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Equity and Trusts > Constructive Trusts > Flashcards

Constructive Trusts Flashcards

1
Q

Who are fiduciaries?

A

All the trustees and other people can be such as lawyers, partners, principal and agent etc

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2
Q

How does Bristol and West Building Society v Mother [1998] define a fiduciary?

A

“A fiduciary is someone who has undertaken act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.”

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3
Q

What duties do fiduciaries have?

A

Onerous duties over and above any liability that they might have in contract or tort

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4
Q

How are fiduciaries relevant to constructive trusts?

A

Constructive trusts are only applicable if there is a trust or fiduciary relationship

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5
Q

What did Reading v A-G [1951] identify as a fiduciary relationship?

A

Sergeant in the army

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6
Q

What did English v Dedham Yale [1978] identify as a fiduciary relationship?

A

A property developer

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7
Q

What did Swain v Law Society identify as a fiduciary relationship?

A

Law Society is not a fiduciary relationship

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8
Q

What did Westdeutsche v Islington [1996] identify as a fiduciary relationship?

A

Not Islington council

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9
Q

Who else would qualify as a fiduciary?

A

Football agents, art dealers etc

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10
Q

What is the main duty of a fiduciary?

A

Not to make a profit from the trust

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11
Q

What dies Bristol and West Building Society v Mothew make a distinction between?

A

Lack of reasonable care and skill - make trustees liable for common law type damages
Breach of fiduciary duty - make a trustee liable to restore the trust property

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12
Q

What was held in Target Holdings v Redferns [1996]?

A

Fiduciaries must make equitable compensation to put the trust back to what it would have been had the breach not been committed

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13
Q

What was held in Bristol and West Building Society v Mothew about payment of fiduciaries?

A

Trustees or fiduciaries cannot be paid unless specifically authorised

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14
Q

What is the rule stated in Keech v Sanford (1726)?

A

The trustee/fiduciary must not use their position for personal advantage

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15
Q

What rule was created in Ex Parle Lacey [1802]?

A

The “self-dealing” rule

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16
Q

What is the “self-dealing” rule?

A

The trustee or fiduciary must not purchase trust property. Property gained is held on constructive trust.

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17
Q

In what case was an exception allowed regarding the profiting from the trust?

A

Holder v Holder [1968]

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18
Q

What does Sudden v Crossland (1856) define as a “secret profit”?

A

Taking a bribe, as in this case, or it could mean taking money from their fiduciary position without the informed consent of their principal.

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19
Q

What was established in Imageview Management Ltd v Jack [2009]?

A

“An agents own personal interests come entirely second to the interest of his client. If you undertake to act for a man you must act 100%, body and soul for him. You must act as if you were him. You must not allow your interest to get in the way without telling him.”

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20
Q

What is a proprietary claim?

A

Where a secret profit is held in constructive trust then the beneficiaries can follow or trace this profit if it is turned into other property.

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21
Q

What did the case of Lister v Stubbs [1890] require?

A

Property had to be removed from the fiduciary or trust relationship for a constructive trust to be imposed

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22
Q

What was held in A-G for Hong Kong v Reid [1994]?

A

There requirement is Lister v Stubbs was no longer necessary. A fiduciary took a bribe and a constructive trust was imposed on him.

23
Q

What was held in FHR European Ventures v Cedar Capital Partners [2014]?

A

A bribe or secret commission is held on constructive trust

24
Q

What are the two types of constructive trusts?

A

Institutional Constructive Trust

Remedial Constructive Trust

25
Q

What case are the two types of constructive trusts established?

A

Westdeutsche Landesbank Girozentrale v Islington Borough Council [1996]

26
Q

What is an institutional constructive trust?

A

Arises by operation of law as from the date of the circumstances which gave rise to it

27
Q

What is a remedial constructive trust?

A

A judicial remedy giving rise to an enforceable equitable obligation

28
Q

How did Lord Denning describe a constructive trust in Hussey v Palmer?

A

It is a trust imposed by law whenever justice and good conscience require it

29
Q

What is the idea of constructive trust as a remedy?

A

Impose liability upon a third party (someone who is not a trustee or fiduciary). These would be people who have received trust property from the person in breach of trust or assisted that person in removing that property.

30
Q

What are the advantages of using a constructive trust rather than contract, tort or criminal law?

A
  1. Widens the available defendants
  2. Recover property removed from the trust, which might have increased in value
  3. Limitation Act 1980 does not apply to institutional constructive trusts, but does apply to remedial constructive trusts
31
Q

What are the two requirements for constructive trusts as a remedy?

A

Must be a fiduciary or trust relationship from which the property has been removed
Breach of trust

32
Q

According to Barnes v Addy (1874) what are the three situations a “stranger” or third party can have a constructive trust imposed upon them?

A
  1. Intermeddler
  2. Knowing receipt of trust property or recipient liability
  3. Dishonest Assistance/Knowing Assistance in a dishonest and fraudulent design or accessory liability
33
Q

What is an intermeddler?

A

A person who acts as a trustee will be treated as a constructive trustee.

34
Q

What happened in the case of Jasmine Trustees v Wells & Hind [2007]?

A

Trustees not properly appointed

35
Q

What happened in the case of James v Williams [1999]?

A

An executor de son tort

36
Q

What was happened in the case of Dubai Aluminium v Salaam [2003]?

A

Even solicitors can be intermeddlers

37
Q

What are the five tests for the level of knowledge that a breach had been committed to establish a constructive trust?

A
  1. Actual knowledge
  2. Wilfully shutting one’s eyes to the obvious
  3. Wilfully and recklessly failing to make inquiries which an honest person would have made
  4. Knowledge of circumstances which would indicate the facts to an honest and reasonable man
  5. Knowledge of circumstances which would put an honest and reasonable man on inquiry.
38
Q

What is knowing receipt of trust property or recipient liability?

A

A person receives property that they know has been taken from a trust or fiduciary relationship

39
Q

What was said in Polly Peck International v Nadir No2 [1992]?

A

Satisfied with constructive knowledge - the recipient should have known it was a trust property

40
Q

What was said in Re Montague’s Settlement [1987]?

A

Actual knowledge must be proved

Technical, detailed knowledge if the trust is not required

41
Q

What was suggested in the case of BCCI v Akindele [2000]?

A

The recipient’s state of knowledge should be such that it is unconscionable for the recipient to keep the property

42
Q

Where was the test in BCCI v Akindele confirmed?

A

Arthur v Attorney-General of the Turks and Caicos Islands [2012]

43
Q

What is dishonest assistance/knowing assistance in a dishonest and fraudulent design or accessory liability?

A

An attempt to impose liability upon those through whose hands the trust property has passed or who assist in the breach of the trust (solicitors and banks)

44
Q

What was said in Royal Brunei Airlines v Tan [1995]?

A

There is not always a clear distinction between situation 2 and 3

45
Q

How was the test for liability changed over the years?

A

Older cases insist on actual knowledge of the breach of trust or active dishonesty in order to impose a constructive trust
However some more recent cases suggest that constructive knowledge is enough. The third party should have known that they were assisting in a breach of trust

46
Q

What was said in Selangor United Rubber Estates v Cradock (No3) [1968]?

A

Constructive knowledge is similar to negligence (the defendant has not acted with reasonable care)

47
Q

What was established in the Carl-Zeiss Stiftung v Herbert Smith [1969]?

A

The modern trend is to require proof of dishonesty before imposing a constructive trust

48
Q

What happened in AGIP (Africa) v Jackson [1991]?

A

They must have known they were laundering money. They knew that something was being concealed.

49
Q

What development did Twinsectra v Francis Yardley [2002] make?

A

Introduced a kind of mens rea requirement. The solicitor would have only been liable if he both contravened normally accepted standards of honesty and knew that he was doing something wrong.

50
Q

What then happened in Barlow Cloves International v Eurotrust International [2006]?

A

Returned to the objective test.
A defendant’s knowledge of a transaction had to be such as to render his participation country to normal acceptable standards of honest conduct.

51
Q

What did Sinclair Investments (UK) v Versailles Trade Finances [2011] confirm?

A

The objective test is thought to be the law

52
Q

What was established in Dubai Aluminium v Salaam [2003] regarding vicarious liability?

A

A firm may be vicariously liable for a partner’s dishonest assistance

53
Q

For situation 2 what must be proved?

A

Actual knowledge

54
Q

For situation 3 what must be proved?

A

Dishonesty

Equity and Trusts (4 decks)

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