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Andrew Dickinson
Tue, 29 Jul 1997 09:26:00
Satnam Investments v. Dunlop Heywood & Co.


The above decision of Chadwick J. is certainly worthy of note (and will no doubt attract much comment). In terms of fact and result, it appears to be similar to the Canadian LAC Minerals decision.

The plaintiff appointed the first defendant as its agent for the purposes of acquiring part of a development site. It acquired part of that site together with an option over two other sites. In 1995, receivers were appointed in respect of the plaintiff following a cashflow crisis. After that event, the second defendant, a director of the first defendant, wrote to the third defendant, a property company, to inform it of the proposed development. The third defendant (knowing of the breach of duty) acquired the two sites over which the plaintiff had an option. The plaintiff sought relief against the third defendant on the ground that it held those sites on constructive trust and against the first and second defendants for breach of fiduciary duty.

Chadwick J held that it the third defendant held the sites on constructive trust for the plaintiff and should convey those properties subject to payment by the plaintiff of the third defendant's costs of acquisition. It appears that unjust enrichment reasoning was applied and that the imposition of a constructive trust was described as a remedy. It is not clear from the summary that I have whether the judge was persuaded by the reasoning in LAC or by that of the Privy Council in AG -v- Reid (although the effect of that reasoning was to impose an "institutional" constructive trust). In any case, the much heralded coming of the remedial constructive trust may have arrived in English law.

The first and second defendants were ordered to pay equitable compensation.



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