The Paradox of the Equitable Proprietary Claim

Equitable property rights can be seen as paradoxical: how can a system based on conscience have developed rights that operate in rem? In Akers v Samba Financial Group, for example, Lord Sumption states that that ‘an equitable interest possesses the essential hallmark of any right in rem’, yet goes on to say that when an asset subject to an equitable interest is transferred to a third party, ‘the question becomes whether the conscience of the transferee is affected’. Our aim here is to resolve this paradox, at least in relation to rights under a trust. Where T holds on trust for B, we argue that conscience is crucial when considering how and when B may make an equitable proprietary claim against C, a successor in title to the original trustee. Such a claim can only be made in relation to property which is held by C at a point in time when C’s conscience is affected by knowledge of the initial trust relationship between T and B, in such a way as to subject C to a duty to B. In other words, the proprietary effect of the trust is based squarely on an initial relationship between B and T, and a later, similar relationship between B and C, rather than any abstract, depersonalised interest of B. The resolution of the paradox depends on accepting that, when B’s beneficial interest is described as proprietary, ‘proprietary’ must be understood in a special, limited sense. The key to Lord Sumption’s observation in Akers is the particular, and idiosyncratic, sense in which his Lordship used the term ‘in rem’, defining the essential hallmark of such a right as being that it is ‘good against third parties into whose hands the property or its traceable proceeds may have come, subject to the rules of equity for the protection of bona fide purchasers for value without notice’. We agree that the ability to affect C is what justifies regarding a beneficial interest under a trust as more than a mere personal right. It is possible to recognise that a beneficial interest has such an effect whilst also distinguishing it from rights, such as a legal