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I apologize for increasing the length of this communication by appending Lionel's message dated 06 October 2000 14:37. However, after the four weeks taken to compose my answer, I fear lest the appendix be necessary to enable recall of the context. An intervening onset of many diverse distractions may well not have been unique to me. I apologize also to any who, in the answer, find that I draw the discussion too far from restitution. I plead that my range is but an aspect of the seamlessness, which Maitland remarked (if I remember rightly) in the web of history and which, as an attribute of philosophy itself, is shared by the law. Legal maxims, especially, have a broad sweep.

In contrast, there was no need for Lionel to apologize. Admittedly I am relieved by his retraction, but because the charge was puzzling, not because it was offensive. Much less worrying, but nonetheless a puzzle, is his advancing his renewed residence in Canada as justification for the use of "z", rather than "s" in "rationalizing". Does Oxford no longer follow its own English dictionary? Still, let no one doubt my sincere and great gratitude for his demonstration of the lack of clarity in the draft, which I submitted to him. This I have attempted to correct in the attachment. Of course, let no one doubt, either, that his demonstration and my attempt, whether jointly or severally, detract nothing from our cheerful agreement to differ.

Because of the length of my answer I have made it an attachment. I have done so in two forms: "Rich Text" and "Word".

-----Original Message-----
From: Lionel Smith
Date: 06 October 2000 14:37
Subject: Re: RDG: Constructive trust (Ellingsen v Hallmark)

I retract my comment about speaking in riddles, and I apologize to Gordon if it was offensive. But I still think it is better to say what is the rule and why it makes sense than to interpose maxims and unnecessary concepts like ratification.

I said that my understanding of Gordon's original comment was that you could recover the profits of a wrong against a wrongdoer who knew he was acting wrongfully, but not against one who claimed to be entitled to take whatever it was that he took. That distinction, if it is to be justified, needs to be justified on its own terms and not by reference to maxims. I personally do not think it could be justified, and this becomes clearer when the language of ratification and assumpsit is stripped away.

Here is another example of what I mean: Gordon said: "Mesne profits are a form of damages - Elliott v. Boynton [1924] 1 Ch. 236 at 250 per Warrington, L.J. Yet they are not limited to the demonstrable damage (if any) suffered by the plaintiff, who may recover under this head the full potential value of the land to the defendant trespasser for the period of the defendant's wrongful occupation - Inverugie Investments v. Hackett [1995] 1 W.L.R. 713 P.C. In my respectful submission, this is not restitution based on a general theory of unjust enrichment. The trespasser has wrongfully deprived the plaintiff of the land and so is caught by the maxim, In odium spoliatoris omnia praesumuntur, which is, being interpreted, 'Everything is presumed to the prejudice of a plunderer'; Accordingly it is presumed that the full potential value of the land to the trespasser would have been available to the plaintiff."

I agree that this is not restitution based on a general theory of unjust enrichment. I think it is a disgorgement response which is available as an alternative to the usual compensatory response, in the case of trespass to land. Is there a difference between that and what Gordon says? Yes. What if the defendant was able to prove, as an affirmative fact, that the plaintiff suffered no loss (even though the defendant profited)? You might say, in that case, that there would be no claim to the profit. But let's assume that you want to allow the claim in such a case, because I think Gordon and I agree on that. On my reasoning you say: because the claim is measured by the defendant's gain, and does not purport to be a damages claim for compensation, it is irrelevant that the plaintiff suffered no loss. But if you want to allow the claim on Gordon's reasoning, I think you have to say that Gordon's maxim/presumption is an irrebuttable presumption. But Wigmore showed, a long time ago, that an irrebuttable presumption is not a presumption at all, it is a rule of substantive law. In other words, if you say that it is presumed irrebuttably as a matter of law that the plaintiff suffered a loss which is equal to the defendant's gain, then what you are really saying is that it is *completely irrelevant* whether the plaintiff suffered a loss. But then look what you are doing. You allow the claim on the reasoning that it is compensation for damages; but it is measured by the defendant's gain, because you have a rule that the plaintiff's compensation is deemed to be the defendant's gain. That is what I mean when I speak of riddles: without trying to give offence, I am only saying that it is an unnecessarily mysterious way of rationalizing (I am back in Canada so I can spell with z's again) the liability. If you do not just admit that the claim is measured by the defendant's gain, you have to use a fictional deemed loss to build a kind of semantic bridge from compensation for loss to disgorgement of gain.

Gordon continued: "This is the maxim, which I was taught to be the warrant for Vice-Chancellor Wood's 'second principle', stated in Frith v. Cartland (1865) 2 H. & M. 417at 420: "... if a man mixes trust funds with his own, the whole will be treated as the trust property, except so far as he may be able to distinguish what is his own …"

This context is dear to my heart, and I agree that the rule stated in Frith v. Cartland is based on subordinating the interests of those who wrongfully create evidentiary difficulties. But on the same reasoning I have deployed above, this is also not a presumption properly so called, because if it is a presumption it is irrebuttable, and then it is not really a presumption at all. That is why I have argued that the tracing rules, contrary to the usual understanding, do not involve presumptions at all. If they did involve presumptions of honesty on the part of breaching trustees, there would be no way to justify the "lowest intermediate balance rule", which was affirmed in Frith v. Cartland itself. That rule only makes sense if we lose the language of presumptions and say that *while* every possible inference is drawn against the person who wrongfully created an evidentiary difficulty, *nonetheless* (because this is not an irrebuttable presumption of law, just a rule for resolving difficulties of evidence) we cannot draw inferences which are contrary to the known facts. That is the logical limit which is imposed when the reasoning is based on evidentiary considerations, which is why, in the context of profitable trespass, you need to explain the liability without reference to evidentiary considerations (such as deemed losses), unless you do not want the plaintiff to have the defendant's gain in the case where the plaintiff can be shown to have suffered no loss.

Lionel