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Hi all,

I've been in email contact with a colleague of ours in Canada, in which I berated the loneliness of the long distance restitution lawyer, commenting that as the only person in Ireland doing restitution I had no-one to bounce ideas off etc, and he commented that thing were much the same in Canada where there were a few such persons but spread across the continent. Then he said that he had hoped that the restitution list would supply that sense of community which is missing when one is the only person as far as the eye can see reading / writing / eating / breathing / sleeping restitution (sorry I got a bit carried away, perhaps not sleeping). Anyway, he has a point. And I've got a note I'd like to run by you. It's drafted as an LQR note, though I suspect that it's too long for the LQR and will have to be sent elsewhere. But that's for when I decide to send it to a journal. Right now I just want to know whether colleagues think it should be sent anywhere (except perhaps a morgue).

To those of you who read further, many thanks.

Eoin O'Dell.
Trinity College, Dublin.

Negligent Solicitors and Wills: A Further Footnote.
Equitable Maxims, Trusts and Restitution.

Consider the following fact scenario. A donor retains the services of a professional to ensure that the plaintiff will get certain of the donor's property, but the professional directs it instead to the recipient. Here, the intended beneficiary, the plaintiff, has lost and the recipient has gained by virtue of the actions of the professional. In principle, the plaintiff can sue the professional in tort for negligence; it may be that he can in the alternative sue the recipient in restitution.

The negligence action is secure at least since the House of Lords' decision in White v. Jones [1995] 2 A.C. 207 (H.L). Tony Weir, commenting on that case in an earlier volume of this Quarterly, suggested that a better solution would be provided by an action based upon the Inheritance (Provision for Family and Dependants) Act 1975, by which the plaintiff sued the recipient directly ((1995) 111 L.Q.R. 357). However, S.M. Cretney subsequently pointed out that this statutory mechanism is not suited to this end ((1996) 112 L.Q.R. 54). A contemporary Irish case suggests, however, that the recipient may be held to have received the proceeds on trust for the plaintiff. That being so, the trust provides an alternative mechanism by which to achieve Weir's suggestion.

The Irish case is Shanahan v. Redmond (High Court, unreported, 21 June 1994, Carroll J; [1996] - I.R. -- (forthcoming)). The donor had originally instructed a life assurance company to name the defendant as beneficiary of a trust comprised in a life assurance savings policy, but subsequently sought to install the plaintiff as the beneficiary in the defendant's place. His first attempt to achieve this by a Deed of Appointment having failed, he gave clear instructions, sufficient according to the terms of the policy, to the insurance company to cancel the policy and replace it with a similar one under which the plaintiff would be the beneficiary. These instructions were never carried out, and the recipient was paid on foot of the policy. Carroll J. held that the policy must be treated as if it were a substitute policy in which the plaintiff was named as the sole beneficiary in place of the beneficiary, on the basis of the application of the equitable maxim that equity regards as done that which ought to be done. The obligation on the insurance company under the policy following the written notice ought to be treated as if it had been performed. In effect, the recipient held on trust for the plaintiff (which was the express result of the earlier and similar McMechan v. Warburton [1896] 1 I.R. 435 (Chatterton V.C.); aff'd [1896] 1 I.R. 441 (C.A.)).

Applying the same principle to the facts of White v. Jones, the beneficiary under the will would therefore be deemed to hold the proceeds on trust for the intended beneficiary. Conversely, the White v. Jones principle, (and its Irish antecedent, Wall v. Hegarty [1980] I.L.R.M. 124 (H.Ct.)) could easily have been applied on the facts of Shanahan so that the plaintiff would have had a cause of action against the insurance company to recover the value of the disposition which he would have received if the company had been negligent in directing it to the recipient. (Of course, if both remedies exist, the plaintiff would have to elect between them rather than have the benefit of both; and it may be that if the plaintiff successfully sues the recipient, the recipient in turn, to the extent that he relied upon the receipt, may have an action against the negligent professional).

Of the two competing remedies, the merits of the tort claim have been analysed in the many commentaries on White v. Jones, of which Weir's note is an important example; it is submitted here that the solution in Shanahan is not justified in terms of the doctrines of equity deployed in the case, though a personal remedy in restitution probably would be. It is the unarticulated consequence of the decision that the recipient held on trust for the intended beneficiary, and it thus supplies an example of the (putative) "perfection" aim of constructive trusts (see Elias, Explaining Constructive Trusts (Oxford, 1990) esp p. 50). However, it is a cardinal principle of equity that it will not perfect a gift, (e.g. "the expectant donee has no equity to compel the completion of the gift. That is good sense and good law." Re Wilson [1933] I.R. 729, 739 per Johnston J.); indeed, it could not be otherwise, given that equity will presume a gift to be held on resulting trust for the donor, unless there is good reason to the contrary. The argument gave the Vice-Chancellor in McMechan much trouble, though, on the facts, he held that since the donor was settling her disposition upon a trust, she was within an exception to the rule. Elias's treatment of the "perfection" aim does not convincingly displace the rule that equity will not perfect a gift, and what the court in effect did here was impermissibly to perfect a gift in favour of the intended beneficiary.

Again, the beneficiary under a life assurance policy is usually a volunteer, and it is clear that "volunteers are unable to take advantage of the maxim" that equity regards as done that which ought to be done (Meagher, Gummow and Lehane, Equity. Doctrines and Remedies (3rd ed, Butterworths, Sydney, 1992) p. 95) Be that as it may, Shanahan has already been criticised academically in Ireland on the ground that it gave the benefit of this maxim to a volunteer (Delany, Equity and the Law of Trusts in Ireland (Round Hall Sweet & Maxwell, Dublin 1995) p. 32). In this regard, two issues must be separated. First, take the general case posited in the scenario at the beginning of this note. There the intended beneficiary is indeed a volunteer, and he would not be entitled to the benefit of the maxim.

Second, Shanahan in fact represents a subtle twist on the general case. When the donor sought to replace the recipient as the beneficiary, he instructed that he, the donor, would be the new beneficiary. Thus, on the facts, both the donor and the intended beneficiary were the same person; the donor was the payor of the premia on the life assurance policy and since he had indeed thereby given value, it may be said that the intended beneficiary, who is also the donor, is not a volunteer and is thus properly able to take advantage of the maxim. However, the courts are astute to distinguish the capacities in which a person acts, and actions done in one capacity may have no effect when that person acts in another capacity. Thus, in Beswick v. Beswick [1968] A.C. 58 (H.L.), it was held that Mrs. Beswick as a stranger to a contract which had been made for her benefit could not enforce the contract in her own right, but that, in her capacity as executor of one the parties to the contract, she could enforce it. Similarly, here, though the donor and the intended beneficiary happen to be one person, he had two separate capacities, as Mrs. Beswick had; in his capacity as the intended beneficiary, he was a volunteer, unable to take advantage of the maxim. Furthermore, a lesson of Walsh v. Lonsdale (1882) 21 Ch.D. 9 is that it is only to the extent that a court will order specific performance that the maxim is properly applicable (see e.g. Coughlan, Property Law in Ireland (Gill & Macmillan, Dublin, 1995, p. 311). Whether or not the donor can compel the professional to carry out his instructions, in the general case the intended beneficiary certainly cannot. In the specific example of Shanahan, where donor and intended beneficiary are the same person, Beswick may very well insist upon distinguishing the two capacities, so that qua intended beneficiary, such specific performance would still be unavailable.

Thus, the equitable maxim equity regards as done that which ought to be done does not provide any foundation upon which to predicate liability both in our general case and on the facts of Shanahan, (and, parenthetically, the rules that equity will not perfect a gift, that a volunteer cannot call in aid the maxim that equity regards as done that which ought to be done, and that it is only if equity can order specific performance that it will give a plaintiff the benefit of the maxim, are all therefore seen to amount to three different ways of expressing the same proposition.)

Nevertheless, underlying the result in Shanahan is the intuition that the intended beneficiary should have a remedy as against the recipient. Such a result may be explained on the basis that the remedy prevents the recipient being unjustly enriched at the expense of the intended beneficiary. Certainly, the recipient has received funds intended for him and is thereby enriched at his expense. However, one must ask whether, for the purposes of the law of restitution, it can properly be said that the recipient's enrichment is unjust. The best candidate "unjust" factor is "ignorance"; which is "that factor which calls for restitution when wealth is transferred to a defendant wholly without the knowledge of the plaintiff" (Birks, An Introduction to the Law of Restitution (Clarendon Press, Oxford, 1985, revised 1989, p. 142). The condition of receipt by the defendant without the plaintiff's knowledge is satisfied both when the plaintiff expects to receive the enrichment and subsequently discovers that it is has in fact gone to the recipient, and when the plaintiff does not know that he was to have been the recipient until after the defendant's receipt. Thus, on the facts both of White v. Jones and Shanahan there would seem to be at least a prima facie case in favour of a remedy in restitution.

Of course, as is almost inevitable in a dynamic and developing subject, such a simple analysis is contestable. First, in a casenote on the decision of the Court of Appeal in White v. Jones, Barker suggested that such an action in restitution ought not to be available, principally because to do so "provides little incentive to the negligent solicitor to take care". ((1994) 14 O.J.L.S. 137, 138-139; citing Cane (1983) 99 L.Q.R. 346, 349). This assumes that the restitution action necessarily excludes a tort action; but if the claims are concurrent, then the hortatory threat of the negligence action remains, and does not of necessity exclude the restitution action. Second, and more fundamentally, the notion of ignorance as an unjust factor is deeply controversial. Thus Goff and Jones "doubt whether ignorance can properly be of itself the ground of restitutionary claim" (p. 107), though if that which renders an enrichment unjust in principle is that it has been received unintentionally, non-consensually, or non-voluntarily, it is difficult to resist Birks' conclusion that receipt without knowledge is a paradigm example of such an unjust enrichment (cp. Burrows (The Law of Restitution (Butterworths, London, 1993) p. 139).

Third, there are difficulties with whether it can properly be said that the recipient's enrichment is at the expense of the intended beneficiary. Where a defendant directly takes the plaintiff's money, he is enriched by subtraction from the plaintiff. Where, however, the defendant intercepts money certainly intended for the plaintiff, then, for Birks, he is as surely enriched at the plaintiff's expense. Birks describes this enrichment by intervention as an "interceptive subtraction". This notion of interceptive subtraction has come in for cogent criticism from Smith, especially on facts such as those in White v. Jones or Shanahan. ((1991) 11 O.J.L.S. 481). His critique is primarily twofold. First, he argues (at pp. 486-487) that it is difficult in fact to be sure that the enrichment "would certainly have arrived in the plaintiff if it had not been intercepted by the defendant" (Birks, pp. 133-134; emphasis supplied). Second, Smith argues that in principle the intended beneficiary has lost nothing, since the recipient "has been enriched at the expense of the donor, not of the intended beneficiary" (Smith, p. 517). As to certainty, difficulties of fact should never impugn the validity of a principle (any principle), such factual problems merely serve to limit the number of successful cases. Furthermore, in both McMechan and Shanahan, it was specifically held that the donor's instructions to the solicitor and insurance company respectively were sufficient (hence Carroll J's invocation of the equitable maxim in Shanahan; cp. Smith p. 486, n. 21). Indeed, it is the fact that the donor has done all that he can do (but someone else later in the chain has not) that distinguishes this situation from the cases in which equity will not complete a gift, since, in those cases, the reason why the gift is incomplete is that the donor did not do all that he must. As to Smith's second point, it is telling, but it may be objected that if the donor has intended to part with the enrichment, and has done all that he can do to direct the enrichment to the intended beneficiary, it is difficult to understand how anyone's enrichment in respect of something with which the donor has intentionally parted can be an enrichment at his (the donor's) expense. Consequently, if the recipient's enrichment is at anyone's expense, it must be at the expense of the intended beneficiary. If all such arguments are resolved in favour of interceptive subtraction and ignorance, then these concepts provide a ready explanation for the result in Shanahan. Indeed, the ease with which these concepts explain it suggests strongly that the issues of principle should be resolved in their favour.

Any such remedy in restitution would in the first instance be a personal one, consisting of a duty to pay the value of the enrichment received. A proprietary remedy would require to fulfil further conditions the precise scope of which is still contested (contrast, for example, the relatively active role perceived for such remedies in Goff and Jones, The Law of Restitution (4th ed., Sweet & Maxwell, London, 1993) pp. 93 - 102, with Burrows' assertion that in general there is "no convincing justification for giving proprietary, rather than personal, restitutionary remedies" (Burrows, p. 43; cp. pp. 369 et seq. )). Nevertheless, in A.G. for Hong Kong v. Reid [1994] 1 A.C. 324 (P.C.), Lord Templeman held that the recipient of a bribe was to account for it to his principal at the moment when he received it; and, as equity regards as done that which ought to be done, the very money he received became, in equity, the property of his principal, who could thus maintain a proprietary claim to the money and property purchased with it. Controversy surrounds both the proprietary result (e.g. Crilley, [1994] R.L.R. 57; Pearse, [1994] L.M.C.L.Q. 189) and the application of the maxim to that end (Oakley, [1994] C.L.J. 31, 32-33; Gardner, [1995] C.L.J. 60, 61-63), and, as we have already seen, it is certainly inapplicable both in our general case and on the facts of Shanahan. Thus the imposition of a trust upon the recipient to prevent his unjust enrichment at the expense of the intended beneficiary is inappropriate. It will also usually be unnecessary: on the facts both of Shanahan and of White v. Jones, the personal remedy would have been sufficient.

Finally, another chancery case having a bearing on the facts in White v. Jones was brought to greater prominence by virtue of a note in this Quarterly by K.R. Handley ((1994) 110 L.Q.R. 55); it is Bulkley v. Wilford (1834) 2 C.&F. 102; 6 E.R. 1094. In that case, the negligent attorney was himself the recipient, and was deemed to hold the estate on trust for the intended beneficiary. Elias sees this as a case which serves the (putative) "restitution" aim of constructive trusts (Elias, pp. 66 - 71). Nevertheless, it is too special a case from which to derive any but the most oblique support for the restitution remedy argued for here, because that liability is strict, whereas the liability in Bulkley seems to have been fault-based, imposed for the attorney's fraudulent or negligent "breach of duty" (Cp. Seagrave v. Kirwan (1828) 1 Beatt. 157, 166; Lysaght v. McGrath (1882) 11 L.R. (Ir.) 142).

In conclusion, then, where a donor hires a professional to ensure that an intended beneficiary will get certain of the donor's property, but the professional directs it instead to the recipient, in principle the intended beneficiary can sue either the professional in tort or the recipient in restitution. Certainly, the trust in Shanahan had this latter effect, and if it is justified, then it may provide a mechanism by which Weir's preferred solution could be implemented; in any case, a personal restitutionary action would have the same effect.