Conscience, discretion and the creation of property rights

© 2006 The Author. Journal Compilation © 2006 The Society of Legal Scholars. Published by Blackwell Publishing,9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

Legal Studies, Vol. 26 No. 4, December 2006, pp. 475–499DOI: 10.1111/j.1748-121X.2006.00033.x

Conscience, discretion and the creation of property rights

Nicholas Hopkins*

Senior Lecturer in Law, University of Southampton

This paper considers the utility of the concept of conscience or unconscionable conductas a contemporary rationale for intervention in two principles applied where a personseeks to renege on an informal agreement relating to land: the principle in

Rochefoucauldv Boustead

; and transfers ‘subject to’ rights in favour of a claimant. By analysing theconcept in light of our current understanding of the nature of judicial discretion and theuse of general principles, it responds to arguments that unconscionability is too generala concept on which to base intervention. In doing so, it considers the nature of thediscretion that is actually in issue when the court intervenes through conscience in theseprinciples. However, the paper questions the use of constructive trusts as a response tounconscionability. It argues that there is a need, in limited circumstances, to separate thefinding of unconscionability from the imposition of a constructive trust. In these limitedcircumstances, once unconscionability is found, the courts should have a discretion as tothe remedy, modelled on that developed in the context of proprietary estoppel. The messageunderlying this paper is that many of the concerns expressed about unconscionability thathave led to suggestions of alternative rationales for intervention can in fact be addressedwhilst retaining an unconscionability analysis. Unconscionability remains a preferablerationale for intervention as it provides a common thread that links apparently separateprinciples and can assist our understanding of their scope.

INTRODUCTION

This paper considers developments in our understanding of the concept of conscienceor unconscionable conduct as the rationale for intervention where a person seeks torenege on an informal agreement relating to the transfer of rights in land. The use ofconscience as a justification for intervention lies at the very heart of the developmentof the jurisdiction of equity. As early as 1391, petitions were made to the LordChancellor to be decided in accordance with ‘good faith and conscience’.

1

In recenttimes, there has been a renaissance of interest in conscience, which has seen thereassertion of the central role of the concept in the modern law of trusts

2

and

* This paper is based on a paper delivered to the Property and Trusts Section of the Societyof Legal Scholars’ Annual Conference, University of Strathclyde, September 2005. I amindebted to my colleagues Kit Barker, Sarah Nield and Peter Sparkes for their comments onan earlier draft and to the anonymous referees for their helpful suggestions. All remainingerrors are, of course, my own.

1.

T Plucknett and J Barton (eds) ‘Christopher St German’s Doctor and Student’ (1974) 91Seldon Society 36.

2.

Westdeutsche Landesbank Girozentrale v Islington London Borough Council

[1996] AC669.

476 Legal Studies, Vol. 26 No. 4

© 2006 The Author. Journal Compilation © 2006 The Society of Legal Scholars

proprietary estoppel.

3

This renaissance has, however, attracted powerful criticism. Theauthors of the most recent edition of

Meagher, Gummow & Lehane’s Equity Doctrinesand Remedies

use their preface to decry the ‘indiscriminate and excessive relianceon unconscionable conduct as a test for intervention’.

4

Responding to the reassertionof unconscionability as the underlying principle of trusts, Birks commented:

‘Lord Browne-Wilkinson [in his judgment in

Westdeutsche Landesbank Giro-zentrale v Islington LBC

] no doubt takes for granted that the conscience of equityis an artificially ordered conscience and always will be. He can therefore presenthis overview on a basis which assumes not only an immense body of technicallearning but also an habituation to the technique of adapting that technical learningto the broad language in which equity has always traded. The teacher on the otherhand has to preserve the precision of the technical learning against the instincts ofthe beginners, only too anxious to deal directly in fairness, justice and goodconscience.’

5

The use of unconscionability has come under further attack through attempts toidentify alternative rationales for intervention in circumstances currently consideredto be founded on that concept.

6

While specific concerns with the use of unconscio-nability in particular contexts have been raised, an overarching concern lies in theapparent vagueness of the concept as a basis of intervention. It is thought to suggesttoo wide a discretionary approach. Birks’ comment aptly reflects both the existenceof such concern and an acknowledgment that the concern is not directed at a discretionthat

actually

exists, but one that the language of conscience can give the

appearance

of existing. Expressed in its widest terms, it is a concern about the existence (orappearance) of ‘palm tree justice’.

7

In light of the apparent renaissance of unconscionability, but also of the criticismdirected at the concept, this paper considers the utility of the concept as a rationalefor intervention in a contemporary context. It focuses on two principles that areapplied where a person seeks to renege on an informal agreement relating to land:the doctrine derived from

Rochefoucauld v Boustead

;

8

and transfers of land ‘subjectto’ rights in favour of the claimant. These principles are discussed because theyinvolve unconscionable conduct of the same type and have provided a focus foralternative rationales for intervention. This paper urges caution in trying to replaceunconscionability with something more specific, on the basis that we thereby risklosing a common thread that links apparently separate principles and can assist ourunderstanding of their scope. The argument advanced, therefore, is that unconscio-nability remains the preferable rationale for intervention in these circumstances.

3.

See, in particular,

Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd

[1982] 1QB 133 and

Gillett v Holt

[2001] Ch 210.

4.

R Meagher, D Heydon and M Leeming

Meagher, Gummow & Lehane’s Equity Doctrines& Remedies

(Chatswood: Butterworths, 4th edn, 2002) p xii.

5.

P Birks ‘Trusts raised to reverse unjust enrichment: the

Westdeutsche

case’ [1996] RLR3 at 20.

6.

See, in particular, S Bright ‘The third party’s conscience in land law’ [2000] Conv 398and B McFarlane ‘Constructive trusts arising on a receipt of property sub conditione’ (2004)120 LQR 667.

7.

Birks’ objections to remedial discretion are further discussed below n 93 and associatedtext.

8.

[1897] 1 Ch 196.

Conscience, discretion and the creation of property rights 477


The analysis provided in this paper is underpinned by our understanding of twobroader, preliminary issues: the use of general concepts or principles as the basis ofintervention and our increased appreciation of the nature of judicial discretion. It issuggested that our understanding of unconscionability can be enhanced, and many ofthe concerns about the use of the concept dissipated, if it is analysed against contem-porary thinking on these issues. This paper further suggests the need, in limitedcircumstances, to separate the use of the concept as a rationale for intervention fromour remedial response once unconscionability has been established. In this respect,the paper draws on developments in the use of unconscionability in the exercise ofremedial discretion in proprietary estoppel.

TWO PRELIMINARY ISSUES

(a) General principles as the basis of intervention

The first preliminary issue relates to the use of general principles as a basis ofintervention. Some of the difficulties attendant in using unconscionability are nodifferent from those arising in relation to other broad legal concepts.

9

In particular, aparallel can be drawn with the concept of an unjust enrichment. The comparisonintended here is not based on the substance of the principles, but on our understandingof the use or role of the principles. The parallel is compelling however since, as willbe seen, commentators have suggested unjust enrichment as an alternative rationaleto unconscionability as a basis of intervention in some contexts. Further, at a highlevel of abstraction, ‘unjust’ and ‘unconscionable’ carry similar connotations. In

Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation

,the High Court of Australia noted that ‘contemporary legal principles of restitutionor unjust enrichment can be equated with seminal equitable notions of goodconscience’.

10

It is accepted that the courts do not intervene on the basis of an abstract notion ofan unjust enrichment, but only in relation to specific examples of unjust enrichments.This can be explained by distinguishing a broad and narrow sense in which unjustenrichment is used. In its broad sense (described by Virgo as a descriptive sense)

11

unjust enrichment simply denotes ‘a state of affairs where the defendant can be saidto have been enriched in circumstances of injustice’.

12

In a narrow sense (in Virgo’sterms, a substantive sense)

13

it is used to denote the existence of limited and specificfactors on which the claimant can obtain a restitutionary remedy as the defendant hasbeen unjustly enriched at his or her expense. The legal status of unjust enrichment iseven more sophisticated than this division allows. Barker demonstrates that in Englishlaw unjust enrichment is used both as a legal principle and as a classificatory unit.

14

9.

Cf A Mason ‘The place of equity and equitable remedies in the contemporary commonlaw world’ (1994) 110 LQR 238 at 255 referring to difficulties in defining unconscionability.

10.

(1988) 164 CLR 662 at 673.

11.

G Virgo

The Principles of the Law of Restitution

(Oxford: Clarendon Press, 1999) pp 8–9.

12.

Ibid, p 8.

13.

Ibid, pp 9–10.

14.

K Barker ‘Understanding the unjust enrichment principle in private law: a study of theconcept and its reasons’ in J Neyers, M McInnes and S Pitel (eds)

Understanding UnjustEnrichment

(Oxford: Hart, 2004) pp 82–90.



It is a ‘higher-level mediator of lower-level ideas’.

15

As with the division betweenbroad and narrow senses of the concept, Barker’s analysis emphasises that liabilityis not generated by reference to the abstract (higher-level) idea of an unjust enrich-ment, but specific elements of liability are determined by case-law that examines, forexample, the different grounds on which an enrichment is unjust. Barker furtherexplains that unjust enrichment provides a coherent, if diverse, legal category, as therules it contains all address the same question of the actionability of gains in privatelaw.

16

The concept of conscience or unconscionable conduct appears to exist at a higherlevel of abstraction than unjust enrichment. It expresses an idea that the action of aparty (or possibly an outcome) is contrary to the traditions of equity. It tells us (asdoes the notion of ‘unjust’) that an objection exists, but not what is objected to (the‘enrichment’ aspect of unjust enrichment). The notion of unconscionable conduct onits own thus lacks the coherence that ‘enrichment’ provides the concept of unjustenrichment as being concerned specifically with gains. To place unconscionableconduct at the same level of abstraction as unjust enrichment, we must be able tostate what ‘unconscionable’ is directed at. In this respect,


and ‘subject to’ cases fall within a loose family of doctrines in which the unconscio-nable conduct is generally seen as lying in the assertion of legal rights.

17

Hence, atthe same level of abstraction as the broad sense of unjust enrichment, we are con-cerned with a state of affairs where it is considered unconscionable for a person toassert his or her legal rights. This paper argues that as regards the principles underdiscussion it is possible to identify the specific instances of unconscionability onwhich the courts intervene. Where unconscionability can be reduced to this level ofabstraction (an equivalent level to that denoted by the narrow sense of unjust enrich-ment), it is no less certain (or more unsatisfactory) as a basis for intervention thanother apparently broad legal concepts.

(b) The nature of judicial discretion

The second preliminary issue underpinning the analysis in this paper is our under-standing of the nature of judicial discretion. While much general jurisprudentialwriting on this matter has arisen outside property law, and in particular outsideequity,

18

a substantial body of literature on discretion within property law has

15.

Ibid, p 87.

16.

Ibid, pp 92–95.

17.

M Bryan ‘Unjust enrichment and unconscionability in Australia: a false dichotomy?’ inJ Neyers, M McInnes and S Pitel (eds), above n 14, p 47, at p 57. He notes, ‘[it] is not a closely-knit family, nor is it introverted. New members will be made welcome’. The category is drawnas a contrast to situations where unconscionability relates to the manner in which a transactionhas been procured.

18.

See, eg, R Dworkin

Taking Rights Seriously

(London: Duckworth, 1977). He excludesequitable relief from his theory (see his discussion, p 71). Other key general discussions onthe nature of discretion include D Galligan

Discretionary Powers – A Legal Study of OfficialDiscretion

(Oxford: Clarendon, 1986) and K Hawkins (ed)

The Uses of Discretion

(Oxford:Clarendon, 1992).



developed.

19

Discretion has been shown to exist in different degrees, to be directedat different matters and to arise for different purposes. For this analysis, it is helpfulto note a broad distinction, variously expressed, between weak (Dworkin) or back-ground (Gardner) discretion and strong (Dworkin) or foreground (Gardner) discre-tion.

20

The former, the legitimacy of which appears beyond doubt, involves the judgeapplying established standards (Dworkin) or determining facts and interpreting rules(Gardner). In essence, it is the discretion involved in deciding cases and applyinglaw.

21

In contrast, strong/foreground discretion, the presence of which is far morecontentious, indicates that the judge is not bound by established standards (Dworkin)or must make a personal choice (Gardner). It equates to a discretion to make rules

22

or, it may be added, to provide a tailored remedy. Dworkin considers strong discretionto be rare, though suggests the availability of equitable remedies to be one example.While the need for this particular concession has been doubted,

23

a form of discretionmoving beyond the weak/background type may be more readily accepted within thecontext of equity. In this respect, it should be noted that these categories of discretionmay be seen as representing opposite ends of a spectrum.

24

Hence, while palm treejustice would be of the strong/foreground type, discretion within that category neednot be so unrestrained. Further, either type of discretion may arise only in relation tospecific matters within a decision. In particular, the nature of the discretion may differbetween the determination of the dispute between the parties and the award of aremedy. Discretion may also exist as a permanent feature of intervention, or betemporary and intended to build rules for the future.

25

With these preliminary issues in mind, the use of conscience as a rationale forintervention can be discussed.

CONSCIENCE AS THE RATIONALISATION FOR INTERVENTION

(a)


: the two-party case

The paradigm case within


arises where land is transferredfrom the claimant to the defendant on an undertaking that the defendant will hold the

19.

One particular focus has been remedial discretion and the concept of the remedialconstructive trust. See, eg, P Birks ‘Property rights as remedies’ and S Gardner ‘The elementof discretion’ in P Birks (ed)

The Frontiers of Liability Vol II

(Oxford: Oxford University Press,1994); P Birks ‘Rights, wrongs and remedies’ (2000) 20 OJLS 1. Broader discussions ofdiscretion in property law include R Grantham ‘Doctrinal bases for the recognition of propri-etary rights’ (1996) 16 OJLS 561 and S Jus

Judicial Discretion and the Right to Property

(London: Pinter Press, 1998).

20.

These different types of discretion are outlined by Dworkin, above n 18, pp 31–34 andS Gardner ‘The remedial discretion in proprietary estoppel’ (1999) 115 LQR 438 at 441–442.

21.

C Schneider ‘Discretion and rules – a lawyer’s view’ in K Hawkins (ed), above n 18,p 47 at p 51.

22.

Ibid.

23.

P Loughlin ‘No right to the remedy? An analysis of judicial discretion in the impositionof equitable remedies’ (1989) 17 Melb ULR 132.

24.

See, eg, S Evans ‘Defending discretionary remedialism’ (2001) 23 Syd LR 463 at 482–483.

25.

The concept of ‘rule building discretion’ is discussed by Schneider, above n 21, p 64 andGardner, above n 19, p 198.



land on trust for the claimant. The trust is not evidenced in writing, as required bys 53(1)(b) of the Law of Property Act 1925. However, the defendant is precludedfrom relying on non-compliance with s 53 as to do so would enable the statute to beused as an instrument of fraud. The defendant’s liability in such a situation is beyonddoubt. However, both the rationale for intervention and the mechanism through whichthe court intervenes (express or constructive trust) remain contested.

In


, Lindley LJ founded intervention on equitablefraud or unconscionability. He explained, ‘. . . it is fraud on the part of a person towhom land is conveyed as a trustee, and who knows it was so conveyed, to deny thetrust and claim the land himself’.

26

It should be noted that nothing turns on anydistinction between the concept of (equitable) fraud referred to by Lindley LJ andunconscionability; terms which have been defined by reference to each other.

27

Inthat case, the existence of fraud enabled parol evidence to be admitted to establishthe trust. The court classified the trust as an express trust on the basis that it wasone the parties intended to create.

28

However, the classification of the trust asexpress was necessary to prevent the claim failing under the prevailing provisions ofthe Statute of Limitations and was addressed specifically in that context. Subse-quently, the basis of intervention has been explained as lying in the defendant’sattempt to renege on an agreement to hold on trust. This interpretation is consistentwith (and arguably implicit in) Lindley LJ’s reference to the defendant’s attempt todeny the trust and claim the land for himself. It is explicitly adopted as the explana-tion of the principle in

Bannister v Bannister

.

29

There, Scott LJ explained interven-tion as arising where the absolute character of a conveyance was set up to defeat‘the true bargain’ under which a beneficial interest was to belong to another. Thetrust was classified (without discussion) as constructive and this classification isnow favoured. Oakley, for example, explains the basis of this constructive trust inthe following terms: ‘[what] brings about the intervention of equity is the acquisi-tion of property on the strength of an oral undertaking or agreement followed by anattempt to renege on the undertaking or agreement because of the lack of the neces-sary statutory formalities’.

30

Hence, in a case within the scope of


, the court inter-venes through the mechanism of a constructive trust in response to the defendant’sfraudulent (or unconscionable) denial of an agreement to hold on trust. To establishthe requisite fraud it is necessary only to show that the land was transferred pursu-ant to an agreement to hold on trust. In


itself, mortgag-ees sold and transferred land to the defendant who had orally agreed with theclaimant mortgagor to hold the land on trust for her. In


, theclaimant to the trust (who was the defendant in the action) sold two cottages to herbrother-in-law on an oral agreement that she would continue to occupy one of thecottages for life. The case was technically distinguishable from

Rochefoucauld vBoustead

insofar as the transferee in


obtained a discounton the market value in return for agreeing to the trust claimant’s continued occup-ation. The existence of a discount is not, however, considered to be necessary for

26.

[1897] 1 Ch 196 at 206.

27.

See, eg,

Nocton v Lord Ashburton

[1914] AC 932 at 954;

Semiahmoo Indian Band vCanada

(1977) 148 DLR (4th) 523 at 551–552.

28.

[1897] 1 Ch 196 at 208.

29.

[1948] 2 All ER 133.

30.

A Oakley

Constructive Trusts

(London: Sweet and Maxwell, 3rd edn, 1997) pp 53–54.



intervention to be made and its existence was not relied on by the court in

Bannisterv Bannister

.

31

There is no general concern that Rochefoucauld v Boustead gives rise to a strong/foreground discretion. The court has only a weak/background discretion to determine,on the facts, whether the land was transferred pursuant to the requisite agreement. Inthis respect, in Bannister v Bannister, Scott LJ explained that it was not necessaryfor the agreement to include an express stipulation that the transferee ‘is in so manywords to hold as trustee’.32 It was sufficient to show that ‘[the bargain] included astipulation under which some sufficiently defined beneficial interest in the propertywas to be taken by another’.33 However, the rationalisation for intervention as basedon fraud or unconscionability has been challenged. A number of commentatorsexplain intervention as based on preventing the unjust enrichment of the transferee.34

Where this rationalisation has been suggested, it is often unclear whether unjustenrichment is being used in the broad or narrow sense identified above. It is submitted,however, that unjust enrichment, in either sense of the term, does not provide aconvincing rationalisation.

In the broad sense of the term it may be accurate to say that a defendant whoreneges on an agreement to hold on trust pursuant to which land is transferred wouldbe unjustly enriched. However, at best this takes our understanding of interventionno further than the statement that it is unconscionable or fraudulent of the transfereeto renege on the agreement. Indeed, a rationalisation based on unjust enrichment inthe broad sense may serve to place too much emphasis on a particular factor. Anunjust enrichment analysis seems particularly compelling in a case such as Bannisterv Bannister where a discount has been provided in return for the agreement. Youdanillustrates that, in the absence of a discount, unjust enrichment may suggest a differentoutcome in that case: to deny a trust for which no consideration has been providedis akin to the denial of a gift; to enforce such a trust is unjustly to enrich the claimantwho receives both full market value and continuing occupation.35 As Youdan acknowl-edges, however, in fact Rochefoucauld v Boustead applies even in the absence ofconsideration.36 A broad unjust enrichment analysis may be applied even where nodiscount is provided. By seeking to renege on the trust pursuant to which the landwas transferred, the defendant purports to obtain more than he or she was intendedto acquire. However, an unjust enrichment analysis that highlights the financialposition of the parties risks losing sight of the essential element of the Rochefoucauldv Boustead principle.

There appears to be at least a developing view that intervention to prevent adefendant from reneging on an agreement to hold on trust involves unjust enrichmentin the narrow sense. Worthington expresses her preference for a restitutionary

31. T Youdan ‘Formalities for trusts of land and the doctrine’ in Rochefoucauld v Boustead(1984) 43 CLJ 306 at 328. Intervention has consistently been linked solely to the defendant’sfraud in reneging on the agreement.32. [1948] 2 All ER 133 at 136.33. Ibid, at 136.34. A rationalisation founded on unjust enrichment is forwarded by J Ames ‘Constructivetrusts based upon the breach of an express oral trust of land’ (1906–07) 20 Harv LR 549 and,in his authoritative analysis of the Rochefoucauld v Boustead principle, by Youdan, aboven 31. More recently, this rationalisation has been adopted by S Worthington Equity (Oxford:Clarendon, 2003) pp 186–188.35. Youdan, above n 31, at 328.36. Ibid, at 328.



approach.37 Bright suggests that for the defendant to deny the claimant’s rights despitethe absence of formalities ‘would infringe many private law interests’ including therestitutionary interest where the defendant would otherwise be unjustly enriched.38

Two related obstacles arise in interpreting Rochefoucauld v Boustead as constitutingunjust enrichment in this narrow sense. The first is the courts’ use of the constructivetrust as the basis of intervention. The relationship between constructive trusts andunjust enrichment remains contentious. In An Introduction to the Law of Restitution,Birks envisaged both resulting and constructive trusts as having a role in claims torestitution.39 He suggested, however, that there was no reason why either type of trustshould be coterminous with wrongs, unjust enrichments or other events.40 LordMillett, by contrast, has argued that the constructive trust has ‘very little’ role to playin claims to restitution based on the reversal of an unjust enrichment.41 In his view,the ‘only principled basis’ for proprietary restitutionary relief in such cases is theresulting trust.42 Millett considers constructive trusts to be confined to restitution forwrongs, particularly claims based on a breach of fiduciary duty.43

It is suggested, with respect, that the foundation of constructive trusts is uncon-scionability not, in its narrow sense, unjust enrichment. If the constructive trust canarise concurrently with an unjust enrichment then this is coincidental; the trustremains a response to unconscionability, not to the existence of the unjust enrichment.This is most clearly illustrated by a mistaken payment. In such a case, the enrichmentis made unjust by virtue of the mistake, but no constructive trust arises unless theconscience of the recipient is affected.44 Equally, in a case within Rochefoucauld vBoustead, to show an unjust enrichment does not explain the award of a constructivetrust. If Lord Millett’s view prevails, then the suggestion that Rochefoucauld v Boust-ead constitutes unjust enrichment can be shortly answered: if the resulting trust is themechanism to provide for proprietary restitution, then the development of the princi-ple in that case around the constructive trust is inconsistent with an unjust enrichmentanalysis. This argument is open to the obvious challenge that the error lies with thecourts’ classification of the trust as constructive. It is therefore necessary to considerthe second obstacle to a restitutionary rationalisation: the need to identify the unjustfactor on which restitution is obtained. Two grounds arise for discussion. As will beseen, neither of these grounds can convincingly be applied to cases within Rochefou-cauld v Boustead.

37. Above n 34, p 187.38. Bright, above n 6, at 402. The other private law interests referred to by Bright areexpectations and reliance, interests generally seen in property law as linked with interventionthrough estoppel.39. P Birks An Introduction to the Law of Restitution (Oxford: Clarendon, 1985) pp 55–64.40. Ibid, pp 55–56.41. P Millett ‘Restitution and constructive trusts’ (1998) LQR 399 at 399–400.42. Ibid, at 415.43. Ibid, at 400 and 408. Claims within Rochefoucauld v Boustead are not necessarily capableof analysis as involving restitution for wrongs. Such a claim relates to the breach of a primaryduty, such as a fiduciary duty. A transferee may have no existing duty towards the transferor.Such duties would arise on the creation of the express trust, but it is the failure of this trust(through want of formalities) that leads to the application of Rochefoucauld v Boustead.44. This example is drawn from Lord Browne-Wilkinson’s criticism of Chase ManhattanBank NA v Israel-British Bank (London) Ltd [1981] Ch 105 in his judgment in Westdeutsche[1996] AC 669 at 714–715.



In Rochefoucauld v Boustead and Bannister v Bannister the agreement to hold ontrust may be seen as part of the consideration for the transfer as it was one aspect ofthe bargain pursuant to which the land was transferred. Hence, the first possibleground is a failure of consideration.45 However, failure of consideration provides aground for restitution only where the failure is total. In contrast, in these cases, theagreement to hold on trust represented only a part of the bargain. Courts havedeveloped mechanisms to find (artificially) a total failure of consideration whereconsideration that has been provided can be attributed to a collateral benefit, or whereconsideration can be apportioned.46 These mechanisms, however, do not seem apt toapply where an agreement for a trust and payment of the purchase price are part andparcel of a single transaction for the transfer of land and the purchaser fails to provideonly the anticipated trust.

The second ground is derived from Chambers’ examination of the role of resultingtrusts as the mechanism for proprietary restitution.47 Its adoption would therefore bedependent on accepting that Rochefoucauld v Boustead should properly be classifiedas involving that type of trust. Chambers seeks to match traditional categories ofresulting trust with unjust factors based on the existence of a non-voluntary transfer.48

In this context, he looks generally at express trusts that fail, including those that failfor non-compliance with formality requirements.49 This would therefore includeRochefoucauld v Boustead, although no specific reference is made to that case.Chambers derives an unjust factor from the assumption that where an express trustfails, from the outset the settlor did not intend the trustees to benefit from the property:‘settlors usually have no intention to benefit the trustees whatsoever’.50 Cases withinthe Rochefoucauld v Boustead principle may fall within an exceptional category(arguably implicit in Chambers’ qualification of his statement as reflecting the usualscenario) where in fact the trustees are intended to benefit, with the trust operatingto qualify the extent of that benefit.51

The difficulty in applying either of these unjust factors to Rochefoucauld v Boust-ead is, in essence, the same. Both factors operate on the absolute (a total failure ofconsideration or no intention to benefit the trustee), while in cases within Rochefou-cald v Boustead, the position is likely to be qualified: a failure to uphold part of thebargain pursuant to which land is transferred to obtain a greater benefit than thatprovided by the bargain.

In summary, used in a broad sense, an unjust enrichment rationalisation of Roche-foucauld v Boustead does not take us any further in understanding the principle. Inits narrow sense, obstacles remain in accepting Rochefoucauld v Boustead as involv-ing a claim to restitution for unjust enrichment. In light of these difficulties, it is

45. It should be noted that in this context ‘consideration’ is used in a broader sense than itis in relation to the law of contract. Birks explained, above n 39, p 223, ‘[it] means that thestate of affairs contemplated as the basis or reason for the payment has failed to materialiseor, if it did exist, has failed to sustain itself’.46. Virgo, above n 11, pp 336–341.47. R Chambers Resulting Trusts (Oxford: Clarendon, 1997).48. Ibid, p 113.49. Ibid, pp 115–116.50. Ibid, p 116.51. See, eg, Bannister v Bannister [1948] 2 All ER 133. There, the trustee was intended tobenefit from the transfer with the trust operating to qualify the extent of that benefit byconferring a life interest on the transferor (the settlor).



suggested that the concept has no role to play in our understanding of Rochefoucauldv Boustead. The principle derived from that case is appropriately seen as interventionto prevent a specific form of unconscionable conduct, arising where the defendantreneges on a trust pursuant to which land is transferred.

(b) Rochefoucauld v Boustead: the three-party case

The definition of fraud or unconscionability in Rochefoucauld v Boustead is suffi-ciently broad to incorporate an extension to the paradigm, arising where the intendedbeneficiary of the trust is not the transferor him or herself, but is a third party to theagreement.52 It is acknowledged that while the existence of this extension is generallyaccepted, it is difficult to find clear authority for the application of Rochefoucauld vBoustead to such facts. In Rochefoucauld v Boustead itself, there were three partiesinvolved in the transaction though the case is (correctly) seen as in substance anagreement for the benefit of the transferor. There, land was transferred from a mort-gagee to the defendant who had agreed with the mortgagor to hold it on trust for her.Hence the beneficiary had an existing proprietary right in the land (an equity ofredemption) and the effect of the agreement was to give up that right and for a newright (the trust) to be created in her favour. Bannister v Bannister was applied in Nealev Willis,53 which is referred to by Youdan in supporting claims by third parties, thoughit is doubtful that the case in fact falls within the Rochefoucauld v Boustead principle.In Neale v Willis, the Court of Appeal intervened to prevent the defendant renegingon an undertaking that property would be jointly owned by his wife pursuant to whichhis wife’s mother had provided a loan in connection with the purchase. Hence, thedefendant had entered into an agreement that his wife, a third party, would have aninterest in the house. However, this agreement was not made with the transferor andthe transfer was not made pursuant to the agreement. The agreement was instead partof a separate transaction connected with obtaining finance for the purchase. In theabsence of stronger authority, it may at least be noted that there is no serious doubt(judicial or academic) as regards the application of Rochefoucauld v Boustead in athree-party case. Further, the principle in Rochefoucauld v Boustead has been influ-ential in the development of intervention where land is expressly transferred ‘subjectto’ rights in favour of a third party. Reference to Rochefoucauld v Boustead in thedevelopment of that principle may therefore be seen as implicit acceptance of its ownapplication by extension in a three-party case.

Accepting that intervention will take place in a three-party case, is it appropriateto continue to base intervention on unconscionability? The defendant’s conduct, and

52. This extension to the paradigm retains a narrow interpretation of the scope of Rochefou-cauld v Boustead. Youdan, above n 31, at 328–330 draws the scope much more broadly asincorporating agreements relating to the purchase of land from a third party. This would nowinclude, eg, commercial joint ventures for the acquisition of land within the ‘equity’ derivedfrom Pallant v Morgan [1953] Ch 43 in Banner Homes Group plc v Luff Developments Ltd[2000] Ch 372. That doctrine is undoubtedly derived from Rochefoucauld v Boustead, as isdemonstrated by S Nield ‘Constructive trusts and estoppel’ (2003) 23 LS 311. However, oncewe move outside the paradigm of an agreement between the parties to the transfer, additionalrequirements for intervention may arise. Eg, intervention through the Pallant v Morgan equity(and establishing unconscionability within that doctrine) is explicitly linked to a requirementof reliance on the agreement by the claimant to the trust.53. (1968) 19 P&CR 836.



the nature of the courts’ discretion, is the same regardless of the identity of theintended beneficiary. In both two- and three-party cases, the need for intervention istriggered by the defendant’s attempt to deny the trust pursuant to which the land wastransferred. The only discretion is the weak/background discretion to determine theexistence of the oral trust. However, the factual difference (that the beneficiary is athird party to the agreement) appears to have been influential in arguments foralternative rationales insofar as those alternatives reflect arguments in favour ofintervention in respect of one or other of these parties. In this part of the paper, themerits of these alternatives as providing the ground for intervention are considered.The question of in whose favour intervention should be made is left for discussionbelow.54

The first alternative basis for intervention, reflecting arguments advanced in thetwo-party case, is unjust enrichment. In its narrow sense, unjust enrichment dictatesintervention in favour of the transferor rather than the intended beneficiary, as thetransferee is enriched at the transferor’s expense.55 Hence, intervention ensures thatthe transferee is not unjustly enriched at the expense of the transferor without nega-tiving the effect of s 53(1)(b) of the Law of Property Act 1925 by apparently enforcingthe oral trust. This argument is, however, subject to the same difficulties identifiedabove in relation to two-party cases: the use of constructive (rather than resulting)trusts as the mechanism for intervention and the absence of an unjust factor dictateagainst an unjust enrichment analysis.

The second and third alternative bases for a claim are derived from attempts torationalise intervention in favour of a third party through the imposition of a construc-tive trust, including but not confined to cases within the factual situation underconsideration. They are drawn respectively from analyses provided by Bright56 andMcFarlane.57 The broad scope of these analyses is significant since, as will be seen, indrawing analogies between different situations there is a danger of losing sight of theclose relationship between Rochefoucauld v Boustead in two- and three-party cases.

Bright draws a distinction between cases where a constructive trust is imposed infavour of a party to an agreement (the transferor), where intervention is justified by‘many private law interests’ and those where the intended beneficiary is a third partyto the agreement.58 The use of Rochefoucauld v Boustead in three-party cases isconsidered by Bright to be a misapplication of the doctrine as the real difficulty in suchcases is not one of formalities, but is one of privity: the third party is not privy to the

54. Below n 123 and associated text.55. Worthington, above n 34, pp 187–188 uses an unjust enrichment analysis in the contextof supporting intervention in favour of the transferor. Youdan, above n 31, at 335 supports theclaim of the third party despite his own adoption of an unjust enrichment rationalisation. Onhis view, the fact the oral trust is valid, though unenforceable, precludes the transferor fromseeking restitution, as the transferee can uphold the trust if he or she chooses to do so. In itsnarrow sense, however, unjust enrichment cannot be used to support a claim by the third party.A transferee who reneges on an agreement for a trust in favour of a third party obtains anenrichment (the beneficial interest) that was intended to belong to the third party, but theenrichment is not ‘at the expense of’ the third party. Birks’ suggestion, above n 39, pp 135–136 that such cases fall within a principle of interceptive subtraction is refuted by L Smith‘Three-party restitution: a critique of Birks’s theory of interceptive subtraction’ (1991) 11 OJLS481 at 511–514.56. Above n 6.57. Ibid.58. Ibid, at 402.



agreement between the transferor and transferee which provides for the trust and this,at the time intervention was developed, prevented the third party having rights enforce-able against the transferee.59 Bright therefore suggests that the transferee’s liabilityshould be based on his or her assumption of responsibility to the third party. Suchliability is not derived from conscience or trusts, but is founded in the law of contract.60

Bright’s discussion of the principle in Rochefoucauld v Boustead is focused on theparadigm case of a transfer on oral trust in favour of the transferor.61 This is contrastedwith cases (discussed below) where land is transferred ‘subject to’ rights in favourof a third party.62 Bright does not specifically address cases within the extension tothe paradigm of Rochefoucauld v Boustead where land is transferred on a stipulationfor an oral trust in favour of a third party. It is submitted that even if Bright’sdistinction between two- and three-party cases is accepted, the correct analogyfor such a transfer is with the two-party case. The real difficulty where land istransferred on an oral trust for a third party is (as in the two-party case) the absenceof formalities for an express trust. Any (additional) issue of privity flows directly fromnon-compliance with formalities as, if the trust was evidenced in writing, privitywould, of course, provide no bar to enforcement.

McFarlane discusses Rochefoucauld v Boustead in the context of a number of otherinstances where property is transferred subject to a condition conferring rights on athird party. The purpose of his analysis is to argue that all such cases are united bya common principle. On his view, the courts intervene because the transferee hasmade an undertaking to confer new rights on the third party and, as a result, hasacquired an advantage which assists his or her acquisition of the property.63 Inresponse, the transferee is prevented from acting inconsistently with the undertak-ing.64 McFarlane identifies a number of advantages that he considers to follow fromrecognising this common principle and rejecting the ‘vagueness of unconscionability’as the rationale for intervention.65 This includes ensuring that the general formula ofconstructive trusts arising in response to unconscionability is not used to shield novelclaims from rigorous scrutiny.66

While McFarlane’s focus is on third-party cases,67 the principle he suggests issufficiently broad to incorporate cases where the transferor is the intended beneficiary

59. Ibid, at 403. The principles developed prior to the enactment of the Contract (Rights ofThird Parties) Act 1999. The extent to which that Act provides a means of enforcement for theintended beneficiary in three-party Rochefoucauld v Boustead cases (and also in ‘subject to’cases which invariably involve third-party claimants) remains uncertain. Bright, at 416, outlinessome of the difficulties in applying the Act and McFarlane, above n 6, at 683–684, highlightsthe difference in the analysis between the Act and the constructive trust solution adopted inthe case-law.60. Founding liability on contract will, on appropriate facts, raise additional issues of for-malities. If the contract is for the creation of a proprietary right, then its validity is dependenton compliance with the Law of Property (Miscellaneous Provisions) Act 1989, s 2(1). Theexceptions (in s 2(5)) would assist only if intervention is through a constructive (or resultingor implied) trust. I am grateful to Sarah Nield for bringing this point to my attention.61. Above n 6, at 402–403.62. Ibid, at 403–404.63. Ibid, at 668.64. Ibid, at 668.65. Ibid, at 694.66. Ibid, at 694.67. See, eg, the basic form of cases he identifies; ibid, at 668.



and he refers to such cases in his discussion.68 It is submitted that there are difficultiesin accepting McFarlane’s common principle as a rationalisation for Rochefoucauld vBoustead. In seeking analogies with other cases, his analysis loses sight of the actualprinciple provided in that case. Rochefoucauld v Boustead enables the court tointervene to prevent a transferee on trust from reneging on the trust and claiming theland for him or herself. The case is (necessarily) concerned with the creation of newrights, as it prevents the unconscionable reliance on non-compliance with statutoryrequirements for the declaration (ie the creation) of a trust. However, nothing withinthe formula provided in the case requires it to be shown that by entering the under-taking the transferee has ‘acquired an advantage in relation to the acquisition of thatproperty’.69 The provision for intervention solely on the basis of the transferee’sattempt to deny the trust links together the application of Rochefoucauld v Bousteadin both two- and three-party cases, and distinguishes this instance of unconscionabil-ity from other principles discussed by McFarlane.

It is submitted that where land is transferred to the defendant pursuant to an oraltrust in favour of a third party, intervention to prevent the defendant from renegingon the undertaking is founded on unconscionability. This reinforces the close analogywith the two-party case, where the transferor is the intended beneficiary. In bothsituations, the only requirement for intervention is that the defendant has reneged onthe agreement pursuant to which the land was transferred. The only discretion in issueis weak/background in nature, whereby the court determines, on the facts, whetheran agreement of that nature exists. This leaves open the question (considered below),in whose favour conscience-based intervention should operate.

(c) Transfers ‘subject to’

In a handful of cases, courts have developed a principle enabling intervention whereland is transferred ‘subject to’ rights in favour of the claimant, a third party to thetransfer, and the transferee seeks to renege on the ‘subject to’ agreement. Thisprinciple has developed by reference to that in Rochefoucauld v Boustead and inter-vention has been justified on the basis that it is unconscionable for the defendant torenege on the agreement. In response to the unconscionable conduct, the defendanthas been held to be constructive trustee for the claimant with his or her anticipatedrights taking effect under the trust. The imposition of liability in ‘subject to’ caseshas proved contentious.70 As will be seen in the following discussion, interventionhas developed from weak authority. That intervention will take place now appearsbeyond doubt. Indeed, it is one of the principles relied upon by the Law Commissionin rejecting the need to introduce a requirement of knowledge or notice into thedefinition of ‘purchaser’ in the Land Registration Act 2002.71 While the fact ofintervention may now be unarguable, the analysis of intervention as involving the

68. Ibid, at 676–677.69. Cf McFarlane’s formula for the common principle he advocates; ibid, at 668.70. See, eg, MP Thompson ‘Registration, fraud and notice’ (1985) 44 CLJ 280 at 288–289.71. The Law Commission Land Registration for the Twenty-First Century: A ConsultativeDocument (Report No 254, 1998) para 3.48. The ‘unexpected level of attention and approval’now afforded to the ‘much-maligned’ decision in Lyus v Prowsa Developments [1982] 1 WLR1044, where a constructive trust was imposed on the basis of a ‘subject to’ provision, is notedby E Cooke and P O’Connor ‘Purchaser liability to third parties in the English land registrationsystem: a comparative perspective’ (2004) 120 LQR 640 at 662–663.



imposition of a constructive trust as a response to the defendant unconscionablyreneging on an agreement continues to attract substantial criticism. This criticism isunderlined, in part, by concerns that the use of the constructive trust is inappropriateand is informed by the need to rationalise intervention on behalf of a third party tothe agreement.72 This part of the paper considers the development of unconscionabil-ity as the basis for intervention, leaving aside (for consideration below) the appropri-ate response to that conduct.

Intervention on the basis of a ‘subject to’ provision was first considered in Binionsv Evans.73 There, the transferee (the plaintiff in the action) purchased land ‘subjectto’ rights in favour of the defendant. The defendant was the widow of an employeeof the transferor to whom the transferor had agreed (in a written document) to allowrent-free occupation for life. The transferee obtained a discount on the purchase inreturn for the ‘subject to’ agreement but, notwithstanding, sought possession againstthe defendant. By reference to Bannister v Bannister, Lord Denning MR consideredthe court should impose a constructive trust on the transferee ‘for the simple reasonthat it would be utterly inequitable for the plaintiffs to turn the defendant out contraryto the stipulation subject to which they took the premises’.74 Lord Denning MR’sjudgment is weak authority: it is an alternative ground for decision given in a minorityjudgment.75 However, the principle he advocated was applied in Lyus v ProwsaDevelopments Ltd,76 where land was sold in exercise of a mortgagee’s power of sale‘subject to’ a third party’s (the claimant in the action) estate contract. Dillon Jidentified the fraud (or unconscionability) in issue, by reference to Rochefoucauld vBoustead, as consisting in ‘the first defendant reneging on a positive stipulation infavour of the [claimants] in the bargain under which the first defendant acquired theland’.77

Intervention pursuant to a ‘subject to’ provision was subsequently considered(though not applied) in Ashburn Anstalt v Arnold,78 which is generally accepted asproviding the most authoritative exposition of the principle.79 There, Fox LJ empha-sised that the mere inclusion of a ‘subject to’ clause is not a sufficient basis forintervention, noting that ‘the court will not impose a constructive trust unless it issatisfied that the conscience of the estate owner is affected’.80 The inclusion of theclause is not conclusive as to the existence of an agreement as it may have been

72. Bright, above n 6, and McFarlane, ibid.73. [1972] 1 Ch 359.74. Ibid, at 368.75. The majority considered the defendant to have a beneficial interest under a settlementwithin the Settled Land Act 1925, which bound the transferee as a purchaser with notice (the‘subject to’ clause evidencing notice). Lord Denning MR’s preferred solution was that thedefendant had a contractual licence at the time of the transfer, which was itself a property rightbinding the transferees through notice. The personal status of contractual licences was sub-sequently established in Ashburn Anstalt v Arnold [1989] Ch 1.76. [1982] 1 WLR 1044.77. Ibid, at 1054. C Harpum ‘Constructive trusts and registered land’ (1983) 42 CLJ 54 at54 criticised the decision as ‘another example of judicial unwillingness to come to terms withthe Land Registration Act 1925’. The far-reaching consequences of the decision he raised, at56, of using the constructive trust to assign the burden of a contract relating to land have notcome to fruition as the operation of the doctrine has developed.78. [1989] Ch 1.79. See, eg, Lloyd v Dugdale [2002] 2 P&CR 13 at [52] per Sir Christopher Slade.80. [1989] Ch 1 at 25–26.



inserted to protect the vendor from liability to the transferee for non-disclosure ofexisting interests. As regards the agreement itself, it is established that this must relateto the creation of new rights in favour of the third party.81 This requirement is linkedto determining the purposes of the ‘subject to’ clause: evidence of an agreement torecognise ‘fresh rights’ demonstrates that its inclusion is not merely to protect thevendor from liability for non-disclosure of existing rights.82 It also, perhaps, deflectsattention from the highly contentious issue of enforcing rights outside the priorityrules that form the bedrock of land law. The existing (non-enforceable) right is notdirectly binding on the purchaser though essentially the same result is achievedindirectly through the creation of fresh rights.83

In Lord Denning MR’s initial discussion of intervention in Binions v Evans, it isapparent that the unconscionable conduct in issue is the same in substance as that inRochefoucauld v Boustead. Intervention arises because the transferee reneges on apositive stipulation pursuant to which the land is transferred. This origin of theprinciple is further reflected in Dillon J’s definition of the requisite unconscionabilityin Lyus v Prowsa Developments Ltd. The factual context of the cases differs fromRochefoucauld v Boustead in two key respects. The first is the nature of the interestto be enjoyed by the third party. As has been seen, Rochefoucauld v Bousteaddeveloped where the interest conferred is a beneficial interest under a trust. Theagreement reneged upon is an oral agreement for a trust with the only bar to enforce-ment being the absence of written evidence within s 53(1)(b) of the Law of PropertyAct 1925. In ‘subject to’ cases, the nature of the third party’s interest is not soconfined, but has included property rights that do not involve the creation of a trust(for example the estate contract in Lyus v Prowsa Developments Ltd) and intereststhat are merely personal (in particular, contractual licences). It is submitted that thisdifference is not relevant to the finding of unconscionability, consisting in the trans-feree reneging on the agreement. As is considered below, its relevance lies in deter-mining the appropriate response to the unconscionability.

The second difference lies in the nature of the agreement or undertaking. InRochefoucauld v Boustead, the agreement lies in the oral declaration of trust. Onceestablished that land was transferred pursuant to such an oral declaration, it is nec-essarily unconscionable for the transferee to renege. Where the claim to an agreementlies in a ‘subject to’ clause, it is more difficult to establish the existence of anagreement because of the ambiguous nature of such a clause. The circumstancessurrounding the clause therefore need to be scrutinised to establish whether anagreement in fact exists. If an agreement is found to exist (and land was transferredpursuant to the agreement) then, as in Rochefoucauld v Boustead, it is necessarilyunconscionable for the transferee to renege on the agreement. It is emphasised,however, that the unconscionability with which the courts are concerned is as limitedhere as it is in Rochefoucauld v Boustead: the unconscionability arises where (andonly where) the transferee reneges on an agreement pursuant to which land is trans-ferred. The finding of unconscionability again involves a weak/background discretion

81. This is evident in the discussions of the principle in Lyus v Prowsa Developments Ltd[1982] 1 WLR 1044 and Ashburn Anstalt v Arnold [1989] Ch 1. See further the summary ofthe principle in Lloyd v Dugdale [2002] 2 P&CR 13 at [52](3).82. Cf Ashburn Anstalt v Arnold [1989] Ch 1 at 26.83. N Hopkins The Informal Acquisition of Rights in Land (London: Sweet and Maxwell,2000) pp 49–51. The difference between constructive trusts imposed to enforce existing rightsand those imposed to recognise new rights is discussed by McFarlane, above n 6, at 669–674.



directed at ascertaining whether, on the facts, the ‘subject to’ clause evidences theexistence of the requisite agreement.

This analysis reflects the approach taken by courts in ‘subject to’ cases. Thisapproach is most apparent in Lyus v Prowsa Developments Ltd, where interventionwas seen as necessarily following from, and dependent upon, establishing the exist-ence of an agreement upon which the transferee had reneged.84 The approach of thecourts is open to criticism, however, insofar as they have not maintained a cleardistinction between establishing the agreement (which is a necessary precursor toestablishing unconscionability) and establishing the unconscionability; nor have thecourts invariably defined unconscionability solely in terms of reneging on the agree-ment. As a result, statements can be found in judgments indicating the existence ofa broader principle (and a wider discretion) than is in fact applied. For example, inAshburn Anstalt v Arnold, Fox LJ started his consideration of ‘subject to’ agree-ments by reference to the general formula for constructive trusts and explained, ‘thetest, for the present purposes, is whether the owner of the property has so conductedhimself that it would be inequitable to allow him to deny the claimant an interest inthe property’.85 However, it is apparent from Fox LJ’s judgment that the finding ofunconscionability in the context of ‘subject to’ cases is dependent on the transfereereneging on an undertaking to recognise a new obligation in favour of the thirdparty.86 In Lloyd v Dugdale, in summarising the requirements for intervention in‘subject to’ cases, Sir Christopher Slade commented that, ‘[in] deciding whether ornot the conscience of the new estate owner is affected . . . the crucially importantquestion is whether he has undertaken a new obligation, not otherwise existing, togive effect to the relevant incumbrance or prior interest’.87 This comment is ambigu-ous insofar as it appears to link the question of conscience to the existence of a newobligation. The existence of a new obligation is relevant in establishing whether thetransferee entered into the requisite agreement or undertaking. The transferee’sunconscionability relates specifically to reneging on that agreement onceestablished.

Hence, it is suggested that where courts intervene on the basis of a transfer ‘subjectto’ rights in favour of a third party to the agreement, this is in response to unconscio-nability consisting in the transferee’s attempt to renege on the agreement pursuant towhich land was transferred. The unconscionability is the same as that in issue inRochefoucauld v Boustead and involves only a weak/background discretion.

(d) Summary

In sum, concern at the use of unconscionability as a rationale for intervention is basedon the appearance of a wide discretion that does not in fact exist in Rochefoucauld vBoustead and ‘subject to’ cases. Intervention in cases within these principles involvesonly a weak/background discretion to ascertain the existence of the requisite agree-ment. The concern, however, is that the broad language of conscience leaves theconcept open to misuse, whether by ‘beginners, only too anxious to deal directly in

84. [1982] 1 WLR 1044 at 1053.85. [1989] Ch 1 at 22.86. Ibid, at 25–26.87. [2002] 2 P&CR 13 at [52](3).



fairness, justice and good conscience’88 or by a rogue judge.89 To remove the languageof conscience through a concern of misuse is to provide a cure disproportionate tothe disease. The proportionate response to misuse is to discipline our understandingto enable use and misuse to be identified and differentiated. Alternative rationales,aimed at removing the language of conscience, have been shown to provide lesssatisfactory explanations for intervention. Understanding and accepting unconsciona-bility as the basis of intervention and as providing a common thread linking the two-and three-party applications of Rochefoucauld v Boustead and ‘subject to’ cases isimportant in a number of respects. First, it is a true reflection of how and whyintervention in these circumstances has developed: they are logically connected asintervention is triggered by the same conduct on the part of the transferee. Secondly,it allows the possibility of future, legitimate development of intervention in otherfactual contexts. Indeed, understanding the nature of the unconscionability that linksthese principles provides a benchmark to assess the legitimacy of any future exten-sion. Thirdly, unconscionability increasingly appears to be the vehicle by whichprinciples of equity are developed in modern law.90 To deny its role in these principlesrisks losing sight of the general trend reflected in the renaissance of the concept andmay, unintentionally, side-step a proper assessment of that general trend.

RESPONDING TO UNCONSCIONABLE CONDUCT

This paper has argued that intervention in Rochefoucauld v Boustead, both in two-and three-party cases, and in ‘subject to’ cases, arises in response to a specific formof unconscionable conduct. Once the ground for intervention is established, it isnecessary to consider the response to the unconscionability. This is significant since,as will be seen, criticism of the manner in which the court responds has played animportant role in attempts to change the basis of intervention. In this part of the paper,it is argued that legitimate concerns at the courts’ approach do not require us to replaceunconscionability as the basis of intervention, but can be addressed within the frame-work of an unconscionability analysis.

In developing intervention within Rochefoucauld v Boustead and ‘subject to’transfers, the courts have not explicitly distinguished between establishing unconscio-nability and determining how to respond to unconscionability. These principles havedeveloped by reference to the scope of constructive trust doctrines. A finding ofunconscionability by the defendant in reneging on the agreement has led to theresponse of imposing a constructive trust. The constructive trust, as is well known,is a device founded on conscience. In Paragon Finance plc v DB Thakerar & Co,Millett LJ explained, ‘A constructive trust arises by operation of law whenever thecircumstances are such that it would be unconscionable for the owner of property . . .to assert his own beneficial interest in the property and deny the beneficial interest

88. Birks, above n 5.89. See Bright, above n 6, at 406. She acknowledges that the discretion applied in ‘subjectto’ cases is of the weak/background type, but still seeks an alternative rationale for interventionin part through concern that the appearance of strong/foreground discretion is open to ‘aberrantdecision making’.90. M Halliwell Equity and Good Conscience in a Contemporary Context (London: OldBailey Press, 1997).



of another’.91 However, it is submitted that, while the constructive trust is a mecha-nism to respond to unconscionability, it is not the only possible response: a construc-tive trust requires a finding of unconscionability; but a finding of unconscionabilityshould not automatically lead to the imposition of a constructive trust.

It is suggested, therefore, that there is a need to separate the finding of unconscio-nability from the imposition of a constructive trust.92 Once unconscionability is found,the courts should have a strong/foreground discretion as regards the remedy. Asuggestion that discretionary remedialism should be introduced requires careful con-sideration as it is an idea that has met with vehement opposition. Birks, the foremostcritique, condemned the separation of liability from remedy to such an extent that hewanted ‘remedy’ removed from legal vocabulary.93 In his view, the remedy followsautomatically from the event so that the claimant has a right to the remedy and thelanguage of ‘rights’ is to be preferred. At the core of Birks’ criticism is a concernthat discretionary remedialism would undermine the legitimacy of the judicial func-tion and reduce claimants to ‘child-like supplicants . . . before a court which hadgrown much too big for its boots’.94 Additionally, he raises practical considerationsin managing litigation and providing appropriate settlements.95 Birks’ objectionsappear to be founded on a model of remedial discretion which is not merely strongin nature, but is unrestrained; remedial palm tree justice. Strong discretion, as hasbeen noted, is not necessarily so broad.96 Barker has stressed the importance ofmaintaining the ‘logical connection’ between the event on which the court intervenesand the remedy or response to that event.97 This connection, it is suggested, informsthe boundaries within which discretion may legitimately operate. The legitimacy ofthe judicial role and management of litigation should not be jeopardised by recogni-tion of a discretion operating within confined boundaries. Indeed, it is suggested thatremedial discretion within these confines may bring coherence, while acknowledgingthat not every instance of unconscionability requires or justifies the same response.On this basis, the discretion advocated can be outlined in the following terms.

The discretion should arise where the court intervenes on the basis of unconscio-nability in circumstances in which a constructive trust is not an appropriate response.98

91. [1999] 1 All ER 400 at 409.92. Cf P O’Connor ‘Happy partners or strange bedfellows: the blending of remedial andinstitutional features in the evolving constructive trust’ (1996) 20 Melb ULR 735 at 738–739.She discusses the separation of the remedial constructive trust from the underlying principleof liability (unjust enrichment) in the USA and Canada. In those jurisdictions, liability isdependent upon a finding of unjust enrichment, but the imposition of a constructive trust doesnot follow automatically from that finding.93. P Birks ‘Rights, wrongs, and remedies’ (2000) 20 OJLS 1.94. Ibid, at 23. Birks’ objections to discretionary remedialism are summarised by Evans,above n 24, at 464–467.95. Ibid, at 23.96. Above n 24 and associated text.97. K Barker ‘Rescuing remedialism in unjust enrichment law: why remedies are right’(1998) 57 CLJ 301 at 316.98. As the discretion advocated in this paper arises only in those situations where a construc-tive trust is not appropriate, constructive trusts that do arise remain institutional, not remedial,in nature. This initially appears paradoxical: questioning the appropriateness of the constructivetrust implicitly suggests its recognition is discretionary. However, as is seen in the discussionthat follows, the constructive trust is considered to be appropriate whenever land is transferredon an express trust that fails. The remedial discretion is confined to ‘subject to’ cases wherethe agreement concerns rights that do not generally take effect under a trust.



In such cases, the court should award a remedy that is appropriate and proportionateto counter the unconscionable conduct. The claimant therefore has a right to a remedyto counter the unconscionability, but the form of that remedy lies within the discretionof the court. Conversely, the defendant has a right that his or her proprietary entitle-ment is not interfered with by the court more than is necessary to counter his or herunconscionability. In this respect, congruence is maintained between the event andthe response: the court intervenes on the basis of unconscionable conduct and pro-vides a remedy that goes no further than is necessary to counter that conduct. Thecourt’s discretion is therefore limited to determining the form of the remedy.

In providing a counter to Birks’ objection to discretionary remedialism, Evanssuggested that the discretion involved is, in fact, weak.99 Recently, Zakrzewski hassuggested a classification of remedies by their relationship to the rights that existedbefore the parties went to court.100 On his analysis, remedies are either ‘replicative’as restating existing substantive rights, or ‘transformative’ as varying the parties’existing rights. Zakrzewski eschews a distinction between discretionary and non-discretionary remedies in part because this gives the impression that the discretionexercised as regards equitable replicative remedies is stronger and broader than is infact the case.101 The discretion advocated here, while limited in its scope of applica-tion, is undoubtedly strong in nature as it confers on the judge a choice as to theremedy to award. It is not, however, unrestrained, as that choice is confined by theunderlying purpose of countering the unconscionability. On Zakrzewski’s classifica-tion, the remedy is transformative. As he acknowledges, while discretion can bepresent (or absent) in both replicative and transformative remedies, the discretion maybe stronger in the latter category.102

The existence of this limited discretionary remedialism is not unprecedented inEnglish law. As will now be seen, it mirrors the remedial discretion exercised inclaims to proprietary estoppel.

(a) Unconscionability and remedial discretion in proprietary estoppel

Intervention through proprietary estoppel has generally been accepted as beingfounded on unconscionability at least since the decision in Taylors Fashions Ltd vLiverpool Victoria Trustees Ltd.103 While the unconscionability in estoppel againrelates to reneging on an undertaking (of an assurance the claimant has or will acquirerights), estoppel is distinguished from the other principles under discussion insofaras the unconscionability is also dependent upon a finding of detrimental reliance.104

The role of unconscionability in establishing an estoppel claim has received renewedinterest since the decision in Gillett v Holt.105 That case suggests that unconsciona-bility should be seen as an overriding or umbrella element of an estoppel claim. Itfeeds into the other elements of the claim (assurance, reliance and detriment) but

99. Evans, above n 24, at 482–489.100. R Zakrzewski Remedies Reclassified (Oxford: Oxford University Press, 2005).101. Ibid, p 96.102. Ibid, p 102.103. [1982] 1 QB 133.104. This distinction between the principles is drawn by Nield, above n 52, at 321.105. [2001] Ch 210.



also provides a general evaluative tool through which the court considers the claim‘in the round’.106

The prevailing view is to analyse estoppel as a two-stage process. Once a claimto estoppel is established (the first stage) the court has a strong/foreground discretionto determine the remedy to award (the second stage).107 Prior to the court order, theclaimant has only an inchoate equity, representing the existence of the estoppel claim.This view is challenged by McFarlane’s ‘unitary’ approach to estoppel, under whichthe right acquired arises immediately without the need for a court order.108 Buildingon this approach, Bright and McFarlane have argued that the claimant automaticallyacquires a right to the extent necessary to protect his or her reasonable reliance.109

On their view, in granting a remedy, the court then ‘fashion[s] an order which givesbest effect to that [existing] right’.110

The crucial difference between Bright and McFarlane’s approach and the prevail-ing view lies in their suggestion that rights arise automatically to protect the claim-ant’s reliance. Estoppel is not currently seen as generating rights without (or pre-dating) the court order. It is, notwithstanding, possible to distinguish between thepurpose of the remedy, or the underlying result to be achieved, and the form of theremedy.111 While the prevailing approach to estoppel considers both of these to bewithin the courts’ discretion, the purpose of the remedy is not seen as a matter fordecision in each case. Cooke notes that only in a few cases have courts undertaken‘a real exercise of discretion [by asserting] . . . that not merely is the precise order inthe courts hands but also the measure of relief to be effected by the order’.112 On acase-by-case basis, the courts’ discretion, while strong/foreground in nature, isdirected only at determining the form of the order. The purpose of the remedy haspreviously been thought to lie either in the award of expectations or in the recoveryof reliance loss.113 The form of the order was however generally seen as consistentwith either view of the purpose of the remedy, as a reliance-based approach, in theory,was seen as consistent with the award of expectations in practice.114 In their analysis,

106. Gillett v Holt [2001] Ch 210 at 225 per Robert Walker LJ. For a full analysis of thisdevelopment see N Hopkins ‘Understanding unconscionability in proprietary estoppel’ (2004)20 JCL 210.107. It was in the context of discussing the nature of this discretion that Gardner forwardedhis division between foreground and background discretion, above n 20. The nature of thediscretion is further discussed by E Cooke Estoppel, Discretion and the Nature of the EstoppelEquity, presented at the Second Biennial Conference on the Law of Obligations, University ofMelbourne, July 2004.108. B McFarlane ‘Proprietary estoppel and third parties after the Land Registration Act 2002’[2003] CLJ 661.109. S Bright and B McFarlane ‘Proprietary estoppel and property rights’ (2005) 64 CLJ 449.110. Ibid, at 477. Applying Zakrzewski’s analysis, this would make the remedy replicativerather than transformative. Zakrzewski favoured classifying estoppel remedies as replicative,while acknowledging that if (as is advanced here) the view is taken that estoppel involvesremedial discretion, then the remedy would need to be classified as transformative: aboven 100, pp 132–133.111. Cf Gardner, above n 19, at 201–203.112. E Cooke The Modern Law of Estoppel (Oxford: Oxford University Press, 2000) p 157.113. The alternative views are forwarded by E Cooke ‘Estoppel and the protection of expec-tations’ (1997) 17 LS 258 and A Robertson ‘Reliance and expectation in estoppel remedies’(1998) 18 LS 360.114. A Robertson ‘The statute of frauds, equitable estoppel and the need for something more’(2003) 19 JCL 173 at 187.



Bright and McFarlane adopt a reliance-based approach as both the principle under-lying the estoppel claim and the measure of the right (automatically) acquired. Theycite the use of proportionality in remedies in support of this.115 However, as will beseen, an examination of the case-law suggests that the renewed emphasis on uncon-scionability in establishing the existence of the estoppel claim since Gillett v Holt hasstarted to spill over to the determination of the remedy. There is evidence of a shiftin the underlying purpose of the remedy from expectations or reliance to a conscience-based approach.116 In this development, proportionality has been closely connectedwith unconscionability.

Evidence of a shift to a conscience-based approach to remedies is found both ina revival of the significance of proportionality in determining the remedy and inindications that the ‘in the round’ evaluation that characterises the use of unconscio-nability in establishing the estoppel is being carried over to the exercise of remedialdiscretion. In Jennings v Rice, Aldous LJ suggested that that the proportionality ofthe remedy to the detriment is ‘the most essential requirement’.117 In the context ofestoppel remedies, proportionality has been closely linked with unconscionability. InWaltons Stores v Maher Brennan J explained:

‘the element which both attracts the jurisdiction of the court of equity andshapes the remedy to be given is unconscionable conduct on the part of the personbound by the equity . . . [In] moulding its decree, the court, as a court of con-science, goes no further than is necessary to prevent unconscionable conduct.’118

This was cited by Mason CJ in Commonwealth v Verwayen in holding that ‘a centralelement of [estoppel] is that there must be proportionality between the remedy andthe detriment . . . It would be wholly inequitable and unjust to insist upon a dispro-portionate making good of the relevant assumption’.119 There, the focus on propor-tionality was a key factor in the court’s assertion of a reliance-based approach toremedies. However, Mason CJ further suggested that to do more than prevent theclaimant’s detriment ‘would sit uncomfortably with a general principle whose under-lying foundation was the concept of unconscionability’.120

Aldous LJ’s reference to the primacy of proportionality was made in the contextof reasserting the courts’ remedial discretion. He explained (immediately prior to hisreference to proportionality) that ‘the value of [the equity derived from estoppel] willdepend upon all the circumstances including the expectation and the detriment. Thetask of the court is to do justice’.121 There are echoes in this statement of the ‘in theround’ evaluation conducted to establish an estoppel. Most explicitly, the prevailingview of the courts to the purpose of the estoppel remedy is summarised by Arden LJin Ottey v Grundy. She explained:

‘the purpose of proprietary estoppel is not to enforce an obligation which doesnot amount to a contract [expectations] nor yet to reverse the detriment which the

115. Above n 109, at 453–454.116. Such a shift may fall within what Gardner describes, above n 19, p 203 as the ‘irreducibleminimum of discretion as to purpose’.117. [2002] EWCA Civ 159, [2003] 1 FCR 501 at [36].118. (1988) 164 CLR 387 at 419.119. (1990) 170 CLR 394 at 413.120. Ibid, at 411.121. [2003] 1 FCR 501 at [36] (emphasis added).



claimant has suffered [reliance] but to grant an appropriate remedy in respect ofthe unconscionable conduct.’122

The courts’ approach to the exercise of remedial discretion in estoppel, in particularthe relevance of unconscionability in this context, is far from settled. If confirmed,however, its effect will be to provide congruence between the basis of interventionand the courts’ response. The court intervenes in estoppel because it is unconscionablefor the representor to renege on the assurance. Through the exercise of a strong/foreground discretion, the court provides a remedy appropriate in respect of theunconscionable conduct. The purpose of the remedy having shifted from expectationsor reliance to unconscionability, the courts’ discretion on a case-by-case basis isfocused on determining the form of the order appropriate to give effect to this purpose.The possible use of this model in the principles under discussion will now be assessed.

(b) Responding to unconscionability in Rochefoucauld v Boustead

In a case within Rochefoucauld v Boustead, where the unconscionability relates toreneging on an agreement for an express (but unenforceable oral) trust, the impositionof a constructive trust is entirely appropriate. In a two-party case, the trust arises infavour of the transferor. In a three-party case, the issue arises whether the trust shouldstill be imposed in favour of the transferor or, instead, in favour of the third party (theintended beneficiary). This is not, therefore, a matter as to the nature of the responseor the form of the remedy, but it is a different question: in whose favour should theresponse (the constructive trust) operate? Carrying through an unconscionabilityanalysis suggests that there is no single answer to this question. The court shouldintervene to counter the unconscionability and whether that requires a trust in favourof the transferor or the third party may be dependent on the facts of the case. Ananalysis founded on unconscionability suggests that the courts should have a strong/foreground discretion, not as to the purpose or form of the response, but as to theidentity of the beneficiary of that response. Is such a discretion legitimate?

Such a discretion has the advantage of enabling us to recognise that the circum-stances in which this instance of unconscionability arises are sufficiently broad thatthe same response is not necessarily required or justified. It enables us to provide acounter to the unconscionability, while ensuring that we do not go further than isnecessary. In this respect, unconscionability has an advantage over alternative ration-ales for intervention. As has been seen,123 these generally reflect arguments forintervention in favour of one or other of the parties and, therefore, they implicitlyassume that intervention should always be made in favour of that party. However, itwould seem undesirable for such discretion to be a permanent feature of intervention:certainty is needed to identify the appropriate claimant. The discretion advocated maytherefore constitute ‘rule building discretion’ used, in this instance, to ascertain thefactors that should determine whether the trust arises in favour of the transferor orthe third party.124 For example, where the transferor is alive and therefore has theopportunity to execute an express trust, there may be no justification in going furtherthan imposing a trust in his or her favour. Where the transferor has died in the belief

122. [2003] EWCA Civ 1176 (unreported) at [61].123. Above n 54 and associated text.124. This type of discretion is noted above n 25 and associated text.



that the trust is valid, intervention in favour of the third party may be the only effectiveresponse to the unconscionability.

(c) Responding to unconscionability in ‘subject to’ cases

As has been seen, the unconscionability in ‘subject to’ cases is the same as that inRochefoucauld v Boustead. In determining the appropriate response to the unconscio-nability, two factors must be addressed: first, the significance of the factual difference(discussed above) as regards the nature of the interest to be enjoyed by the claimant;secondly, the fact that the claimant has invariably been a third party to the agreement.

In developing intervention in ‘subject to’ cases, courts have carried over fromRochefoucauld v Boustead not only the definition of unconscionability in issue, butalso the response to that unconscionability by the imposition of a constructive trust.This is controversial as it has led to the imposition of a constructive trust in relationto property rights that do not generally take effect under a trust and to protect rightswhich are personal in nature. Concern about an apparent misuse of constructive trustdoctrine has, at the least, provided one motivation for suggestions of an alternativebasis for intervention.125 It may be possible to rationalise the use of constructive trustsin such cases.126 However, once the finding of unconscionability extends beyondreneging on an agreement for a trust, it seems unsurprising that the use of the sameresponse should prove problematic. It is preferable, in such cases, to confer on thecourt a strong/foreground discretion, analogous to the discretion exercised on a case-by-case basis in estoppel, to determine an appropriate remedy to counter the uncon-scionability. This is, therefore, a discretion as to the form of the remedy to achievethe underlying purpose. Proportionality may provide a measure of the appropriateremedy insofar as the remedy should go no further than is necessary to respond tothe unconscionability. An appropriate award could include (but is not confined to) thecreation of the property right the ‘subject to’ agreement anticipated would be enjoyedby the claimant, or recognition of a personal right in his or her favour. As in estoppelcases, in determining the form of the remedy, the court should consider the case ‘inthe round’.

The fact that intervention occurs in favour of a third party to the agreement hasclearly influenced suggestions of alternative rationales for intervention. In light ofthis fact, alternatives have focused on the idea that the courts’ real concern is withthe enforcement of promises. This is evident, for example, in the suggestions madeby Bright and McFarlane. As is noted above,127 Bright argues that the real issue inthese cases is that the intended beneficiary is not privy to the promise. She considersan approach founded on constructive trusts developed to overcome the consequentdifficulties in enforcing the promise through contract law. She challenges thesedifficulties and argues that liability should now be recognised as arising throughcontract.128 McFarlane doubts the correctness of a contractual analysis, though hisown analysis is aimed at identifying an event on which the courts intervene to preventa transferee from acting inconsistently with his or her promise. It is suggested,

125. Bright, above n 6, and McFarlane, ibid.126. Arguments in favour of the use of constructive trusts are discussed (and refuted) byMcFarlane, ibid, at 691–694.127. Above n 60 and associated text.128. Bright, above n 6, at 415–419.



however, that intervention in favour of the third party is consistent with an uncon-scionability analysis. By applying the same guideline that has been suggested inrelation to Rochefoucauld v Boustead, the effect of factual differences between caseswithin the scope of that principle and ‘subject to’ cases is that intervention in favourof the third party is necessary to counter the unconscionable conduct. In Rochefou-cauld v Boustead, a remedy in favour of the transferor provides him or her with anopportunity to make good the defect that led to the failure of the express trust. A‘subject to’ provision generally appears to be used to create new rights in favour ofa third party, either because that person has existing property rights that will not beenforceable on the transfer,129 or has a personal right (in particular, a contractuallicence) that is incapable of binding a transferee. The imposition of a ‘subject to’clause to reflect an undertaking by the transferee to recognise new rights in favour ofthe third party may therefore be the only way the transferor can protect that thirdparty. Hence, a remedy in favour of the transferor, unlike in Rochefouauld v Boustead,provides no guarantee that he or she will be able to secure the third party’s rights.

CONCLUSION

This paper has focused on two principles where the courts intervene to determineentitlement to land as a response to unconscionable conduct. It has argued that,analysed in the context of our contemporary understanding of the nature of judicialdiscretion and the use of general principles, unconscionability remains the mostappropriate rationale for intervention. The concept should continue to be used inpreference to alternative justifications that have been suggested. As a rationale forintervention, the language of conscience is provocative as it inherently gives rise tothe appearance of a wide discretion. However, it has been shown that the actualdiscretion in issue in these two principles is in fact limited. The appearance of thebasis on which the courts act is undoubtedly important for our understanding of thescope and limits of intervention. Notwithstanding, if we remove the language ofconscience through concern about an appearance of a discretion that does not in factexist, we lose a common thread that that concept can provide between the differentprinciples and which, properly understood, can itself assist our understanding of theirscope. Conscience, like unjust enrichment, is a broad concept that is used in differentsenses and can be understood at different levels of abstraction. There appears to besome reluctance to adopt this approach to unconscionability, marked by attempts toidentify or develop alternative justifications for intervention. The diversity of situa-tions in which conscience is referred to, and its connection with equity as an inten-tionally flexible jurisdiction, no doubt preclude as structured an approach to theconcept as has been directed at unjust enrichment. However, this paper has shownthat, in respect of the principles under discussion, conscience does in fact denote aspecific and limited form of conduct.

Conscience is not inviolable but, if it is replaced, then the replacement shouldfurther our understanding or provide greater coherence. The alternatives that havebeen suggested do not appear to do so. Properly understood, an unconscionability

129. Eg, Lyus v Prowsa Developments Ltd [1982] 1 WLR 1044. There, the ‘subject to’agreement was contained in a sale pursuant to a mortgagee’s power of sale. The claimant’sproperty right (an estate contract) post-dated the mortgage and therefore would itself beunenforceable against the purchaser.



analysis alone can be used to explain intervention both in two- and three-party cases,provide guidance to determining in whose favour the court should intervene andinform us as to the appropriate response. In cases within Rochefoucauld v Bousteadand those involving ‘subject to’ transfers, courts intervene in response to unconscio-nability arising where a transferee reneges on an agreement pursuant to which landis transferred. The transferee’s conduct is the same in these cases and its designationas unconscionable is not affected by differences in the identity of the intendedrecipient of rights or differences in the nature of those rights. In cases within theseprinciples, the finding of unconscionability involves only a weak/background discre-tion directed at ascertaining the existence of the requisite agreement. If the agreementis found to exist, then it is necessarily unconscionable for the defendant to renege.Once established, the courts’ response to the unconscionability needs to be addressed.This paper has argued that the courts’ response should be treated as a separate issueto establishing the unconscionability and, in particular, should not automaticallyinvolve the imposition of a constructive trust. As a general guideline, the courts shouldrespond by providing an appropriate and proportionate remedy to counter the uncon-scionability. This is to confer on the courts, in limited cases, a strong/foregroundremedial discretion analogous to that developed in relation to proprietary estoppel.

Conscience, discretion and the creation of property rights

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