Characterization of proprietary restitution in the conflict of laws.

• Author: Tudsri, Pattarapas

This article examines the interaction of the law of restitution for unjust enrichment and the law of property with private international law. Classically, in private international law, the first step in the analysis of the governing law of a dispute with international elements is the classification of the dispute. This classification process sometimes involves much complexity, and this has been the case particularly for claims which in the domestic common law have been described as "proprietary restitution".

This article begins by examining many of the critical, long-lasting debates concerning the domestic law organization of the concepts of restitution and unjust enrichment, with particular regards to proprietary restitutionary remedies which may arise in connection with claims said to be based on unjust enrichment. When turning to private international law, the author seeks to develop an approach that attempts to go beyond the internal debates on classification and to arrive at a more neutral approach of classification that is likely to work well with the choice of law rules which have been developed essentially in accordance with the civilian, as opposed to the common law, categories of causes of action. In analyzing the classification process at the private international law level, the author attempts to address all of the major domestic law proprietary restitutionary claims such as claims to traceable proceeds, proprietary claims to the profits of wrongdoing, resulting trusts, constructive trusts arising in mistaken transfers and remedial constructive trusts.

Dans cet article, on examine l'interaction du droit de la restitution pour enrichissement injustifie et du droit des biens avec le droit international prive. Traditionnellement, en droit international prive, la premiere etape de l'analyse du droit regissant un conflit comportant des elements internationaux consiste a cataloguer le conflit en question. Ce processus de qualification met parfois en jeu davantage de complexite, ce qui fut particulierement le cas des actions qui, en commonlaw national, furent decrites comme des reclamations en >.

L'article commence en analysant un certain nombre de debats persistants et critiques concernant l'organisation, par un systeme de droit national, des concepts de restitution et d'enrichissement injustifie, en examinant en particulier les recours applicables en matiere de restitution de biens susceptibles de surgir dans le cadre d'actions en justice que l'on dit fondees sur un enrichissement injustifie. En se tournant vers le droit international prive, l'auteur cherche a elaborer une approche qui depasserait le cadre des debats internes sur la classification et aborderait de facon plus neutre cette classification afin de mieux fonctionner avec les regles de conflit de lois, lesquelles ont ete elaborees en grande partie en fonction des categories de causes d'action civilistes, par rapport a celles propres a la commonlaw. En analysant le processus de classification au niveau du droit international prive, l'auteur tente de traiter toutes les demandes principales de restitution de biens selon le droit du pays, telles que les demandes relatives a des produits identifiables, les revendications de biens relatives a des profits resultant d'actes reprehensibles, a des fiducies resultoires, a des fiducies constructoires decoulant de transferts errones et a des fiducies constructoires de nature reparatoire.

Table of Contents I. INTRODUCTION II. UNJUST ENRICHMENT, RESTITUTION AND PROPERTY A. Introductory Notes B. The Domestic Understanding of the Law of Restitution and Unjust Enrichment C. Property, Unjust Enrichment and Proprietary Restitution D. The Confusion in Macmillan Inc v Bishopsgate Investment Trust Plc (No 3) III. COMPARATIVE ANALYSIS OF PROPRIETARY RESTITUTION IN THE DOMESTIC LAW AND THE CONFLICT OF LAWS A. Claims to Substitute Assets: Foskett v McKeown B. Breach of Equitable Obligations and Wrongs 1. Characterising the Underlying Wrongs 2. Proprietary Consequences of Equitable Wrongs 3. Delineating the Boundary of the Proprietary Issue in Equitable Claims: Thahir v Pertamina Revisited C. Resulting Trusts and Transfers Pursuant to Void/Avoided Contracts D. Proprietary Consequences of Mistaken Transfers and Transfers by Ignorance E. Remedial Constructive Trusts IV. CONCLUSION The problem of characterisation has given rise to a voluminous literature, much of it highly theoretical. The consequence is that there are almost as many theories as writers and the theories are for the most part so abstract that, when applied to a given case, they can produce almost any result. They appear to have had almost no influence on the practice of the courts in England. (1)

1. INTRODUCTION

   Despite characterization being the first step which the courts have to encounter in any given conflict of laws case, few would doubt the accuracy of the above statement in relation to the degree of clarity that common law courts have given to the characterization process. The difficulties stem from the fact that it is inherent in the choice of law rules that there is more than one potentially relevant system of law. Each of these competing laws may hold an entirely opposite view on the classification of the issues before the court, and these views may also be entirely different from the classification that the forum would accord to its domestic cases. (2) To add to this complication, there are also uncertainties regarding the "thing" to be characterized. (3) The courts have made reference to "the issue," "the question in this action," "the relevant rule of law" and "the cause of action." (4) However, these terms seem to be used "loosely and interchangeably" and with little clarification. (5) Although it is beyond the scope of this article to explore the theoretical basis of conflict of laws characterization, (6) it suffices to mention here that characterization is ultimately dealt with by the forum. Accordingly, it must be done in accordance with the forum's own conflict of laws rules, which may be guided, but not controlled, by its purely domestic law. (7)

   Even though the "enlightened lex fori" (law of the forum) approach to characterization is theoretically sound, it may be difficult to put into practice. This difficulty is particularly acute in relation to the area of law known in the domestic law (8) of the common law tradition as proprietary restitution. The reason for this lies in the different approaches toward the property-obligations divide adopted at the conflict of laws and the domestic law levels. Whereas the conflict of laws has traditionally embraced a Romanistic characterization together with clear boundaries between the law of property and obligations, these two areas of law are most deeply intertwined and have never been "usefully" distinguished in the common law domestic law. (9) It has even been suggested that an attempt to classify proprietary restitution as falling within either the law of property or obligations may seem rather "pointless" for domestic law purposes. (10) Whether or not the conflict of laws should adopt this attitude toward classification is, however, questionable. In the conflict of laws, classification can be crucial to the claims; the resultant choice of law regime identified by the characterization process may point to different applicable laws, which ultimately lead to different results. (11) In examining the characterization of proprietary restitution for conflict of laws purposes, this article argues that the confusion surrounding the domestic comprehension of the doctrinal basis of proprietary restitutionary claims should not be transposed onto the conflict of laws, where the distinction between property and obligations must be kept clearly defined. For causes of action known in the domestic law as proprietary restitution, in which proprietary entitlement is at stake, the applicable law should be identified solely by choice of law rules for property. The language of "restitution" and of "proprietary restitution" should be carved out from the conflict of laws. Rule 230 in Dicey, Morris & Collins, which refers to choice of law for restitution, should therefore be regarded as an unfortunate addition to the existing categories of choice of law regimes. To reach this conclusion, this article demonstrates that the obligational restitutionary approach is fundamentally flawed because it fails to address properly the distinction between restitution and unjust enrichment. This approach too readily accepts the projection of the law of restitution--still in an "embryonic" (12) stage of development, with its confused treatment of property and obligations--onto the Civilian-based conflict of laws structure. (13) In contrast, the proprietary approach is convincing. Even though it entails an outright rejection of the possibility that property rights may be created as a response to unjust enrichment, a strict divide between property and obligations should not be regarded as problematic. This approach seems to attach proper weight to the situs of the property in dispute. If the purpose of the choice of law rules lies in the identification of the law which has the closest connection to a given dispute, it is difficult to see why the law of the location of the asset should not always play a leading role when the dispute is concerned with a restitutionary claim alleging property rights in that asset.

   The approach to characterization adopted in this article--that the conflict of laws' requires a strict characterization process--may appear striking to many conflict lawyers. For them, the debate on the correct classification is redundant, since the substantive choice of law rules may be manipulated to ensure that proper effect is given to the law of the country that is most closely connected to the claim. While it is true that as long as the proper law can be identified, there appears to be nothing which...