Chapter 9: Liability of strangers and fiduciary relationships Flashcards
who is a stranger?
No duty to the trust (settlor, trustee beneficiary)
when does a stranger become a constructive trustee?
learns the property is trust property
What can beneficiaries do when someone is appointed as a constructive trustee?
make personal claim action
what should you look for to determine if someone is a constructive trustee?
look at how they act with the trust property:
did they know it was trust property?
did they act in a manner inconsistent with the trust?
What are the remedies available against constructive trustees?
Recovering property
Tracing
Personal claim
what is a fiduciary?
someone who has undertaken an act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence
what is a constructive trust?
a trust imposed by equity (fairness) without any express or presumed intention of the parties.
what can equity do with constructive trusts?
Impose a CONSTRUCTIVE TRUST on a stranger.
how is a constructive trust different from a common intention constructive trust?
CICT only applies to family home disputes
elements of a constructive trust
-No express or implied intention of the parties
Justice and good conscience require the person in possession of the property to hold it on trust for another
Exempt from formalities LPA 1925
The court feels a trust should be imposed
Remedy for a claimant to obtain restitution
what is the duty of a constructive trustee?
transfer property to beneficiary
when can a claimant beneficiary trace and recover the property?
if the constructive trustee is still in possession
when can a claimant bring a personal claim against a constructive trustee?
at any time whether they do or do not have the property
when would claimant trace property equivalent?
if it has been disposed of (e.g money from sale)
what is restitution?
no person should be allowed to profit at another’s expense without making repayment for the value that was unfairly received.
what are the 3 circumstances when the law imposes a constructive trust on a stranger?
Recipient liability
Accessory liability
Intermeddling
what are the 3 types of recipient liability?
Stranger received property knowing it was in breach of trust or fiduciary duty
Stranger receives trust property without notice of the trust
later becomes aware
Deals with the property in a manner inconsistent with the trust
Stranger knows they are receiving trust property
Does not know they are receiving it in breach of a trust.
Deals with the property inconsistent to the trust
what is accessory liability?
Stranger who never received property
Knew there was a trust and the person they assisted was acting in breach
Dishonestly assisted trustee with their breach
what is dishonest assistance?
Existence of trust
Breach of trust or fiduciary duty
Assistance by stranger with breach
Stranger is dishonest about their assistance.
Dishonest = not acting as an honest person would in the circumstances
What is intermeddling?
Stranger (not a trustee)
Acts as a trustee without authority
Action causes loss to the trust = constructive trustee
Personally liable
who is a bona fide purchaser for the value of the legal estate without notice?
Someone who is purchasing the land/ property and does not know of any prior interest / claims (e.g a trust)
who does a beneficiary have a claim against if a bona fide purchaser buys trust property?
only have a claim against trustees for any loss on the sale
who is an innocent volunteer?
Received trust property without consideration and did not know it was trust property.
what can be used against an innocent volunteer?
tracing - return property to the trust.
