#constructive trusts

[lawdegreerevision]

Are constructive trusts institutional or remedial?

In a series of cases in the 1970s denning mr sought to develop what he called ‘a constructive trust of a new model’ [Eves v Eves]

No fiduciary relationship needed: instead one would be imposed ‘whenever justice and good conscience require it . . . it is an equitable remedy by which the court can enable an aggrieved party to obtain restitution’

The main areas in which the new model constructive trust has been used are in disputes over the home

There are two objections to the new model constructive trust:

To look at a constructive trust as a remedy and not as a substantive institution is wrong because, the property is trust property and therefore if the trustee becomes bankrupt the beneficiaries take priority over the trustee’s creditors. It is more than just a remedy.

The idea of imposing a constructive trust whenever justice requires leads to uncertainty. 

The new model constructive trust was firmly rejected by the Court of Appeal in Halifax Building Society v Thomas and Re Polly Peck International plc (No. 2).

This debate is about whether a constructive trust should be tied to equitable principles, albeit functioning as a remedy in one sense as in Boardman v Phipps or if it should simply be a general remedy, taking its place alongside damages and injunctions.

[lawdegreerevision]

Constructive Trusts: trusts of the home

The most recent leading case is Stack v Dowden where the basis of the claim was said to be a constructive trust. 

Lady Hale in Stack v Dowden: the fundamental principle is ‘the search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect to the property in the light of their whole course of conduct in relation to it’. 

In Laskar v Laskar, Lord Neuberger, (who had dissented from lady Hale’s reasoning in Stack v Dowden), held that a resulting trust was appropriate where property had been purchased as an investment and not as a home.

[lawdegreerevision]

Constructive trusts: examples

Profits made by a fiduciary

“[A trustee] is not, unless expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict” - Lord Herschell in Bray v Ford

Receipt of bribes

Attorney General for Hong Kong v Reid - Where a person receive bribes in breach of their fiduciary duty then they become a constructive trustee of them and so here the bribes were the property of their employer in equity. thus the employer was entitled to claim the profits from the bribes when they were invested.

Joint ventures

Where X and Y agree to acquire and develop land jointly and Y acquires it in his own name with the agreement of X but then seeks to retain the land for his own benefit, the court will regard him as holding the land on trust for the joint venturers i.e. both X and Y [Pallant v Morgan]

Statute as an instrument of fraud

Usually straightforward as in Rochefoucauld v Boustead, but 

Midland Bank Trust Co. Ltd v Green - An option granted by a father to his son to purchase a farm had not been registered as required by the land Charges Act 1972 and the father, having changed his mind about the sale, then carried out a ‘sham’ sale to his wife so that his son’s option was then defeated. The son’s claim failed, lord Wilberforce observing that ‘it is not fraud to rely on legal rights conferred by an Act of parliament’.

[lawdegreerevision]

Constructive trusts: what are they?

Millett (1998) = they arise ‘whenever the circumstances are such that it would be unconscionable for the owner of the legal title to assert his own beneficial interest and deny the beneficial interest of another’.

Another quote is by Lord Scott in Yeoman’s Row Management Ltd. v Cobbe: “it is impossible to prescribe exhaustively the circumstances sufficient to create a constructive trust but it is possible to recognise particular factual circumstances that will do so and also to recognise other factual circumstances that will not.”

[blackletter20]

Barclays Bank Ltd v Quistclose Investments Ltd | English Equity & Trusts | Case Study | Black Letter Publishing Conditional lending, while perhaps overlooked during commercial and personal loans, forms the bedrock of such delicate transactions, and so should the borrower find themselves unable to apply the funds as expected, the nature of the agreement remains lawfully intact in favour of the lender.

[blackletter20]

Chan v Zacharia | Australian Equity & Trusts | Case Study | Black Letter Publishing Matters of contract and the fiduciary elements of a working partnership, become at odds in a case involving opportunism with little regard to the details of the agreement signed when two former business partners acrimoniously part ways.

[sandiegoprobate]

Estates, Wills & Trusts Class #9

Tonight's class topics: Constructive Trusts; Resulting Trusts; and Estate Taxation.