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Sender:
Eoin O' Dell
Date:
Tue, 4 Feb 1997 14:38:18 GMT
Re:
Some random thoughts on Polly Peck

 

The silence post-Polly Peck is almost as intriguing as the case itself. It is probably not so much that the case has not provoked debate as that the debate has proceeded off-list. In an attempt to pull some of it onto the list, can I pose the following issue. It is all off the top of my head, and probably wrong, so I would welcome the inevitable clarifications of the following analysis.

In Polly Peck, Rattee J. held that (a) the claim was in respect of a trespass to the applicant's property from which the respondent derived a profit, (b) that it could be brought in London, (c) that there was an arguable case that damages in the restitution measure to strip the respondent of that profit, and, (d) that there was a further arguable case that such profits could be held on a restitutionary remedial constructive trust. Is this characterisation broadly correct? Assuming it is, and granting (a) and (b), I want to focus on (c) and (d).

My understanding of the area entitled restitution for wrongs (in particular, given that the case is about the tort of trespass, restitution for torts) is as follows: where, by the commission of a tort, D has been enriched at P's expense, P has three theoretical claims:
(i) in tort, for damages in the compensation measure;
(ii) in tort, for damages in the restitution measure; and
(iii) in restitution, in autonomous unjust enrichment, (where an appropriate 'unjust' factor is available on the facts). It is clear that the first is a claim in tort, and the third is a claim in restitution. For me, it is equally clear that the second claim is a claim in tort, where the principle against unjust enrichment supplies a policy reason to extend the range of measures of damages available in tort to include restitution among the aims of tort damages, along with compensation, punishment (punitive / exemplary damages), and (occasionally) contempt (eg contemptuous damages of £1 for libel).

Now, add the issue of a constructive trust to each of the above three claims. If a trust is imposed upon the defendant in claim (i), it is imposed in the context of a wrong to supply a further remedy for that wrong, it must be justified by the law relating to that wrong, and to that extent, it is a remedial constructive trust. If a trust is imposed upon the defendant in claim (iii), it is imposed to elevate a personal restitutionary claim into a proprietary one, and it must be justified for restitution reasons. If, however, it is imposed upon the defendant in claim (ii), and if I am right in my characterisation above that such a claim is a claim in tort, then a trust in such circumstances is imposed to supply a further remedy for that wrong, and must be justified by the law relating to that wrong: to that extent, it is a remedial constructive trust. Of course, to the extent that the principle against unjust enrichment supplies a policy reason to extend the range of measures of damages available in tort to include restitution among the aims of tort damages, it likewise provides here a policy reason to extend the range of reasons why a constructive trust can be imposed.

The conclusion is that claim (ii) is a tort claim, and claim (iii) is a restitution claim; so that in in a claim (ii) situation, the claim is in tort, and the principle against unjust enrichment is only ever one policy among many which must be taken into account in tailoring the remedy (whether personal (damages) or proprietary (constructive trust)); whereas in a claim (iii) situation, the claim is in restitution, and the remedy (again whether personal (damages) or proprietary (constructive trust)) is imposed directly as a consequence of the principle against unjust enrichment.

If that is correct, then, in proposition (c) above, when Rattee J accepted that there was a good arguable case for damages in the restitution measure for the tort of trespass, he accepted that this was a claim was in tort and not in restitution, that it is, in other words, a claim (ii) case and not a claim (iii) case. It follows then that the justification for the constructive trust (for which he accepted in proposition (d) that there was a good arguable case) must be justified by the law relating to that wrong. In other words, the aim of the trust is primarily remedial. Of course, on its pattern (stripping profits) the trust is also restitutionary, and to the extent that the principle against unjust enrichment supplies a policy reason to justify the imposition of a constructive trust as a remedy in such circumstances, it supports this remedial constructive trust. But it is nonetheless and for all that primarily remedial.

All of this is by way of stating that when I first read the text of the judgment from the listserv (as supplied by Lionel Smith by way of Peter Birks, to both of whom much thanks) I was a little uneasy about Rattee J's language in the final third of his judgment when he spoke of why he thought there was a good arguable case in favour of a constructive trust. I thought then: hang on a minute, this is a restitution case, all the 'remedial' guff is muddying the analysis. Now, however, on the basis of the above reasoning, I think that Polly Peck is really a tort case, and the discussion of the constructive trust in terms of a remedial constructive trust is absolutely right. Running through the case is a recognition that restitution reasoning is somehow appropriate, and, on my view above, it is appropriate to the extent that it provides a policy justification for either a further measure of damages for the personal claim or the imposition of a remedial constructive trust, provided that sight is not lost of the fact that it is still a claim in tort and not in restitution. Any unease I now feel about the case is because Rattee J does not seem to keep sufficiently clear the distinction between a claim in tort with a remedy justified by restitution policy (claim (ii) above) which is what Polly Peck is, and a claim in restitution simpliciter (claim (iii) above) which is what Polly Peck is not. To the extent that, in his failure to keep these claims distinct, Rattee J sometimes speaks language more appropriate to claim (iii), I am now uneasy. But I generally welcome the thrust of his reasoning. What do others think of this ?

Finally, (I can't resist this, sorry); for those of you in jurisdictions in which damages in the restitution measure for tort are a contested notion (the personal remedy for claim (ii) above), consider the decision of the Irish Supreme Court in Maher v. Collins [1975] I.R. 232, where the Court affirmed that the primary measure of damages in tort is the compensation measure, but continued that this "is not to say that there may not be exceptional and particular cases where the defendant's conduct has been calculated by him to make a profit for himself which may well exceed any compensation likely to be payable to the plaintiff. In such rare and exceptional circumstances other considerations may apply". ([1975] I.R. 232, 238 per O'Higgins C.J.). This, to my mind, is a dictum in favour of profit stripping in tort, and it is restitutionary just as much as it is in the contract area (cp Hickey v. Roches Stores [1993] R.L.R. 196).

Best regards,

 

Eoin.

EOIN O'DELL
Barrister, Lecturer in Law

Trinity College
Dublin 2
Ireland

ph (+ 353 - 1) 608 1178
fax (+ 353 - 1) 677 0449

Live Long and Prosper !!
(All opinions are personal; no legal responsibility whatsoever is accepted.)

Eunice and I were married on 27 December 1996
in the University Church, St. Stephen's Green, Dublin
reception in the Liffey Valley House Hotel, Lexlip
honeymoon in Istanbul, Turkey


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