Constructive Trust Flashcards
What are the two types of Constructive Trust?
Institutional and Remedial – Landesbank v Islington
What case cited the two types of constructive trusts?
Landesbank v Islington
Institutional Constructive Trust
An institutional constructive trust is a device which arises in certain defined situations for example where there has been a breach of fiduciary duty and it arises by operation of law the the courts role is to effectively recognise a trust which has already arise. Arises at the moment the conduct occurs. Limits the judges discretion
“Under an institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which give rise to it, the functional of the Court is merely to declare that such trust has arisen in the past. {landesbacnk v islington LBC)
Remedial Constructive Trusts?
Courts decide as a remedy to do justice in a particular case.
What 4 situations give rise to Institutional Constructive Trusts?
(1) Unauthorised profits from a trust or by a fiduciary:
(2) Bribes and secret commissions:
(3)Specifically enforceable contracts
(4) Intermeddling:
Unauthorized Profits from a trust or by a fiduciary
Keech v Sandord - Lease
Moore v MGlynn - Postmaster (No C.T)
Boardman v Phipps
Regal Hastings v Gulliver - need authorisation
IDC v Cooley - Director leaving company
Keech v Sandford
In the case, a trustee (D) held a lease of a shop in trust for an infant beneficiary (C). When the lease needed renewal, the trustee failed to negotiate a new lease on behalf of the beneficiary due to concerns about the infant’s ability to provide security. Instead, the trustee negotiated a new lease for himself. When the beneficiary reached adulthood, he sued the trustee for the lease and profits from the shop. The court held that the trustee was entitled to the new lease but must account for the profits made during the intervening period. Lord King LC emphasized the strict fiduciary duty of trustees to prevent conflicts of interest, stating that trustees should not benefit at the expense of beneficiaries. The ruling aimed to uphold trust estates and prevent trustees from exploiting opportunities to benefit themselves over beneficiaries.
“I must consider this as a trust for the infant, for I very well see that if a trustee, on the refusal to renew, might have a lease to himself, few trust estates would be renewed to cestui que use. Although I do not say there is a fraud in this case, yet the trustee should rather have let the lease run out, than to have had it to himself. It may seem hard that the trustee is the only person of all mankind who might not have the lease, but it is very proper that rules should be strictly pursued, and not in the least relaxed; for it is very obvious what would bev the consequence of letting trustees have the lease on refusal to renew to cestui que use.”
Moore v McGlynn
Court on facts held got job on merit not cause held trust property, but if he did it would be held on constructive trust. Moore v McGlynn illustrates that a trustee shall not be guilty of a breach of trust in setting themselves up in a similar line of business, “provided that he does not resort to deception, or solicitation of custom from the person dealing in the old shop”.
Regal Hastings v Gulliver
The directors had acquired shares in a subsidiary company when the plaintiff holding company couldn’t afford to do so, and they later profited when both the holding company and the subsidiary were sold to a third party. The court found the directors liable to account for the profit they made, as they had breached their fiduciary duty by taking the opportunity for themselves. However, Lord Russell suggested that the directors could have protected themselves from liability by obtaining a resolution from the shareholders either before or after the transaction, thereby legitimizing their actions. This case established the principle that directors must act in the best interests of the company and avoid conflicts of interest or self-dealing. If they do engage in such actions, they may be required to account for any profits made and could face legal consequences
Secret Commission and Bribes Cases?
Lister v Stubbs
AG v Reid
Sinclair Investments
FHR
What Statute deals with Specially Enforceable Contracts?
LCLRA s52
Which case established the two limbs of third party liability in breach of trust?
Barnes v Addy
What are the two limbs of Barnes v Addy
Dishonest Assistance and Knowing Receipt
Dishonest Assitance or Knowing Assistance?
Dishonest
Cases for Dishonest Assistance?
Re Baden v Societe - 5 limbs
Royal Airlines v Tan - combined test of subjective and objective
Twinsectra - R v Ghosh - relaxes (requieres knowledge of dishonesty)
Barlow Clowes - stricter
predominantly objective test with some subjective element