And Lionel replied:

I'm not sure that's right. A debt only arises between trustee and beneficiary if there has been a misappropriation of trust property. If a beneficiary who has the right to call for the trust property does so, and he gets it, I don't think there is ever a time when he is an unsecured creditor. That is why I find this case difficult: defendant was an unsecured creditor without knowing it.

On the point at issue, I must expose my ignorance, and pose the question: why is the duty of the trustee to pay money to the beneficiary not conceptualised or conceptualisable as a debt ? If it is either, then my original analysis stands; if it is not, then I agree that Lionel has run into a difficulty.

One further and unrelated thought occurs to me: when the third party trustee breaches his duty to the defendant beneficiary, and remedies consequentially arise, then the defendant is an unsecured creditor if his remedies are personal, he is in the position of a secured creditor if his remedies are proprietary. If such remedies are restitutionary (and I would argue that when he misappropriated the property, he received it, and thus the remedies can be properly characterised as restitutionary), then the principles articulated by Lord Browne-Wilkinson in Westdeutsche (whatever one thinks of them otherwise) could apply: the third party trustee has knowledge of his unjust enrichment at the time of the appropriation, and there is a specific res over which the constructive trust can attach. Thus, when the third party trustee misappropriates the funds of the defendant beneficiary, the beneficiary is (in the position of) a secured creditor vis a vis the trustee.

Eoin.

EOIN O'DELL
Barrister, Lecturer in Law

Trinity College
Dublin 2
Ireland

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

(All opinions are personal; no legal responsibility whatsoever is accepted.)
Eunice and I got engaged last Saturday, 25 May 1996. !!
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