2.

0 THE RELATIONSHIP BETWEEN RESULTING TRUST AND UNCONSCIONABLE

CONDUCT

2.1 Definition of unconscionable conduct

Unconscionable conduct simply means a conduct which is oppressive or harsh, and more than mere
unfair or unjust.1 In context of equity and trusts, unconscionable conduct in equity includes a wide
range of conduct, such as unconscionable bargain, unjust enrichment, undue influence, duress,
proprietary estoppel and knowing receipt.2

2.2 Resulting trust is not a mechanism prevent unconscionable conduct

In our opinion, constructive trust is a better mechanism than resulting trust to prevent unconscionable
conduct as a resulting trust is not designed for this purpose. We can observe from cases where the
court has refused to enforce a resulting trust when the issue is related to unconscionable conduct. In
Westdeutsche Landesbank Girozentrale v Islington London Borough Council,3 Lord Browne-
Wilkinson denied that the purpose of resulting trust is to reverse unjust enrichment and stated that
resulting trust is created based on the common intention of the parties. 4

In Malaysian context, the court in the case of Tan Hwa Ling@Tan Siew Leng & Ors v Tan Keng
Yong@Tan Keng Hong & Anor5 enforced constructive trust rather than resulting trust as a
mechanism to prevent unconscionable conduct. In this case, the assets and shares of the deceased
father was held on trust by the defendants in favour of the plaintiffs as the plaintiffs were still young
at that time. The first defendant sold one asset and take the proceeds for himself while the defendants
withdrew RM600000 and RM700000 from the family company for their own benefits. The plaintiff
dissatisfied and demanded for the recovery of their portion of shares and assets in the family company
but refused by the defendants. Thus, they brought an action to claim for their portion.

The issue before the court is whether the plaintiff can claim for resulting trust, or alternatively the
constructive trust. The court has interpreted the deceased’s intention and presumed that a resulting
trust has arose in favour of the plaintiff. Alternatively, constructive trust has existed in this case due to
the unconscionable conduct of the defendant of withdrawing the proceeds for their personal use. The
plaintiff can claim for their portion of the assets as trust has been established.

1
Unconscionable conduct. (n.d.). Retrieved from https://www.accc.gov.au/business/anti-competitive-
behaviour/unconscionable-conduct
2
Mark Pawlowski. Unconscionability As A Unifying Concept In Equity. (2012, November 23). The Denning
Law Journal. Retrieved from
https://pdfs.semanticscholar.org/c8a2/2f0f45c029bb84ba7732b2e3a20998592e9f.pdf
3
Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] UKHL 12
4
Resulting Trust. (2016, December 4). Retrieved from https://lawexplores.com/resulting-trusts/
5
Tan Hwa Ling@Tan Siew Leng & Ors v Tan Keng Yong@Tan Keng Hong & Anor [2020] 10 MLJ 651
From this case, we can infer that resulting trust is not a mechanism in dealing with unconscionable
conduct. The court imposed resulting trust purely to locate the plaintiff’s beneficial interest in the
assets left by the deceased which can be determined by looking into the deceased’s implied intention.
Whereas for the part where defendants have commit unconscionable conduct, the court established
constructive trust in order to return the money to the plaintiffs. Thus, constructive trust is established
to prevent such unconscionable conduct.

2.3 Constructive trust imposed in response to unconscionable conduct

According to the above reasoning, constructive trust is a more appropriate mechanism to prevent
unconscionable conduct as one of the fundamental purpose of constructive trust is to provide an
equitable remedy to the person whose rights have been affected by unconscionable conduct of another
party.

In Hussey v Palmer,6 Lord Denning defined constructive trust as a trust imposed to provide justice
and good conscience. Constructive trust should be applied when the defendant unable to hold the
property in good conscience as it constitutes an unconscionable conduct. In Baumgartner v
Baumgartner,7 the court recognised constructive trust as a remedy for unconscionable conduct. In
this case, constructive trust was established as the appellant’s action of asserting exclusive title to the
property was held to be unconscionable. 8 Also in Stepherson Nominees Pty Ltd v Official
Receiver,9 Gummow J stated that constructive trust will be established when the person holds the
property in dispute in an unconscionable manner and he denies the claim that made by the person who
has an equitable interest in it. Another circumstance can be seen in Hurd v Zomojo,10 where a person
who make improper profit from his position in a fiduciary relationship is held to be liable as a
constructive trustee for the improper profit. 11

Malaysian court also recognised the similar principle. In Takako Sakao v Ng Pek Yuen & Anor,12
the court held that if a trustee acquires a property arises from breach of trust or any unconscionable
conduct, he will be considered as holding the property on constructive trust on behalf of the true
beneficiary.

6
Hussey v Palmer [1972] 3 All ER 744
7
Baumgartner v Baumgartner (1987) 164 CLR 317
8
Ashley Black. (1988). Baumgartner v Baumgartner, The Constructive Trust and The Expanding Scope of
Unconscionability. Retrieved from http://www.unswlawjournal.unsw.edu.au/wp-content/uploads/2017/09/11-1-
3.pdf
9
Stepherson Nominees Pty Ltd v Official Receiver (1987) 16 FCR 536
10
Hurd v Zomojo (2012) 299 ALR 621
11
Christopher Wood. (2014, December 19). Constructive trusts and property interests. Retrieved from
https://www.lexology.com/library/detail.aspx?g=ae7dd769-e6a8-4cc5-8099-cd3035c7ac7c
12
Takako Sakao v Ng Pek Yuen & Anor [2009] 6 MLJ 751
The landmark case of RHB Bank Bhd v Travelsight (M) Sdn Bhd & Ors and another appeal 13 is
also relevant where the Federal Court has recognised a remedial constructive trust as a remedy for
unjust enrichment for the first time. The respondent purchased property from Atlas Sdn Bhd and
assigned the rights of property to appellant as it was partly financed by the appellant. Atlas then
breached the agreement and the High Court held that the agreement was rescinded. However, Atlas
did not repay the purchase price and went liquidated. The liquidators refused to refund the purchase
price.

The Federal Court held that the agreement was not rescinded as Atlas did not repay the purchase
price. Therefore, the property belongs to the respondent and appellant. The liquidators who assert
rights on the property are inconsistent to the rights of true owner and constitute an unconscionable
conduct. This would give rise to a constructive trust, and the respondent and appellant should entitle
to refund of the purchase price. This case allowed a person with interest in the property to claim by
imposing constructive trust whenever unconscionable conduct is involved. 14

13
RHB Bank Bhd v Travelsight (M) Sdn Bhd & Ors and another appeal [2016] 1 MLJ 175
14
Kwong Chiew Ee. (2018). Proprietary Remedy for Unjust Enrichment. Malayan Law Journal Articles, [2018]
4 MLJ Ixx. Retrieved from https://www.rahmatlim.com/media/5036/my_proprietary-remedy-for-unjust-
enrichment.pdf