Constructive Trusts

Question 1

Keech v Sandford

Answer 1

Trustee is the only person of all mankind who might not have the trust property.

Question 2

Boardman v Phipps

Answer 2

B (solicitor) wished to get majority shareholding in company so that the trust’s value would not fall. Trustee refused to buy shares. TP, beneficiary, and B bought the shares themselves with knowledge of beneficiaries (not informed consent as not all of age), made profit for trust and themselves. There was possibility of conflict of interest as the solicitor may have been asked for advice on the purchase of shares. Had to account for profits made.

Question 3

Regal v Gulliver

Answer 3

Similar facts, directors with fiduciary duty to shareholders did not get fully informed consent, made profit, had to account for their profits to company.

Question 4

Attorney-General for Hong Kong v Reid

Answer 4

Bribe money accepted by a person in a position of trust can be traced into any property bought and is held on constructive trust for the beneficiary. There will be personal liability if the value of the property falls. Based on (i) the evil practice of accepting bribes, (ii) Reid, as a fiduciary, was personally liable to account to the crown for the profits made from the breach of his fiduciary duty, (iii) and since equity looks upon as done that which ought to have been done, (iv) Reid was deemed to have accounted to the crown for the value of the bribe immediately after it had been received, (v) therefore the crown was deemed to have an equitable proprietary interest in the bribes from the moment they were paid to Reid, who then held them on constructive trust.

Question 5

Pallant v Morgan

Answer 5

Agreed that land purchased at auction would be divided between neighbouring landowners (no written agreement so contract prima facie unenforceable). Court decreed that property was to be held by the defendant for himself and the plaintiff jointly, and if they couldn’t agree on a division the property must be resold and the proceeds of sale divided.

Question 6

Banner Homes v Luff Development

Answer 6

There was an agreement of joint ventureship but defendant decided to proceed alone. Claimant claimed interest. Held that D had led C to believe that they had entered a joint venture agreement.

Question 7

In The Estate of Crippen

Answer 7

Judges imposed constructive trust on insurance payments, insurance is contractual so money belonged to the husband.

Question 8

Lysaght v Edwards

Answer 8

Testator had agreed to sell a farm but died before completion, farm passed under constructive trust.

Question 9

Southern Pacific Mortgages

Answer 9

Purchaser cannot grant proprietary rights before completion.

Question 10

Rayner v Preston

Answer 10

Vendor trustee only in a qualified sense, their only duty is to pass on the property.

Question 11

Scott v Southern Pacific Mortgages

Answer 11

Purchaser cannot grant proprietary rights before completion.

Question 12

Rayner v Preston

Answer 12

Vendor trustee only in qualified sense, their only duty is to pass on the property.

Question 13

Rochefoucauld v Boustead

Answer 13

C asked D to bid on property so C could eventually purchase it back, D agreed. When C wanted to buy the property back, D refused. Claimant sued. There was no writing so there was no express trust, D raised this argument, relied on LPA. Equity intervened, there was bad conscience.

Question 14

Chase Manhattan Bank v Israel-British Bank

Answer 14

Payment was sent twice by mistake. Held that a trust was in force the moment the mistaken payment was received.