Constructive Trust

Question 1

What are the two types of Constructive Trust?

Answer 1

Institutional and Remedial – Landesbank v Islington

Question 2

What case cited the two types of constructive trusts?

Answer 2

Landesbank v Islington

Question 3

Institutional Constructive Trust

Answer 3

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)

Question 4

Remedial Constructive Trusts?

Answer 4

Courts decide as a remedy to do justice in a particular case.

Question 5

What 4 situations give rise to Institutional Constructive Trusts?

Answer 5

(1) Unauthorised profits from a trust or by a fiduciary:
(2) Bribes and secret commissions:
(3)Specifically enforceable contracts
(4) Intermeddling:

Question 6

Unauthorized Profits from a trust or by a fiduciary

Answer 6

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

Question 7

Keech v Sandford

Answer 7

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.”

Question 8

Moore v McGlynn

Answer 8

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”.

Question 9

Regal Hastings v Gulliver

Answer 9

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

Question 10

Secret Commission and Bribes Cases?

Answer 10

Lister v Stubbs
AG v Reid
Sinclair Investments
FHR

Question 11

What Statute deals with Specially Enforceable Contracts?

Answer 11

LCLRA s52

Question 12

Which case established the two limbs of third party liability in breach of trust?

Answer 12

Barnes v Addy

Question 13

What are the two limbs of Barnes v Addy

Answer 13

Dishonest Assistance and Knowing Receipt

Question 14

Dishonest Assitance or Knowing Assistance?

Answer 14

Dishonest

Question 15

Cases for Dishonest Assistance?

Answer 15

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

Question 16

What is the test for dishonest assistance?

Answer 16

Not acting as an honest person would act in the circumstances taking into account of the facts actually known to the defendant and his experience and intelligence. – Royal Brunei Airlines v Tan

Question 17

What are the three elements required for Knowing Receipt?

Answer 17

(1) Breach of Fiduciary Duty (2) Receipt of the Beneficial Property (3) Knowledge

Question 18

What are the cases for Knowing Receipt on the Concept of Knowledge?

Answer 18

Re Baden Societe
BCCI v Akindele
Re Fredrick Inns (lower threshold)

Question 19

Fredrick Inns