This post has been contributed by Professor Robert Chambers, Module Convenor for Equity and Trusts.

English moneyAngove’s Pty Ltd v Bailey [2016] UKSC 47, [2016] 1 WLR 3179 is a curious case. The outcome was that money paid by mistake was held in trust for the payers, but the reasons for judgment contain almost no discussion of that important issue. Instead, Lord Sumption’s judgment contains an extensive obiter dictum explaining why a trust would not arise if there had been no mistake. The leading English authority on trusts of mistaken payments has been (and might still be) the 1979 decision of Goulding J in Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105. It has been the subject of criticism over the years, including an obiter dictum by Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] UKHL 12, [1996] AC 669 at 714-15, so some clear guidance from an appellate court would have been welcome.

Angove’s Pty Ltd (“Angove”) is an Australian wine producer. Its UK agent was authorised to collect the proceeds of sale from its UK customers. The agent became insolvent and Angove terminated the agency. Money collected by the agent before the termination belonged to the agent, but money collected after the termination was held in trust for the customers who paid it.

At trial, Judge Pelling QC held “that any sum actually received by the [agent] after the date of termination would be held on trust for the payer”, but gave no authority for that conclusion: [2013] EWHC 215 (Ch) at [43]. This was reversed by the Court of Appeal on the basis that the agency had not been terminated: [2014] EWCA Civ 215. The Supreme Court restored the trial judgment. After deciding that the agency had been terminated, Lord Sumption said at [18]:

“This means that it is strictly speaking unnecessary to deal with the second point, namely whether the funds paid by customers to [the agent] since the commencement of the administration are held in trust for Angove’s. But since the point is of some general importance and has been fully argued before us, I think it right to deal with it. I do so on the assumption that (contrary to the conclusion that I have reached) Angove’s notice of termination was not effective to terminate [the agent’s] authority to collect on the invoices.”

The remainder of his judgment is devoted to this obiter dictum. With no explanation of the trust that did arise in the case, or whether Chase Manhattan was correctly decided, we are left to glean possible answers from the obiter dictum. A key passage is found at [30]:

“The exact circumstances in which a restitutionary proprietary claim may exist is a controversial question which has given rise to a considerable body of judicial comment and academic literature. For present purposes it is enough to point out that where money is paid with the intention of transferring the entire beneficial interest to the payee, the least that must be shown in order to establish a constructive trust is (i) that that intention was vitiated, for example because the money was paid as a result of a fundamental mistake or pursuant to a contract which has been rescinded, or (ii) that irrespective of the intentions of the payer, in the eyes of equity the money has come into the wrong hands, as where it represents the fruits of a fraud, theft or breach of trust or fiduciary duty against a third party. One or other of these is a necessary condition, although it may not be a sufficient one.”

The trust must have arisen because Angove’s customers paid the agent “as a result of a fundamental mistake”, believing that the agent still had the authority to collect the money. Presumably, this was sufficient to give rise to a trust, since no other factors appear to be relevant.

The suggestion that fraud or theft can give rise a trust for the victim is also helpful. That has long been accepted in Australia (Black v S Freedman & Co [1910] HCA 58, 12 CLR 105; Evans v European Bank Ltd [2004] NSWCA 82, 61 NSWLR 75), but has never been settled in England.

Another significant feature of the obiter dictum is the continued rejection of the remedial constructive trust by English Courts. Lord Sumption said at [27]:

“English law is generally averse to the discretionary adjustment of property rights, and has not recognised the remedial constructive trust favoured in some other jurisdictions, notably the United States and Canada. It has recognised only the institutional constructive trust”.

He quoted Lord Browne-Wilkinson’s definition of a remedial constructive trust, in Westdeutsche at 714-15:

“It is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court.”

This is contrasted with “an institutional constructive trust”, which “arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past”: Lord Browne-Wilkinson in Westdeutsche at 714.

There is still much work to be done to identify all the circumstances that can give rise to a constructive trust in English law.  While it would have been more helpful if the Supreme Court had explained clearly why the trust did arise in Angove’s Pty Ltd v Bailey, we can be guided by Lord Sumption’s thoughts on why a trust would not have arisen in the absence of a mistake.


  1. Hi,

    I have read the decision and also watched the 4-hour hearing online. I have not detected any discussion that the trust is created in favor of the customers. Lord Sumption has not himself mentioned that the trust arisen as a result of fundamental mistake by customers.
    On the contrary, L Sumption mentioned that Insolvency regulation do not have to be disturbed, and neither Neste Oy or Japan leasing are correctly decided. D&D is neither fiduciary, not it is unconscionable to retain money received from customers, if this is a contractual right accrued when the sale of wine was arranged.
    It is just that by construing the agreement the agency (and right to collect) has been deemed to be revocable, and the right to recoup the commission was neither in the agreement nor did not fall within the exception of the authority coupled with interest – therefore, D&D were not entitled to collect about 900K from customers in order to deduct their commission.
    If the trust has arisen in favor in customers, then it would follow that customers received their wine plus they would have become beneficiaries under the constructive trust, which has arisen for weird reasons – neither as a result of a mistake (payment for goods received cannot be a mistake, as customers followed the agreement exactly like in Westedeutsche, and could never find out that the agreement is terminated), not as a result of wrongdoing by D&D or even the unjust enrichment. No trust is possible in favor of customers.
    The result of this case if that D&D simply cannot have any right to collect the money and customers shall pay directly to Angove. D&D will have to recover their commission from Angove.
    Can you please clarify which trust are we talking about?

    1. Dear Volha,

      Professor Robert Chambers has read your comment and would like you to rephrase the question a littler clearer, so he can try to provide an answer for you.

      Many thanks,
      ULP Office

      1. Hi,
        I have just realized that my comment was read. Apologies, by this time I am already done with Equity Course.
        I agree my question was not clear.

        My question was: who is the beneficiary in Angove’s case? It was not clear from the SC decision – whether it is customers or Angove themselves.

        I now understand from Contract Law point of view that the Supreme Court simply implied the term into the agency agreement . The implied term is that the agent’s right to collect is revocable in case the Agency agreement is terminated. Hence, any sums collected from customers after the termination of the agreement are held on trust. On trust for whom?
        So, the answer to my question is that the customers in this case are definitely not beneficiaries. It cannot be said that they paid by mistake.
        Therefore, the beneficiary in this case – is Angove. It can be said that it is unconscionable to collect the money from customers after the agency agreement is terminated.
        But on the other hand, the payment by customers were most probably for the wine delivered prior to the termination of the agency agreement (as far as I remember customers has something like 60 days to pay invoices). So, it is very much doubtful why the right to collect money for the products delivered can become revocable, especially if it is not expressly stated in the agency agreement.
        To conclude, there is no coherent explanation of the reasons for Equity to step in and resolve the case in favor of Angove.

  2. Hi Volha,

    Thank you for your comment above. Your question will be forwarded to the Module Convenor for further clarification and we aim to get back to you as soon as possible.

    Many thanks,
    Undergraduate Laws Programme

  3. Dear Volha,

    I have sent a gentle reminder to Professor Robert Chambers and will get back to you as soon as I receive a response.

    Many thanks,
    Undergraduate Laws Programme

    1. Dear Bota, I apologise for the delay in getting back to you. I will chase your question up again without delay and get back to you as soon as I receive feedback.

  4. You actually make it seem so easy with your presentation however I to find this topic to be actually something that I think I might never understand. It kind of feels too complex and very extensive for me. I am looking forward on your subsequent put up, I will try to get the hold of it!

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