The Unbearable Lightness of Property - alastairhudson.com

quasi-property. The case of Fletcher v. Fletcher 98 is instructive in this regard. In that
case it was held that where a testator had been incapable of declaring a valid trust over
after-acquired property, a trust had nevertheless been created where the court was
prepared to accept that it was the testator’s intention to create a trust over the
covenant which the testator had created with his intended trustee to hold such afteracquired
property on trust for the testator’s sons. The sleight of hand necessarily to
give flesh to this bony argument was twofold. First, that the trust came into existence
once the covenant was created and the testator had evinced an intention to have that
covenant held on trust (even though such intention is difficult to identify on the facts).
Second, that as soon as the after-acquired property was received by the testator and/or
the trustee it was automatically to constitute the trust fund of that trust which hitherto
had held only the benefit of the covenant.
The logic, not expressed in the case but evident nonetheless, is an extension of the
familiar Walsh v. Lonsdale 99 principle deployed by Lord Templeman in Attorney-
General for Hong Kong v. Reid 100 to the effect that once property is received by the
testator, say, under the terms of the covenant with the trustee the testator is obliged in
equity to give specific performance of that covenant and so equitable title is said to
move automatically to the trust. So the testator is deemed to have transferred
beneficial title in that after-acquired property whether or not a formally valid transfer
of the absolute title has been effected. This is, in truth, one of two phenomena. Either,
first, the court is acting on the conscience of the testator to require him to recognise a
constructive trust 101 or, second, the testator is simply subject to a claim for specific
performance against him personally to carry out the obligations in the covenant. In
either case, the order is a personal claim with proprietary consequences and not a
proprietary right in itself.
The logical problem is not this question of personal claims carrying proprietary
consequences – that is considered below. The issue is that such a personal claim, in
the form of the covenant, is able to found a secured, proprietary right in the afteracquired
property which would have to be effective in the event of an insolvency even
though its basis is in a merely personal claim to transfer property. That is to say, a
personal claim can be elevated to the status of a property claim while that property
claim concerns an asset which itself carries entitlement only to receive judgment in a
personal claim. That much is to defeat the spirit of the insolvency laws which seek to
rank pari passu all those personal claims which exist against an insolvent person, and
exempting from such treatment only those claims under which the claimant can
demonstrate a pre-existing right to a separately identifiable item of property which the
claimants are entitled to abstract from the insolvency proceedings because it is already
“theirs”. The right to the after-acquired property, however, exists as a result of
Fletcher v. Fletcher 102 against whatever property comes into the fund even that
property need not be separately identifiable before being paid into that fund.
The problem here is not that the law is in some way “wrong” but rather that it is either
operating without the logical coherence which it would ordinarily claim for itself or
98 (1844) 4 Hare 67.
99 (1882) 21 Ch D 9.
100 [1994] 1 A.C. 324.
101 If we believe Attorney-General for Hong Kong v. Reid [1994] 1 A.C. 324.
102 (1844) 4 Hare 67.
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