’ (2012) 18 Trusts and Trustees 1000 at 1001–1002. Cf Millett ‘Proprietary restitution’, above 7, at 324.

15. Birks, P An Introduction to the Law of Restitution (Oxford: Clarendon Press, rev edn, 1989) pp 348–349.Google Scholar

16. Goode, R ‘Property and unjust enrichment’ in Burrows, A (ed) Essays on the Law of Restitution (Oxford: Oxford University Press, 1991) pp 215, 219.Google Scholar

17. Two-party cases may raise questions of distributive justice: Harding, M ‘Constructive trusts and distributive justice’ in Bant, E and Bryan, M (eds) The Principles of Proprietary Remedies (Pyrmont: Thomson Reuters, 2013) pp 19, 25.Google Scholar

18. Calabresi, G and Melamed, Ad ‘Property rules, liability rules, and inalienability: one view of the cathedral’ (1972) 85 Harv L Rev 1089 CrossRefGoogle Scholar.

19. Penner, above 15, at 1002.

20. Ibid, at 1001.

21. Eg Australia – Proceeds of Crime Act 1987 (Cth); Proceeds of Crime Act 2002 (Cth) and various state equivalents; Canada – Proceeds of Crime (Money Laundering) and Terrorist Financing Act 2001 (SC 2000, c 17); New Zealand – Criminal Proceeds (Recovery) Act 2009 (NZ); UK – Proceeds of Crime Act 2002 (UK).

22. [1951] AC 827 (HL).

23. Organized and Serious Crime Ordinance, s 1(4). See also Drug Trafficking (Recovery of Proceeds) Ordinance; Prevention of Bribery Ordinance, s 12AA.

24. Eg Grimaldi [2012] FCAFC 6 at [576].

25. Sinclair [2011] EWCA Civ 347 at [52]–[53] per Lord Neuberger; Goode, R ‘A reply’ (2011) 127 L Q Rev 493 Google Scholar at 495; Ho, L ‘Bribes and the constructive trust as a chameleon’ (2012) 128 L Q Rev 486 Google Scholar at 488–489.

26. There may be rare exceptions: see Rotherham, C ‘Policy and proprietary remedies: are we all formalists now?’ (2012) 65 CLP 529 Google Scholar at 534 and 16.

27. Kennedy, D ‘Distributive and paternalist motives in contract and tort law, with special reference to compulsory terms and unequal bargaining power’ (1982) 41 Md L Rev 563 at 587.Google Scholar

28. Ibid, at 571.

29. Stone, M ‘The reification of legal concepts: Muschinski v Dodds ’ (1986) 9 Unsw L J 63 at 67; S Evans ‘Property, proprietary remedies and insolvency: conceptualism or candour?’ (2000) 5 Deakin L Rev 31 at 37–40Google Scholar; Rotherham, C Proprietary Remedies in Context (Oxford: Hart Publishing, 2002)Google Scholar.

30. See Stone, ibid; Evans, ibid; S Evans ‘Defending discretionary remedialism’ (2001) 23 Sydney L Rev 463 at 474–480; Rotherham, ibid.

31. Aristotle Nicomachean Ethics, tr T Irwin (Indianapolis: Hackett Publishing, 2nd edn, 1999) bk V, ch 2 [12] (manuscript 1130b).Google Scholar

32. Ibid, ch 3, [8]–[13] (manuscripts 1131a, 1131b).

33. Ibid, ch 4, [2]–[4] (manuscripts 1131b, 1132a).

34. Ibid, ch 4, [3] (manuscript 1132a).

35. Posner, R ‘The concept of corrective justice in recent theories of tort law’ (1981) 10 J Legal Stud 187 CrossRefGoogle Scholar at 189 (emphasis added). See also Weinrib, E ‘Corrective justice in a nutshell’ (2002) 52 U Toronto L J 349 at 349CrossRefGoogle Scholar.

36. Joachim, Hh Aristotle: Nicomachean Ethics, ed Rees, Da (Oxford: Clarendon Press, 1951) pp 139–140.Google Scholar

37. J Gardner ‘Corrective justice, corrected’, Oxford Legal Studies Research Paper No. 31/2012 (12 June 2012) at 5. Available at SSRN: http://ssrn.com/abstract=2082884 (accessed 25 July 2014); Harding, above 18, p 26.

38. Gardner, ibid, 38.

39. Nozick, above 12, pp 155–168.

40. Ibid, pp 152–153.

41. Ibid, p 153.

42. Ibid, p 152. He includes theft and fraud as instances of injustice in acquisition and transfer.

43. Ibid, p 168.

44. Keren-Paz, T ‘Egalitarianism as justification: why and how should egalitarian considerations reshape the standard of care in negligence law?’ (2003) 4 Theoret Inq Law 275 at 288–294.Google Scholar

45. Keren-Paz, T Torts, Egalitarianism and Distributive Justice (Aldershot: Ashgate, 2007) p 5.Google Scholar

46. Mautner, above 6, at 102.

47. Feinberg, J ‘Justice and personal desert’ in Feinberg, J Doing and Deserving: Essays in the Theory of Responsibility (Princeton, NJ: Princeton University Press, 1970) p 86 Google Scholar; Munzer, Sr A Theory of Property (Cambridge: Cambridge University Press, 1990) p 260.CrossRefGoogle Scholar

48. Harding, M ‘Justifying fiduciary allowances’ in Robertson, A and Tang, Hw (eds) The Goals of Private Law (Oxford: Hart Publishing, 2009) pp 341, 352Google Scholar; Kleinig, J ‘The concept of desert’ (1971) 8 Am Phil Q 71 at 73Google Scholar; Miller, D Social Justice (Oxford: Clarendon Press, 1976) p 85 Google ScholarPubMed; Becker, L Property Rights: Philosophic Foundations (London: Routledge & Paul, 1977) p 50; Munzer, ibid, p 257 Google Scholar; Harris, Jw Property and Justice (Oxford: Clarendon Press, 1996) p 205 Google Scholar.

49. Kleinig, ibid, at 73.

50. Berryman, J ‘The case for restitutionary damages over punitive damages: teaching the wrongdoer that tort does not pay’ (1994) 73 Can Bar Rev 320 at 322.Google Scholar

51. von Hirsch, A Doing Justice: The Choice of Punishments (New York: Hill & Wang, 1976) pp 45–55.Google Scholar

52. Davis, M To Make the Punishment Fit the Crime: Essays in the Theory of Criminal Justice (Boulder, CO: Westview, 1992).Google Scholar

53. J Feinberg ‘The expressive function of punishment’ (1965) 49 The Monist 397 at 400.

54. Ibid, at 407–408.

55. Gardner, J ‘Crime: in proportion and perspective’ in Ashworth, A and Wasik, M (eds) Fundamentals of Sentencing Theory: Essays in Honour of Andrew von Hirsch (Oxford: Oxford University Press, 1998) pp 31, 38–41Google Scholar; A von Hirsch ‘Proportionality in the philosophy of punishment: from “why punish?” to “how much?”’ (1990) 1 Crim L Forum 259 at 262.

56. Bant, E and Bryan, M ‘Specific restitution without trusts’ (2012) 6 J Equity 1 Google Scholar at 16. See eg Gray v Motor Accident Commission (1998) 196 CLR 1; Devonshire and Smith v Jenkins [1979] LAG Bulletin 114 (CA) and Archer v Brown [1985] 1 QB 401; however, in England criminal proceedings are arguably not conclusive against an award of exemplary damages.

57. [1998] HCA 70, (1998) 196 CLR 1 at [42] per Gleeson CJ, McHugh, Gummow and Hayne JJ.

58. [1998] HCA 70, (1998) 196 CLR 1 at [43] per Gleeson CJ, McHugh, Gummow and Hayne JJ. See R v Hoar (1981) CLR 31 at 38 per Gibbs CJ, Mason, Aickin and Brennan JJ.

59. Harding, above 49, pp 352–353.

60. Ibid, p 353. See also Harris, above 49, pp 207–208; Feinberg, above 48, p 82; Miller, above 49, p 91.

61. Becker, above 49, p 51.

62. Harding, above 49, pp 355–356.

63. Olsaretti, S Liberty, Desert and the Market (Cambridge: Cambridge University Press, 2004) pp 62–85.CrossRefGoogle Scholar

64. Eg Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574.

65. Keren-Paz, above 45, at 288–289.

66. American Law Institute Restatement (Third) of Restitution and Unjust Enrichment (2011) § 61.

67. Ibid, comment a to § 61.

68. Sherwin, E ‘Constructive trusts in bankruptcy’ (1989) U Ill L Rev 297 Google Scholar; Kull, A ‘Restitution in bankruptcy: reclamation and constructive trust’ (1998) 72 Am Banking L J 265 Google Scholar; American Law Institute Restatement (Third) of Restitution and Unjust Enrichment, ibid, § 55, comment h. Criticised in Swadling, above 5, at 996.

69. [2001] 1 AC 102.

70. Finch and Worthington, above 8, pp 2–3; Watts, above 7, at 252; K Kilgour ‘Equality redefined – re-assessing the rationale of voidable preference law’ [2004] UCL Jur Rev 252 at 254–255; Duggan, A ‘Proprietary remedies in insolvency: a comparison of the Restatement (Third) of Restitution & Unjust Enrichment with English and Commonwealth law’ (2011) 68 Wash & Lee L Rep 1229 Google Scholar at 1232.

71. Watts, above 7, at 252.

72. Finch and Worthington, above 8, p 3.

73. Kilgour, above 71, at 255. However, it has been queried whether rules of ‘formal equality’ exist: see Lyons, D ‘On formal justice’ (1973) 58 Cornell L Rev 833 Google Scholar; Westen, P ‘The empty idea of equality’ (1982) 95 Harv L Rev 537.CrossRefGoogle Scholar

74. Sherwin, E ‘Topic Ii: the availability of and justification of property-based remedies in restitution’ (2012) 92 BU L Rev 885 at 898.Google Scholar

75. Paciocco, Dm ‘The remedial constructive trust: a principled basis for priorities over creditors’ (1989) 68 Can Bar Rev 315 Google Scholar at 324–325, 340–347; Sherwin, above 69, at 335–337.

76. Paciocco, ibid, at 324–325, 340–347. See also Swadling, W ‘Policy arguments for proprietary restitution’ (2008) 28 Legal Stud 506 at 516–518.CrossRefGoogle Scholar

77. See Mokal, Rj ‘Priority as pathology: the pari passu myth’ (2001) 60 Cam L J 581 CrossRefGoogle Scholar; Kilgour, above 71.

78. See above 31.

79. Birks, P ‘The end of the remedial constructive trust?’ [1998] 12 Trust L Int'l 202 Google Scholar at 214–215; P Birks ‘the law of restitution at the end of an epoch’ (1999) 28 UWA L Rev 13 at 55–56.

80. Birks ‘The end of the remedial constructive trust’, ibid.

81. See eg Chambers, R Resulting Trusts (Oxford: Oxford University Press, 1997)Google Scholar.

82. Bant, E ‘Trusts, powers and liens: an exercise in ground clearing’ (2009) 3 J Equity 286 at 294.Google Scholar

83. Swadling, W ‘The fiction of the constructive trust’ (2011) 64 CLP 399 Google Scholar; Bant, E and Bryan, M ‘Constructive trusts and equitable proprietary relief’ (2011) 5 J Equity 171 Google Scholar; Bant and Bryan, above 57.

84. Dagan, H ‘The distributive foundation of corrective justice’ (1999) 98 Mich L Rev 138 at 153.CrossRefGoogle Scholar

85. Keren-Paz, above 46, p 25.

86. Gardner, above 38, at 5. See also J Gardner ‘What is tort law for? Part 2. the place of distributive justice’ (May 2013), Oxford Legal Studies Research Paper No. 62/2013. Available at SSRN: http://ssrn.com/abstract=2269615 (accessed 25 July 2014).

87. See esp Weinrib, E The Idea of Private Law (Oxford: Oxford University Press, 2nd edn, 2012)CrossRefGoogle Scholar; Weinrib, E Corrective Justice (Oxford: Oxford University Press, 2012).CrossRefGoogle Scholar

88. Eg Botterell, A ‘Property, corrective justice, and the nature of the cause of action in unjust enrichment’ (2007) 20 Can L & Jur 275.Google Scholar

89. Weinrib The Idea of Private Law, above 88, pp 61–62.

90. Weinrib, above 36, at 351–352.

91. Weinrib The Idea of Private Law, above 88, p 211. Cf Keren-Paz, above 46, pp 23–33, who presents a convincing rebuttal to Weinrib.

92. Weinrib The Idea of Private Law, above 88, p 77.

93. Smith, L ‘The motive, not the deed’ in Getzler, J (ed) Rationalizing Property, Equity and Trusts: Essays in Honour of Edward Burn (Oxford: Oxford University Press, 2003) pp 53, 60–61Google Scholar; Pb Miller ‘Essays toward a theory of fiduciary law’, unpublished PhD thesis, University of Toronto (2008) pp 227–243. I am indebted to Jason Neyers for providing me with this thesis.

94. Miller, Pb ‘Justifying fiduciary remedies’ (2013) 63 U Toronto L J 570.CrossRefGoogle Scholar

95. Dagan, H ‘The distributive foundation of corrective justice’ (1999) 98 Mich L Rev 138 CrossRefGoogle Scholar; Cane, P ‘Corrective justice and correlativity in private law’ (1996) 16 Oxford J Legal Stud 471 at 478–480CrossRefGoogle Scholar; Simons, Kw ‘Justification in private law’ (1995) 81 Cornell L Rev 698 Google Scholar at 727–733; Hutchinson, Ac ‘The importance of not being Ernest’ (1989) 34 McGill L J 233 at 241–244.Google Scholar

96. [2014] UKSC 45.

97. See text accompanying nn 12 and 13.

98. Attorney General for Hong Kong v Reid [1992] 2 NZLR 385.

99. Edelman, J ‘Two fundamental questions for the law of trusts’ (2013) 129 L Q Rev 66 at 82.Google Scholar

100. Evans ‘Defending discretionary remedialism’, above 31, at 473.

101. Reid [1994] 1 AC 324 at 330, 339.

102. Ibid, at 330.

103. Ibid, at 331. See Sinclair [2011] EWCA Civ 347 at [83] per Lord Neuberger and Swadling, above 5, at 992–993. Cf FHR v Mankarious [2014] UKSC 45 at [43].

104. Reid [1994] 1 AC 324 at 331 per Lord Templeman.

105. Ibid, at 339.

106. FHR v Mankarious [2023] EWCA Civ 17 (CA), [102] per Lord Chancellor Etherton.

107. Sinclair [2011] EWCA Civ 347 at [53]–[54] per Lord Neuberger.

108. Ibid, at [54].

109. Goode, above 21, at 495.

110. Reid [1994] 1 AC 324 at 331.

111. Sinclair [2011] EWCA Civ 347 at [78].

112. Ibid, at [54], [83].

113. Grimaldi (2012) 200 FCR 296, [2012] FCAFC 6 at [584].

114. Edelman, above 100, at 84.

115. Grimaldi (2012) 200 FCR 296, [2012] FCAFC 6 at [576].

116. Ibid, at [582]–[583].

117. Ho, above 26, at 488–489.

118. Bant, above 83, at 304; Blumin v Ellis, 186 So 2d 286 (Fla App, 1966). Cf Wright, D ‘Proprietary remedies and the role of insolvency’ (2000) 23 UNSW L J 143 at 170–171.Google Scholar

119. Wong, A ‘An introduction to liens in commercial transactions’ (1999) 20 Singapore L Rev 134 at 144.Google Scholar

120. Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460 at [178]. See also Burns, F ‘The equitable lien rediscovered: a remedy for the 21st century’ (2002) 25 UNSW L J 1 at 10.Google Scholar

121. Nyuk Nahan nee Chin ‘Practical justice and appropriate relief: Grimaldi v Chameleon Mining Nl (No 2)’ (2012) 36 UWA L Rev 252 at 261–262; Swadling, above 5, at 986 and 10.

122. See eg Birks ‘The end of the remedial constructive trust?’, above 80; Birks ‘The law of restitution at the end of an epoch’, above 80; Birks, P ‘Three kinds of objection to discretionary remedialism’ (2000) 29 UWA L Rev 1.Google Scholar

123. Aristotle Nichomachean Ethics, above 32, bk V, [26]–[27] (1137b).

124. Barker, K ‘Rescuing remedialism in unjust enrichment law: why remedies are right’ (1998) 57 Cam L J 301 CrossRefGoogle Scholar; Finn, P ‘Equitable doctrine and discretion in remedies’ in Cornish, W (ed) Restitution, Past, Present and Future: Essays in Honour of Gareth Jones (Oxford: Hart Publishing, 1998) p 251 Google Scholar; Loughlan, P ‘No right to the remedy? an analysis of judicial discretion in the imposition of equitable remedies’ (1989) 17 Melbourne U L Rev 132 Google Scholar; Evans, above 31; Wright, D ‘Discretion with common law remedies’ (2002) 23 Adelaide L Rev 243 Google Scholar; Bryan, M ‘Constructive trusts: understanding remedialism’ in Glister, J and Ridge, P Fault Lines in Equity (Oxford: Hart Publishing, 2012) p 215Google Scholar. Cf Jensen, D ‘The rights and wrongs of discretionary remedialism’ [2003] Singapore J Legal Stud 178.Google Scholar

125. Birks ‘Three kinds of objection’, above 123, at 15–16.

126. Ibid, at 14–15.