Andrew Hicks, ‘Do Constructive Trusts Deter Disloyalty?’

Constructive trusts of disloyal fiduciary gain often are justified by the argument of deterrence. For there to be effective deterrence two conditions must be satisfied: first, potentially disloyal fiduciaries must be sufficiently informed, directly or indirectly, of the properties of the constructive trust; secondly, fiduciaries must respond by accurately weighing the costs/benefits of disloyalty and other options before choosing the option that maximises their self-interest. Typically one or both of these conditions will not be satisfied. Drawing upon insights from the behavioural sciences we find that fiduciaries contemplating disloyalty generally cannot be expected to be cognizant of the properties of the constructive trust therefore cannot be influenced by them. Even when known, such properties will not necessarily influence fiduciary behaviour due to the way well-informed fiduciaries are likely to perceive and process the risk their disloyalty will be detected. The deterrence gains generated by the recognition of a constructive trust therefore are likely to be negligible.

Hicks, Andrew, Do Constructive Trusts Deter Disloyalty? (March 10, 2018). (2018) 69 Northern Ireland Legal Quarterly 147-173.

First posted 2018-05-23 13:33:05

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