Constructive Trusts Flashcards
What is meant by a constructive trust?
One that is said to arise by operation of the law, not based on the intention of the parties to create a trust
What has been said to be the theoretical foundation for the constructive trust?
- Suggested to be a response to the defendants unjust enrichment
- Lord Browne-Wilkinson in Westdeutsche said unconsionability on the part of the defendant is the general principle that underpins in all cases
What is the difference between an institutional and remedial constructive trust?
- Institutional: Treated as arising by operation of law on occurence of a certain event where a constructive trust has been recognised in previous law
- Remedial: Recognised where a judge considers that it is appropriate that the defendant should hold property on trust for the claimant (recognised in a number of Commonwealth countries but rejected in England)
What is the vendor purchaser constructive trust?
- Lysaght v Edwards: Where there is a sale of land by contract a trust arises for the seller to maintain the land. The vendor is the trustee and the purchaser has a beneficial ownership
- Said to be justified by the principle that equity treats as done what ought to be done, Walsh v Lonsdale
- Englewood Properties v Patel: The scope of duty of the vendor is limited to preserving the property in its state at the time of contract. It does not require them to account for benefits received
How might a constructive trust arise in the case of a mistaken payment?
- Chase Manhattan Bank v Israel-British Bank: Where money is paid under a mistake, the defendant will hold the money on trust for the claimant
- Westdeutsche Landesbank v Islington LBC: No constructive trust because the local authority had no knowledge sufficient to raise such before the money became untraceable. Distinguished above on the basis that once a party is aware of the mistake and retains the money, a trust arises
Which case shows a constructive trust arising due to the rights of another?
Binions v Evans: the defendants by allowing the claimant to remain in their home for a discount had created a constructive trust and it would be unconscionable for the court to allow the claimant to be evicted
How might a breach of fiduciary duty give rise to a constructive trust?
FHR European Ventures v Cedar Capital Partners
* Bribes and secret commissions received by a fiduciary in breach of trust would be held on constructive trust for the principle
* Agent ought to account to his principal for any benefit received in breach
* Equity does not permit an agent to rely on his own wrong to justify retaining the benefit
