Constructive Trusts Flashcards
What is a constructive trust?
A trust imposed by the court to prevent unconscionable conduct, even if there was no formal intention to create a trust. Common in cases of fraud, breach of fiduciary duty, unjust enrichment, and secret trusts.
What is the key issue in Blackwell v Blackwell and how was it resolved?
A will gave money to trustees for secret beneficiaries. Even though their identities were not in the will, the trust was upheld. The court enforced the half-secret trust to prevent fraud.
What is the “dehors the will” theory from Blackwell v Blackwell?
The trust operates outside the will — it’s an inter vivos (lifetime) trust that becomes active upon death, so it doesn’t violate the Wills Act 1837.
What did the court decide in Generator Developments v Lidl (2018)?
No constructive trust arose from discussions about a joint venture. There was no mutual intention or detrimental reliance, so the Pallant v Morgan principle didn’t apply.
What was the ruling in Bailey v Angove’s regarding agents and insolvency?
The agent didn’t hold funds on constructive trust. There was no fraud or unconscionability — and the statutory insolvency regime took priority.
What did Frenkel v LA Micro clarify about s53(1)(c) LPA 1925?
Written formalities are not required to destroy an equitable interest. The court recognised that the beneficial interest was extinguished by agreement, not disposed of to another person.
How do constructive trusts interact with the Wills Act 1837?
Courts may uphold secret trusts despite non-compliance with s9 of the Wills Act to prevent fraud and honour the testator’s intention under the “dehors the will” theory.
What’s the difference between secret and half-secret trusts?
Secret trust: Nothing in the will says there’s a trust.
Half-secret trust: The will mentions a trust but not the beneficiaries.
Both are enforced to prevent fraud.
When can a constructive trust arise from a joint venture (Pallant v Morgan)?
1) If there’s a common intention not to act alone;
2) If one party relies to their detriment on that intention
Why do courts impose constructive trusts in fraud cases?
To prevent someone from gaining unfairly or abusing formalities (e.g. Wills Act or LPA 1925) to defeat the intentions of another.
