essay on constructive trust

Constructive Trust

Definition of constructive trust, what is a constructive trust, purpose of a constructive trust.

Mentioned earlier, the purpose of a constructive trust is to prevent unjust enrichment. Unjust enrichment is present in almost every case that handles a constructive trust. However, the court does not necessarily need to find that the person in possession of the property deliberately acted in a way that defrauded the other party. Instead, the court may find the unjust enrichment exists due to other circumstances that render the other party unable to continue to hold the title to that property.

Common Intention Constructive Trust

A common intention constructive trust arises in situations wherein there was an intention for one party to give the other party property, but the transfer failed for some reason. Now, because the transfer failed, the would-be beneficiary has suffered a loss due to his reliance on the transfer being properly executed.

Constructive Trust Example Involving an Irrevocable Trust

Related legal terms and issues.

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Introduction 1, conclusions.

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The remedial constructive trust ‘between a trust and a catch-phrase †

† See Williams v Central Bank of Nigeria (2014) WTLR 873, 880 where Lord Sumption quotes this phrase from the judgment of Millett LJ as he then was, in Paragon Finance v DB Thakerar (1999) 1 All ER 400, 413.

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Bruce Collins, The remedial constructive trust ‘between a trust and a catch-phrase, Trusts & Trustees , Volume 20, Issue 10, December 2014, Pages 1055–1068, https://doi.org/10.1093/tandt/ttu230

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The constructive trust is a rubric from within which a court will select an appropriate specific remedy when it intends to impose liability upon a defendant as if he were a trustee. Sometimes the court will impose a proprietary remedy; sometimes it will not. The choice lies well within the established limits of discretion reposed in the court of chancery. In a necessary sense, every order made in favour of a successful claimant is a remedy. The constructive trust, in the above sense, is not a remedy adrift of the principles which enliven it, nor do those principles, once engaged, entitle the claimant as of right to a specific remedy from within the rubric. Troublesome labels should be torn up. FHR European Ventures LLP v Cedar Capital Partners LLC has now definitively established that a bribe taker holds the bribe upon trust for the principal who had no antecedent beneficial interest in the payment. There remain new fields for analysis in the area of impaired title and mistaken payments. The way is clear for a return to the future. The Supreme Court, following its broad charter in FHR European Ventures, will have the opportunity in future to draw upon orthodox equity principle and established discretionary rules to consolidate the law of the overall constructive trust which in a way permits the imposition of a particular remedy appropriate to all the circumstances in any particular case where in the traditional sense equities concern for conscience demands.

‘An insouciant approach to taxonomy’ 2

vague dust-heap for the reception of relationships which are difficult to classify or which are unwanted in other branches of the law 3

there are few areas in which the law has been so completely obscured by confused categorization and terminology as the law relating to constructing trusts. 5

… it would be unrealistic to expect complete consistency from the cases over the past 300 years.

the principle of conscience, identifiable in equity from the Earl of Oxford’s Case to West Deutsche Landesbank and beyond, (which) operates as a high-level principle around which all these constructive trusts revolve.

The subject has stirred fierce debate and the subject has not always generated such pastoral idylls 10 as were fondly called up by Hudson. 11

The remedial constructive trust, if introduced into English law, may provide a more satisfactory road forward. The court by way of remedy might impose a constructive trust on a defendant who knowingly retains property of which the plaintiff has been unjustly deprived. Since the remedy can be tailored to the circumstances of the particular case, innocent third parties would not be prejudiced and restitutionary defences, such as change of position, are capable of being given effect.

A constructive trust is imposed by law and arises when a court construes a set of circumstances and concludes therefrom that the defendant is liable as if he were a constructive trustee . Personal and proprietary remedies are included in the principle. In other words, constructive trustees are those whom a court of equity will treat as trustees by reason of their actions, of which complaint is made.

The expression ‘constructive trust’ does not mean that the court ‘constructs a trust’. The foolishness in such thinking accounts in part for other errors of principle. The court of equity does not build a trust. 14

A measure of doctrinal consistency can be achieved and the folly of spending time trying to locate a constructive trust per se can be avoided in part, if it is remembered that the similarities with a trust arise from the court likening such circumstances to a trust and the holder of property to a trustee. Some circumstances are given the description of ‘ constructive trust ’ in cases when all the familiar attributes of an express trust are not present, for example, those who assist or participate with knowledge in the misapplication of trust property.

The expression remedial constructive trust dates back more than 90 years to a paper written by Roscoe Pound and published in the Harvard Law Review . 15 The expression remained there until it was taken up with enthusiasm in Canada and the USA. 16

A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another

The independent jurisdiction of equity, as a court of conscience to grant relief for every species of fraud and other unconscionable conduct.

Under an institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which gave rise to it: the function of the court is merely to declare that such trust has arisen in the past. The consequences that flow from such trust having arisen (including the possibly unfair consequences to third parties who in the interim have received the trust property) are also determined by rules of law, not under a discretion. A remedial constructive trust … is different. It is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court. 21

It is clear that Lord Selborne regarded as a constructive trustee any person who was not an express trustee but might be made liable in equity to account for the trust assets as if he was. The problem is that in this all-embracing sense the phrase ‘constructive trust’ refers to two different things to which very different legal considerations apply. The first comprises persons who have lawfully assumed fiduciary obligations in relation to trust property, but without a formal appointment. … In its second meaning, the phrase ‘constructive trustee’ refers to something else. It comprises persons who never assumed and never intended to assume the status of a trustee, whether formally or informally, but have exposed themselves to equitable remedies by virtue of their participation in the unlawful misapplication of trust assets. Either they have dishonestly assisted in a misapplication of the funds by the trustee, or they have received trust assets knowing that the transfer to them was a breach of trust. In either case, they may be required by equity to account as if they were trustees or fiduciaries, although they are not. These can conveniently be called cases of ancillary liability. The intervention of equity in such cases does not reflect any pre-existing obligation but comes about solely because of the misapplication of the assets. It is purely remedial. The distinction between these two categories is not just a matter of the chronology of events leading to liability. It is fundamental. In the words of Millett LJ in Paragon Finance Plc v DB Thakerar & Co (a firm) [1999] All ER 400, at 413, it is ‘the distinction between an institutional trust and a remedial formula – between a trust and a catch-phrase.

This important statement of principle contains the significant acknowledgement that in English law there already exists a ‘purely remedial’ device. In Williams v Bank of Nigeria , 24 the Supreme Court described the decision in Gwembe Valley 25 as one in which a company director was liable ‘under a constructive remedial trust’. In Williams 26 Lord Sumption benignly referred, on two occasions, to equity’s ‘remedial jurisdiction’. The debate concerns the reach of the constructive trust and when if at all it confers a proprietary remedy.

With Lord Browne-Wilkinson’s invitation in mind, the two different approaches in England and in Australia, may be examined.

The Australian decisions

The expression ‘constructive trust’ does not describe a concept of fixed meaning. It is used to designate the basis for granting forms of equitable relief which are to some degree equivalent or analogous to relief which would be available against an express trustee for breach of trust. Such forms of relief may be proprietary, in the sense that the court will treat one party as having, or as having had, a beneficial interest in property held by the other, or personal, in the sense that the court will impose on one party a pecuniary liability in favour of the other. 1. In Hospital Products , 28 a leading Australian case upon the liability of fiduciaries to account for profits, there is a passage which is a harbinger of the way the law was to be later developed by the High Court of Australia in Muschinski v Dodds. In Hospital Products , 29 Sir William Deane said: [A constructive trust] may be imposed as the appropriate form of equitable relief in circumstances where a person could not in good conscience retain for himself a benefit, or the proceeds of a benefit, which he has appropriated to himself in breach of his contractual or other legal or equitable obligations to another. Since this particular aspect of the matter was not explored in argument and a majority of the court is of the view that there is no basis for any finding of constructive trust however, it is preferable that I defer until some subsequent occasion a more precise identification of the principles governing the imposition of a constructive trust in such circumstances.

Muschinski v Dodds , one year later gave Sir William that deferred opportunity.

Viewed in the modern context, the constructive trust can properly be described as a remedial institution when equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle. 31

As an equitable remedy (the constructive trust) is available only when warranted by established equitable principles or by legitimate processes of legal reasoning. 33

However the full thread of Sir William’s reasoning in which the Chief Justice agreed, is not always heeded. Critical passages in the judgment which have not received due attention, show that Sir William remained at all times firmly anchored in traditional equity jurisprudence. 34 Moreover, a careful reading of the complete analysis of the constructive trust in Sir William Deane’s judgment reveals an anticipation and resolution of future criticisms.

The law in Australia: the role of conscience

Well known, and identified by one of the leading scholars in this area as the ‘watershed’ in Australia, 35 is the High Court of Australia decision in Muschinski v Dodds , 36 the litigious result of a fractured relationship between two unmarried partners. The appellant, Ms Muschinski had contributed over 90 per cent of the purchase price and the cost of improvements upon a property in which the couple were going to live and operate an arts and craft centre. The property was purchased by the couple as tenants-in-common in equal shares. Ms Muschinski sought a declaration that the property was held upon a constructive trust for her. The High Court allowed Ms Muschinski’s appeal, concluding that it would be unconscionable for Mr Dodds to assert the tenancy-in-common.

In a broad sense, the constructive trust is both an institution and a remedy of the law of equity. … . Like express and implied trusts, the constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court … the rationale of the constructive trust must still be found essentially in its remedial function which it has predominantly retained. … Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention of assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle. … In particular, where competing common law or equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order or from some other specified date. The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles … Viewed as a remedy, the function of the constructive trust is not to render superfluous, but to reflect and enforce, the principles of the law of equity. The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other … Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of another. … Some text writers have expressed the view that the constructive trust is confined to cases where some pre-existing fiduciary relationship can be identified. Neither principle nor authority requires however that it be confined to that or any other category or categories of case … Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another …

After a full endorsement of Muschinski by the High Court in Baumgartner v Baumgartner , 38 and as the law has progressed in Australia, important limitations and qualifications have been placed upon the circumstances in which the remedy of constructive trust will be imposed. It is going too far to say that the later cases repudiate Muschinski however they do represent a direct response to critical comment from England.

A distinction is sometimes drawn between cases where the impugned conduct is such that it can be predicted with some confidence that a court would, if asked, decree a constructive trust and other cases that are not so clear-cut and where an alternative remedy might be deemed more appropriate. In case of the former category, the likelihood of a decree eventuating renders the constructive trust applicable from the time of the impugned conduct and the beneficiary of the trust has a beneficial interest in the trust property from that time. 41

A constructive trust may be imposed upon a particular asset or assets not because pre-existing property of the plaintiff has been followed in equity into those assets but because, quite independently of such considerations, it is, within accepted principle, unconscionable for the defendant to assert a beneficial title thereto to the denial of the plaintiff.

In Grimaldi 43 the Full Federal Court cited Erlanger v New Sombrero Phosphate for its conclusion that the court should do what is practically just. 44 In an important paper published in the Australian Law Journal 45 Mr Justice Gummow cautioned against assuming the ‘right’ to a particular remedy and reminded readers of the essential element of discretion which is engaged before a particular remedy is considered to be appropriate in all the circumstances.

Perhaps the greatest recent emphasis on the need to award the remedy that is ‘appropriate’ in the circumstances, has been in cases where relief by way of the remedial imposition of a constructive trust upon property has been sought. We emphasise the remedial use of the constructive trust so as to exclude from consideration those classes of case where, on the proof of particular facts in a given context (eg the death of one party to an agreement for mutual wills: Birmingham v Renfrew (1937) 57 CLR 666; or the entitlement under contract to an expectancy after the consideration for it is executed: cf Tailby v Official Receiver , the circumstances are ‘construed’ as giving rise to a constructive trust. To illustrate the contemporary convergence in constructive trust claims of what we would call the ‘principle of appropriateness’ and the requirement to do ‘practical justice’ we refer to a number of recent observations of the High Court on these two themes. (i) In Bathurst City Council v PWC Properties Pty Ltd at [42], it was commented that: … before the court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy.

Before a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust. At the heart of this appeal is the question whether the relief granted by the Full Court was appropriate and whether sufficient weight was given by the Full Court to the various factors to be taken into account, including the impact upon relevant third parties, in determining the nature and quantum of the equitable relief to be granted.

A constructive trust ought not to be imposed if there are other orders capable of doing full justice … [I]t is not a complete answer to Walker Corporation’s reliance on Giumelli that remedies other than a constructive trust may lack practical utility because of the impecuniosity of those against whom they are sought. One point made in the Giumelli line of cases is that care must be taken to avoid granting equitable relief which goes beyond the necessities of the case. Another point in those cases is that third party interests must be borne in mind in deciding whether a constructive trust should be granted. That line of cases does not permit a constructive trust to be declared in a manner injurious to third parties merely because the plaintiff has no other useful remedy against a defendant.

The court must look at the circumstances in each case to decide in what way the equity can be satisfied.

the strong discretion in the Court to decide upon the appropriate form of relief for proprietary estoppel, including whether it should be personal or proprietary … 50

ordinarily relief by way of a constructive trust is imposed only if some other remedy is not suitable.

To the extent to which grant of the remedy has been tightened the distance between the English and Australian position has been narrowed.

‘Contemporary convergence’ 53

on the proof of particular facts in a given context … the circumstances are ‘construed’ as giving rise to a constructive trust. 56

At least two conclusions follow, one that the institutional classification and the remedial classification can co-exist and two, that a full range of equitable remedies, particularly lien, charge, account and equitable compensation may fall under the heading of the constructive trust.

an appropriate equitable remedy which falls short of the imposition of a trust. 58

The Australian decisions display a conservative approach to the three foundations of the body of principle, adherence to the institutional trust, which by analogy is treated as a simulacrum of the express trust a strict approach to the imposition of a constructive trust and true fidelity to established equity principle in the remedial category. It is too late to entertain suggestions that within those categories there are fictions which should prompt removal of the institutional classification. 59

Road testing the principles

… satisfied that (the defendant) deliberately manufactured an atmosphere of crisis in order to influence the plaintiff to provide the money for the house. (I am) satisfied, moreover, that she played upon his love and concern for her by the suicide threats in relation to the house. She then refused offers of assistance short of full ownership of the house knowing that his emotional dependence upon her was such as to lead inexorably to the gratification of her unexpressed wish to have him buy the house for her. I am satisfied that it was a process of manipulation to which he was utterly vulnerable by reason of his infatuation.

those conclusions direct the further conclusion that the appellant’s conduct was unconscionable and that, in consequence, the respondent is entitled to equitable relief with respect to the gift of money with which the house was purchased. 62

On the facts in Louth v Diprose 63 there was no question of any fiduciary liability and more importantly the plaintiff did not have any pre-existing proprietary interest in the property which had been owned by a relative of the appellant. It means that in England all the plaintiff would enjoy was a right in personam to the repayment of the money and, if the defendant was impecunious, the plaintiff would recover nothing. Why should that be so when the money unconscionably obtained from the plaintiff by means of lies and deception was specifically intended to be applied and was in fact applied to purchase the house? Had the money been stolen and used to purchase the house then a constructive trust would be imposed. Had the house been conveyed directly by the plaintiff to the defendant a constructive trust could have been imposed so that a disposition of the property to, say a relative who was not a bona fide purchaser for value, would not defeat the plaintiff.

Free from the corrosive effects of inconsistent terminology and by a process not dissimilar to Cedar 64 the law in England while adhering to established principle may develop as part of what one writer has termed the ‘emulsification of the constructive trust’. 65

a trust which is raised by construction of equity in ordered to satisfy the demands of justice and good conscience, without reference to any presumed intention of the parties.

the court will compel the person in whom the property or equitable interest has become vested to hold it for the benefit of the person whose confidence has been abused …

This was the constructive trust so defined. 68

… A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.

It has been well remarked, that the receiving of money which consistently with conscience cannot be retained is, in Equity, sufficient to raise a trust in favour of the party for whom or on whose account it was received. This is the governing principle in all such cases. And therefore, whenever any controversy arises, the true question is, not whether money has been received by a party of which he could not have compelled the payment but whether he can now, with a safe conscience, ex aequo et bono, retain it. Illustrations of this doctrine are familiar in cases of money paid by accident, or mistake, or fraud. And the difference between the payment of money under a mistake of fact, and a payment under a mistake of law, in its operation upon the conscience of the party, presents the equitable qualifications of the doctrine in a striking manner.

Since the eighteenth century, it has been a rule of equity that a person who obtains property from another through undue influence will be held to be a constructive trustee of that property for the person from whom he obtained it.

This doctrine may be traced back to Lord Hardwicke LC in Morris v Burroughs . 71 The passage emphasizes the causal connection between the exertion of undue influence and ‘obtaining’ the property. It is submitted that such a connection may still be established even though there was no pre-existing beneficial interest in the subject property.

English law

In English law the remedial constructive trust has not been approved. In Sinclair Investment Holdings SA v Versailles Trade Finance 72 and Re Polly Peck International Ltd No 73 the Court of Appeal did not sanction the creation of a remedial constructive trust and confined the remedy to the confirmation of what we have been calling an institutional constructive trust. Polly Peck (above) raises the important question of insolvency. 74 William Swadling 75 and Keith Mason 76 answer the Polly Peck insolvency arguments by referring to the exclusion from the bankrupt’s estate (and the assets of an insolvent company) of property held by the bankrupt on trust for another. As Mason also points out the rights of secured creditors are also preserved in England and in Australia. 77 The Supreme Court in Williams 78 did not offer any encouragement to the development of the remedial constructive trust.

Recently, the disapproval of the remedial constructive trust in English law reached the level of the Supreme Court where in FHR European Ventures LLP and ors v Cedar Capital Partners LLC 79 the Court referred to ‘… some sort of remedial constructive trust … which has authoritatively been said not to be part of English law—see per Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington LBC . 80 Yet there are signs of willingness to reclassify the principles.

Where a fiduciary has exploited a commercial opportunity for his own benefit, the relevant question, in my judgment, is not whether the party to whom the duty is owed … had some kind of beneficial interest in the opportunity: … that would be too formalistic and restrictive an approach. Rather, the question is simply whether the fiduciary’s exploitation of the opportunity is such as to attract the application of the rule.

This passage was referred to with approval by the Supreme Court in FHR European Ventures . 82 On the other hand, Sir William Deane in Muschinski 83 disagreed with the proposition that a pre-existing fiduciary relationship was necessary to support a proprietary constructive trust. If the observations of Lord Justice Jonathan Parker attract future support, then the requirement of a pre-existing beneficial interest may also be revisited. There are signs that the shackles may be loosening.

The High Court of Australia has given the constructive trust a role to play as a response to unconscionable conduct in appropriate cases. It has tied the doctrine of unconscionability to the long established principles of equity in English law and cautioned against any suggestion that subjective ‘fairness’ should be a ground of relief. The discussion in this article has asked the question whether equity’s long line of unconscionability authorities can become one of the overall principles which animate the imposition of the constructive trust. For that to happen the requirement of a pre-existing fiduciary obligation qua trust property would have to be modified as it already has in the cases of theft and mistaken payments.

Acceptance of the view expressed by Professor Austin and endorsed in Grimaldi 84 that all proprietary remedies should be discretionary would narrow significantly the gap between the Australian and the English positions as have the High Court decisions after Muschinski v Dodds . 85

If a fiduciary is said to hold property or other benefit upon a constructive trust for his principal when he has acquired it in breach of the rule in Keech v Sandford , 86 has acted honestly 87 and the principal was not in a position to acquire the property for itself, 88 can ‘legal principle, decided cases, policy considerations, and practicalities’, the desiderata expressed by the Supreme Court recently in FHR Ventures LLP & ors v Cedar Capital Partners LLC , 89 lead to a formulation of principle which in appropriate circumstances assimilates cases like Louth v Diprose 90 with those in which a constructive trust has been declared to exist. In Australia, as Louth v Diprose shows, the answer is yes. In England the answer would probably be in the negative. The capacity of the law by the incremental pronouncements of ultimate appellate courts to extend and mould legal principle is well recognized. This is the case in both countries. 91

The appetite for such a reorganization of the subject may be increased by judicial recognition that constructive trusts are quite different from fully constituted express trusts and there has already been a heavy policy element built into the task of construing the relevant circumstances to be analogous to express trusts and described as a constructive trust. Furthermore the constructive trust is generated by analogy, for example in the area of fiduciary profit. Indeed, it has been suggested that the constructive trust is a fiction.

If it is accepted that all the categories of constructive trust are examples of principles developed out of equities concern for conscience why should last category be excluded from the availability of the remedy? What should retard or hold back development?

If a company that could never acquire a beneficial interest in the property claimed is entitled to an order imposing a constructive trust over that property, if profits a company would never make can be made the subject of a constructive trust, if the unsuccessful defendant in a constructive trust claims is not required to have been in a fiduciary relationship with the claimant, if a thief is a trustee of stolen money and a constructive trust will be imposed over that money and any property purchased with it, 92 if, as the Supreme Court has recently decided in the context of a bribe taken that the beneficiary does not have to have a proprietary interest before the court will conclude that the bribe will be held upon trust for the principal and property purchased with the bribe 93 then why should not the plaintiff in Louth v Diprose 94 be entitled to a constructive trust of a proprietary nature over property purchased by the defendant exclusively with money obtained by the defendant by the deliberate exertion of undue influence. When good conscience is the thread running through all the cases there is no good reason why not.

The courts have already stepped in for policy reasons to draw an analogy with the express trust. The discrimen has been conscience. If the constructive trust is not the same as the classical fully constituted express trust does it make sense for the purpose of restricting the availability of the constructive trust, to insist upon the requirements of pre-existing fiduciary relationships in respect of defined property? Should adherence to the view that the constructive trust should take on some of the attributes of the classical trust prevent a constructive trust from being imposed in cases of unconscionability when it also forms a logical and principled part of equity’s concern with conscience and there is present the appropriate close connection between the unconscientious conduct and the subject property cf. Louth v Diprose . 95

By hypothesis, it is not cutting the heart out of the classical trust, nor is it denying to that institution the proprietary remedy which its true nature demands, if the law were to permit the imposition of a constructive trust in a general unconscionable category. It has not been shown that a new paradigm drawing its force and effect from the existing doctrine of unconscionability together with an acceptance of the rule that once an entitlement is made out, equitable remedies are discretionary, does not overcome the problems referred to in the literature by those who would not extend the potential availability of the constructive trust to all cases where property has been acquired by unconscionable means.

Can the difference in the English approach not give recognition to the practical assimilation of the money procured by undue influence and the house purchased as intended exclusively with that money? Is there any material distinction between the cases? Can it not be said that in those circumstances the conscience of the owner of the property so acquired is affected qua the property in a powerful manner warranting the imposition of a constructive trust? Would it not be unconscientious for the legal owner to assert that her conscience was not bound and that the law should disregard the manner by which she acquired the property with money unconscientiously obtained.

If Mr Diprose had given the money to Mrs Louth to hold upon trust then he would enjoy a proprietary remedy. Although Mr Diprose had parted with the money as a consequence of her devious exploitation of her power over him and purchased the home with that money, in England he has no proprietary remedy. Yet in the case of a profit from an honest misuse of a corporate opportunity confers a proprietary remedy upon the fiduciary but so it seems practised, dishonest exploitation of a dominant overpowering relationship does not.

The emulsification of the principles 96

Free from the corrosive effects of competing definitions the law in England and Australia is showing signs of convergence. Legitimate incremental development of the law by the ultimate courts of appeal in each country may bring about a continuation of that process. Once it is recognized that ‘some constructive trusts create or recognize o proprietary interest’ 97 then admission to the non-institutional category of ‘constructive trusts’ may become simpler. There is little evidence of pressure to expand the institutional category in England or Australia. Yet while ever Benjamin Cardozo’s phrase which describes the constructive trust as ‘the formula through which the conscience of equity finds expression’ resonates with equity lawyers, there remains work to be done.

Indeed in this country at least the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to property which may be moulded and adjusted to give effect to the application and interplay of equitable principles in the circumstances of the particular case. 98

Bruce Collins QC is known for his experience in large-scale commercial, insolvency, construction, and engineering and joint venture disputes, often where technical and complex cross examination is involved. Bruce has an international reputation in the field of commercial arbitration and litigation. As well as appearing as counsel in many commercial arbitrations, he has also appeared in the Privy Council, the Full Federal Court and the High Court of Australia, the Supreme Court of New South Wales, Queensland and other States and Territories of Australia and the appellate courts, the Australian Capital Territory, and Fiji.

1. This article has its origins in a paper delivered at the International Trust Litigation Conference in Geneva on 17 June 2014.

2. See Stack v Dowden (2007) 2 AC at 444 where reference is made to Lord Diplock’s ‘insouciant approach to taxonomy’ in Gissing v Gissing (1971) AC 886, 905.

3. Dr Sykes ‘The Doctrine of Constructive Trusts’ (1941) 15 ALJ 171, 175.

4. In RP Austin ‘Constructive Trusts’ in PD Finn (ed), Essays in Equity (1985).

5. Williams v Central Bank of Nigeria (2014) WTLR 873, —.

6. In Muschinski v Dodds (1985) 160 CLR para 14.

7. See FHR European Ventures LLP v Cedar Capital Partners [2014] UKSC 45, para 29.

8. (2014) UKSC 45, 32.

There is in truth nothing more English than a constructive trust, along with the novels of P G Wodehouse, long games of cricket on June afternoons, and the English language itself.

The Remedial Constructive Trust’ is perhaps the most intractably difficult and obscure of these four contested areas. Here the external shocks which have shaken doctrine derive from the combination of secularization and moral pluralism which has changed the structure of family life and, perhaps less importantly, from the ups and downs of the housing market. The constructive trust, be it remedial or substantive, has been enlisted in the quest for acceptable solutions to the proprietary problems of unmarried divorce. It has been compelled to make large but arguably false claims both to be equity’s response to unjust enrichment and to be able to mobilize that concept to solve the economic problems of partners who split up. However, the real source of the turbulence through which the constructive trust is currently hurtling may be more more mundane: language is being used, if not with disregard of meaning, at least without being properly explained and understood, certainly not with the degree of clarity upon which Lord Wilberforce would insist. Why is this? Either there has been a mercifully unintended lapse in the usual standards of lawyerly analysis. Or, more worryingly, ‘equity on the move’ (to adapt Mr. Davies’ graphically threatening phrase) has stirred up the forces of the myopic (concept) of intuitive fairness, decked out in the mumbo-jumbo of unfamiliar vocabulary, to inflict a deeper and premeditated defeat upon the rationality, and justice, of lucidity and precision. The defenders of the latter are now embattled but, at least in England and despite the fact that their strategies differ, they are not in danger of imminent defeat.

11. See n 9 above.

12. FHR European Ventures LLP & Ors v Cedar Capital Partners LLC (2014) UKSC 45.

13. (1996) AC 669, 716.

14. See Giumelli v Giumelli (1999) 196 CLR 101, para 2.

An express trust is a substantive institution. Constructive trust, on the other hand, is purely a remedial institution. As the Chancellor acts in personam, one of the most effective remedial expedients at his command was to treat a defendant as if he were a trustee and put pressure upon his person to compel him to act to compel him to act accordingly.

16. See Chapter 9, Dennis Pavlich, Trusts in Common-Law Canada (Lexis Nexis 2014).

17. (1676) 3 Swans 585.

18. Paragon Finance v DB Thakerar (1999) 1 All ER 400, 413.

19. Baumgartner v Baumgartner (1987) 164 CLR 137, 147 (Mason CJ, Wilson, and Deane JJ).

20. Lonrho (1991) 4 All ER 961.

21. Westdeutsche Landesbank Girozentrale v Islington London Borough Council (1996) AC 669, 714

22. Williams (n 5) para 8.

23. (1874) 9 Ch App 244.

24. Williams (n 5) para 152. Gwembe Valley Development Co Ltd v Koshy (No 3) (2004) 1BCLC 131.

25. Gwembe Valley Development Co Ltd v Koshy (No 3) (2004) 1BCLC 131.

26. See n 5, para 26.

27. McLelland AJA (with whom Priestley and Meagher JJA agreed) in Greater Pacific Investments Pty Ltd (In Liq) v Australian National Industries Ltd (1996) 39 NSWLR 143, 152–53.

28. Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41.

29. Ibid., 125.

30. See n 6, 614.

31. Ibid., 615.

33. Ibid., 616.

34. Ibid., especially at 614.

35. David Wright, The Remedial Constructive Trust (Butterworths 1998) 59.

36. (1985) 160 CLR 583.

37. Pp 615–17.

38. (1987) 164 CLR 137.

39. Keith Mason (2010) 4 Journal of Equity 98.

40. Bell Group (In Liq) v Westpac Banking Corp 2008 225 FLR1BC 200809492, [4798].

41. (2008) 225 FLR 1.

42. (1987) 16 FCR 536.

43. (2012) FCAFC 6.

44. (1878) 3 App Cas 1218, 1278–79.

45. 2003 77 ALJ30.

46. Para 504.

47. Para 10.

48. (1884) 9 App Cas 699, 714.

49. (2007) EWHC 2061, para 274. His Lordship also said that there was no binding English authority against the remedial constructive trust.

50. See also Grimaldi (n 43) para 511 where the Full Federal Court agreed with Professor Austin’s opinion that ‘a proprietary remedy should never be regarded as mandatory.’

51. n 6 above.

52. (2007) 230 CLR 89, 172.

53. See Grimaldi (n 43) para 105.

54. See n 55, para 5.

55. This carries with it of course, an acceptance of the divisions or classifications of Lord Browne-Williamson.

56. Grimaldi (n 43) para 504.

57. Bathurst City Council supra quoted in Grimaldi (n 43) para 506

58. Grimaldi (n 43) para 505.

59. See Baumgartner v Baumgartner (n 19) 147 (Mason CJ, Wilson, and Deane JJ).

60. (1992) 175 CLR 621, para 15.

61. Dawson, Gaudron, and McHugh at para 15.

62. Para 14.

63. See n 60.

64. See n 8.

65. Ong on Equity (The Federation Press 2011) 173.

66. 23rd edn.

67. Ibid., 131.

68. ‘Constructive’ as opposed to ‘actual’. See Snell ibid., 2 and see too Grimaldi (n 43).

69. (1983) 2 Lloyd’s Law Reports 658, —-.

70. In an article published in Current Legal Problems 1973 and fully reproduced in the 6th edn of Nathan and Marshall’s Cases and Commentaries on the Law of Trusts (1975) 352–64.

71. (1737) 1 Ath 398. Oakley made the same point in his monograph, Constructive Trusts (Sweet and Maxwell 1978)

Ch 2 dealing inter alia with inequitable conduct.

72. (2005) EWCA Civ 722.

73. (1998) 3 All ER 812.

74. See the helpful analysis of Peter Watts in (2009) 3 Journal of Equity No 3 at 250, Constructive Trusts and Insolvency and the treatment of the problem in Grimaldi (n 43) which ventured the solution of postponing the effect of the constructive trust to take account of bankruptcy.

75. William Swadling, Policy Arguments for Proprietary Restitution Unjust Enrichment in Commercial Law (S Degeling and J Ederman eds, Law Book Company 2008) 365–66.

76. Hon Keith Mason, ‘Deconstructing the Constructive Trust’ (2010) 4 Journal of Equity 98, 112.

77. See also Parsons a decision of the Full Federal Court (2001) 109 FCR 120.

78. See n 5.

79. (2014) UKSC 45, para 47 (16 July 2014).

80. 1996 AC 669, 714–16.

81. (2003) 2 BCLC 241, para 28.

82. See n 6, para 14.

84. Grimaldi (n 43) para 511.

85. See n 6.

86. (1926) Sel Cas T King 61.

87. Regal (Hastings) Ltd v Gulliver (1967) 24C 134 and Boardman v Phipps (1967) 2 AC.

88. Above at __.

89. (2014) UKSC 45, para 12.

90. See n 60.

91. See Gummow in 47 ALJ ‘Equity too Successful?’ and

92. See Black v S Freedman (1910) 12 CLR 105, 110, Newton v Porter (1877) 69 NY 133 (tracing stolen money into property, without pre-existing fiduciary relationship) and Proprietary Remedies in Context, Rotherham.

93. See for example William Swadling, ‘The Fiction of the Constructive Trust’ (2011) 81(64) Current Legal Problems 399–433 and Professor Michael Bryan, What Exactly is a Remedial Constructive Trust (available online).

94. See n 60.

97. Per the High Court in Giumelli v Giumelli (1999) 196 CLR 101, para 4. Giumelli was a decision based upon ‘good conscience’. See paragraph 2 of the joint judgment.

98. Muschinski v Dodds (n 6) 617.

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• Estate & Trust Planning

Constructive Trusts and the “Elastic” Power of Equity

Law without principle is not law; law without justice is of limited value. Since adherence to principles of “law” does not invariably produce justice, equity is necessary.

• Aristotle, Nicomachean Ethics

By Gary E. Bashian* Perhaps because of their equitable, ancient, and amorphous nature, Constructive Trusts are often misunderstood by both advocates and, on occasion, the judiciary itself. Nevertheless, though rooted in age old equitable principles, Constructive Trusts have many applications; are not to be underestimated or overlooked; and can prove invaluable tools for Trusts and Estates litigators when and where they are properly used. Preliminarily, it must be noted that the very purpose of a Constructive Trust as a remedy is often misconstrued. Constructive Trusts may be able to do many things, but the doctrine is limited insofar as it is not an “intent enforcing” mechanism, but rather a “fraud rectifying” device .  Advocates sometimes overlook this important distinction and seek the imposition of a Constructive Trust to enforce the stated, or presumed, intentions of an individual or entity, only to be met with dismissal either pre-answer or upon Summary Judgment as it is simply not within the power of a Constructive Trust to force a Defendant’s compliance with an unfulfilled promise. Indeed, it is sometimes helpful to think of Constructive Trusts as a Cause of Action sounding in Fraud, but one that is subject to equitable review because some essential element necessary to sustain a Cause of Action for Fraud is not present.  As Constructive Trusts are often used as Fraud rectifying devices, it should come as no surprise that the applicable Statute of Limitations is six years, with a discovery rule based on the wrongful/proper “taking” analysis used in a conversion action . A similar, but slightly different way of thinking about Constructive Trusts as a Fraud rectifying device, is to consider it as an equitable tool for preventing Unjust Enrichment . Generally, Constructive Trusts fall into one of two types.

• The first common situation where the imposition of a Constructive Trust is appropriate is where one party has an equitable interest in an asset, but does not have legal title. Upon the party’s attempt to enforce their equitable interests, the legal title holder refuses to acknowledge that the non-title holder has any rights. A good example of this situation is where one party invests monies in a real property, the deed is in another party’s name, and legal owner of the real property thereafter denies the other party access, use, and/or rights to the real property .
• The second common type of Constructive Trust is where title of an asset is transferred from one party to another based on the promise that it will be returned , or turned over to a rightful beneficiary, at a later time. Thereafter, when the party who no longer has, or can claim, legal title to the asset demands its return, the legal title holder refuses, and retains the asset in their sole ownership.

In order to establish these two common types of Constructive Trusts, a Plaintiff must plead, and subsequently prove, that:

• A confidential and/or fiduciary relationship existed between the parties at issue;
• Defendant made either an express or implied promise;
• A transfer was effected by the Defendant’s Promise; and
• The Defendant was unjustly enriched by said transfer.

However, a Plaintiff is not strictly bound by these elements, nor are Constructive Trusts restricted to the two most common examples described above. Equity, after all, has evolved throughout the history of Jurisprudence to ensure justice when and where the rigid formalism of the law cannot. Indeed, given the nature of an equitable action and the fact that a Constructive Trust is primarily a device to prevent Unjust Enrichment, the Courts have allowed flexibility in the pleading standards of a Constructive Trust, i.e.: a Plaintiff need not necessarily prove each element, nor must the facts rigidly conform to the above listed elements. As the Court of Appeals has made clear that when applying Constructive Trusts: “[t]he equity of the transaction must shape the measure of relief” , thus allowing the doctrine of Constructive Trusts to remedy a myriad of wrongs in many situations where the power of equity is appropriately used. Nevertheless, just because the Court has the equitable power to apply Constructive Trusts in a host of situations, does not mean that they have not had issues determining the limitations of the doctrine, or the standards required to plead and prove why a Constructive Trust should be imposed. In Bower v Bower , the Monroe County Supreme Court offered a thoughtful and detailed discussion about the “conundrum” the Court faces when asked to impose a Constructive Trust outside the more familiar and commonplace fact patterns. Recognizing the “elasticity” of equity, and being guided by the broad powers outlined by the Court of appeals in Simonds v Simonds , the Court characterized Constructive Trusts as creatures of “[u]nfettered equity” which “converts the doctrine of a constructive trust into a subjective judicial judgment about the fundamental ‘fairness’ of a transaction.” Ultimately, the Supreme Court’s analysis is that Constructive Trusts are a loose, equitable framework within which the Court identifies wrongdoing, determines damages in terms of the degree to which a Defendant was unjustly enriched, and orders restitution to the Plaintiff so as to prevent the Defendant from receiving a benefit from their wrongdoing. Though it was not without hesitation that the Court defined Constructive Trusts in this manner – nor without concern or consideration as to how the Court should address the burden of proof; standards of proof; or even the absence of one or more of the accepted elements of the cause of action given the ill-defined boundaries of the doctrine – but its analysis about the nature of the Constructive Trust Doctrine, and the power which it affords the Court to ensure that substantial justice is achieved, could not be more incisive or apt. As a legal doctrine, Constructive Trusts can offer an effective means to protect a client’s equitable rights. The broad and powerful nature of this form of relief cannot be discounted, and should always be considered where and when, in the presence of unjust enrichment, a more commonplace or familiar remedy simply cannot right the wrong that has been done.   *Gary E. Bashian is a partner in the law firm of Bashian P.C. with offices in White Plains, New York and Greenwich, Connecticut. Mr. Bashian is a past President of the Westchester County Bar Association, he is presently on the Executive Committee of the New York State Bar Association’s Trust and Estates Law Section, is a past Chair of the Westchester County Bar Association’s Trusts & Estates Section, past Chair of the Westchester County Bar Association’s Tax Section, and a member of the New York State Bar association’s Commercial and Federal Litigation Section.   Mr. Bashian gratefully acknowledges the contributions of Andrew Frisenda, a Sr. Associate of Bashian P.C. , for his assistance in the composition of this article. Bankers Security Life Insurance Society v Shakerdge , 49 Ny2d 939 [1980] Sitkowski v Petzing , 175 AD2d 801 [2nd Dept 1991] Sharp v Kosmalski , 40 N.Y.2d 119 [1976] see generally Washington v Defense , 149 AD2d 697 [App Div 2 nd Dept 1989] see generally Farano v Stephanelli , 7 AD2d 420 [App Div 1 st Dept 1959] Simonds v Simonds , 45 NY2d 233 [1978] Bower v Bower , 42 Misc.3d 1231(A) [Monroe Sup Ct 2014] ibid

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Land Law: Constructive Trusts

Constructive trusts, what are constructive trusts.

Constructive trusts are a form of implied trust . They are exempt from the formality requirements needed to create a new interest in land. They are also capable of constituting overriding interests that can bind third parties. In different jurisdictions, there are two forms of constructive trust:

• Institutional : the trust is created by law from the date the legal requirements are established. While a claimant will normally go to court to prove they have a trust, the court does not create the trust – they merely declare that it already exists.
• Remedial : the court creates the trust, and has discretion as to whether it has retrospective effect.

Constructive trusts in English law are institutional only: Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669.

Types of Constructive Trust

There are many kinds of constructive trusts. The main ones include:

• ‘Common intention’ constructive trusts;
• Rochefoucauld v Boustead trusts;
• Pallant v Morgan trusts;
• Trusts required to fulfil the maxim ‘equity sees done what ought to be done’. These include trusts for land subject to a specifically enforceable sale contract ( Lysaght v Edwards (1876) LR 2 Ch D 499) and trusts of wrongful fiduciary gains ( FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45);
• Trusts granted as a remedy after a successful proprietary estoppel claim; and
• A ‘trust de son tort’: a non-trustee who takes it on themselves to meddle with a trust, or who acts as if they were a trustee, will be held liable as a constructive trustee.

Common Intention Constructive Trusts

Establishing the trust.

Where parties acquire property at law in joint names but don’t specify who owns the equitable title, the equitable title is rebuttably presumed to be a joint tenancy : Stack v Dowden [2007] UKHL 432. This means that each party holds the legal title on constructive trust for the others. Problems arise when only one party owns the legal title – a common intention constructive trust must be separately established.

To establish a common intention constructive trust, two elements are required:

• A common intention between the parties that they would share in the equitable title;
• That one party acted to their detriment in reliance on this common intention.

There are two ways in which a common intention can arise:

The parties may have expressly agreed to share the property or had discussions that make clear this was their intention: Lloyds Bank v Rosset  [1991] 1 AC 107. There must be positive discussions, however: it is not enough that the parties had unspoken expectations – James v Thomas  [2007] EWCA Civ 1212. It is not necessary for the parties to have agreed shares: Drake v Whipp   [1996] 1 FLR 826.

The courts will infer common intention if the non-legal owner contributed to the purchase price, other than as a gift or loan: Lloyds Bank v Rosset  [1991] 1 AC 107. This can be somewhat indirect, such as transferring a discount: Oxley v Hiscock  [2004] EWCA Civ 546. However, completely indirect contributions, such as to household expenses, are not enough ( Burns v Burns [1984] Ch 317) unless designed to free up one party to pay the mortgage ( Le Foe v Le Foe [2001] 2 FLR 970). Non-financial contributions do not count.

The Lords in Lloyds noted that the court may find an express agreement where the parties would have agreed to the share the property but one party gives a false excuse as to why the other cannot be on the legal title. Other cases have taken the same approach: Eves v Eves   [1975] 1 WLR 1338; Rowe v Prance [1999] All ER D 496.

Detriment can take any form.

• In implied common intention cases, the contribution to the purchase price is enough to establish the detriment as well.
• In express cases, example detriments include home improvements and substantial labour ( Eves v Eves  [1975] 1 WLR 1338) or contributions to household expenses or the mortgage ( Grant v Edwards  [1986] Ch 638).

There must be a causal link between the intention and the detriment. The claimant must at least partially be motivated by the belief they are entitled to property when they incur the detriment: Wayling v Jones (1995) 69 P & CR 170.

Quantifying the Trust

The starting point for determining a person’s entitlement to the equitable title under a constructive trust is the legal title: equity mirrors the law. So, where property is transferred to two people under a joint tenancy at law, it is presumed that there is a joint tenancy in equity: Stack v Dowden [2007] UKHL 432. Problems arise when one party to a legal joint tenancy argues they are entitled to more, or where there is only one legal owner.

Departure from the presumption of equitable joint tenancy should be rare and requires unusual facts: Stack v Dowden [2007] UKHL 432. A strong factor is that the parties kept their financial affairs separate instead of pooling their resources: Fowler v Barron [2007] 2 AC 432. Other factors include any express discussions; what each party contributed to financing the property and its outgoings; and the purpose for which the property was acquired.

When only one person owns the legal title, the courts should allocate shares in the equitable title according to what they believe the parties intended: Stack v Dowden [2007] UKHL 432. This is likely to be difficult, as parties rarely discuss such things explicitly. The same factors relevant to departing from the presumption of joint tenancy are relevant to determining shares where there is only one legal owner.

In either case, it is possible for the parties’ common intentions to change across the course of the relationship. If so, their shares will change: Jones v Kernott [2012] AC 776.

Rochefoucauld v Boustead Trusts

These trusts arise from the maxim that equity will not allow a statute to be used as an instrument of fraud. They are named after the case establishing them: Rochefoucauld v Boustead [1897] 1 Ch 196. There is some controversy over whether they are best classed as express, resulting or constructive trusts.

A constructive trust is imposed in two situations:

Where a S transfers property to T on trust with S as the intended beneficiary, but the requirements for an express trust are not established (typically the formalities requirements): Bannister v Bannister [1948] 2 All ER 133.

Where S transfers property to T with express provision that the transfer is subject to B’s property or personal rights, or on an express trust for B which fails: Archibald v Alexander [2020] EWHC 1621.

The Rochefoucauld v Boustead trust prevents the intended trustee from reneging on the agreement and keeping the property for themselves. It arises because it is unconscionable for the intended trustee to go back on their word.

In a three party case, it is not clear in whose favour the trust arises. Is S the beneficiary, or B? This may turn on what kind of trust the doctrine creates, which has never been confirmed by the courts:

• If this doctrine creates an express trust, the logical beneficiary is B. This is because B is the intended beneficiary.
• If it creates a resulting trust , then the logical beneficiary is S. This is because T is unjustly enriched at S’s expense, and a resulting trust aims to reverse this.
• If the trust is constructive, there are arguments for either S or B. If the goal is to enforce the promise, B should be the beneficiary. On the other hand, equity does not assist a volunteer, and B is a volunteer.

Pallant v Morgan Trusts

The Pallant v Morgan trust is also based on a transferee reneging on an agreement, but unlike the Rochefoucauld v Boustead trust more is required. It has been described as a special type of common intention constructive trust: Crossco No 4 Unlimited v Jolan Limited [2011] EWCA Civ 1619.

To establish this trust, the claimant must show: Banner Homes Group plc v Luff Developments [2000] EWCA Civ 3016

• The parties had an arrangement that arose before either of them acquired the property (though one case suggested it can apply to an agreement entered into after acquisition: Farrar v Miller [2018] EWCA Civ 172). This arrangement does not need to be contractually enforceable, but the parties should intend it to be immediately binding (see Generator Developments Ltd v Lidl UK GmbH [2018] EWCA Civ 396).
• The arrangement envisaged that one of the parties (the acquiring party) would take steps to acquire property, and when they succeeded the other party (the non-acquiring party) would get some interest in that property.
• In reliance on the arrangement, the non-acquiring party does or fails to do something which gives the acquiring party a benefit in acquiring the property, or disadvantages the non-acquiring party’s ability to get the property themselves.
• The acquiring party fails to tell the other party before acquisition that he no longer intends to honour the agreement.
• The circumstances make it unconscionable for the acquiring party to go back on the agreement.

If these requirements are met, the acquiring party will hold the property on trust for the non-acquiring party.

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Constructive trusts over the family home: lessons to be learned from other commonwealth jurisdictions.

Published online by Cambridge University Press:  02 January 2018

Ownership of the family home is usually not disputed until either the relationship between the spouses or cohabitants breakdown or there is a competing claim over the property by a third party. In such circumstances, determination of ownership rights becomes imperative. The Matrimonial Causes Act 1973 gives the courts adjustive powers to deal with disputes between spouses on the breakdown of the marriage. Notwithstanding this, there may be circumstances where it will be necessary or desirable to determine property rights between spouses. Furthermore, the adjustive powers of the courts are not applicable to cohabitants. Thus, in the absence of legal co-ownership in the family home, cohabitants and spouses who cannot rely on the 1973 Act will have to establish an equitable interest in the property. The analyses relied on are primarily based on property law and trusts principles and, more particularly, imputed trusts and proprietary estoppel. Under trusts principles, imputed trusts are usually taken to refer to resulting and constructive trusts.

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1. Section 28(3).

2. Eg where the marriage has not broken down or the adjustive powers of the courts are inapplicable because a spouse's remarriage.

3. Tinsley v Milligan [ 1992 ] Ch 310, CA; [ 1993 ] 3 WLR 126 , HL. Cf Re Sharpe [ 1980 ] 1 WLR 219 , Risch v McFee [199] 1 FLR 105 and Richards v Dove [1974] 1 All ER 888, where the financial contributions made were construed by the courts as being loans rather than for the purpose of acquiring a share in the property. This raises the question of the construction to be given to contributions made for the purposes of ascertaining whether a resulting trust actually arises. Google Scholar

4. Hofman v Hofman (1965) NZLR 795, per Woodhouse J at 800.

5. [ 1991 ] I AC 107 . Google Scholar

6. [1971] AC 886.

7. [1970] AC 777.

8. [ 1975 ] I WLR 1338 . Google Scholar

9. [1986] Ch 638.

10. In both Eves and Grant v Edwards , the defendants had given excuses to the plaintiffs for not sharing the legal title in the properties and the plaintiffs had made indirect contributions rather than direct financial contributions. However, the courts construed the fact that excuses had to be given for not sharing the legal title as evidence of some common intention to share.

11. [1981] AC 487.

12. Per Lord Bridge, at 133.

13. Gardner , S ‘ Rethinking Family Property ’ ( 1993 ) 109 LQR 263 . Google Scholar

14. Burns v Burns [1984] Ch 317.

15. See above n 10. Although Eves and Grant v Edwards were decided prior to Rosser and therefore cannot be attributed to it per se, these cases were not expressly overruled in Rosset . Thus, it would seem that the reasoning of the courts in both these cases for finding a common intention remains sound.

16. Clarke , P ‘ The Family Home: Intention and Agreement ’ ( 1992 ) 22 Fam Law 72 at 74 . Google Scholar

17. Above n 13 at 265.

18. Per Dickson , J , Pertkus v Becker ( 1980 ) 117 DLR (3d) 257 at 270 . Google Scholar

19. Neave , M ‘ Living Together - the Legal Effects of the Sexual Division of Labour in Four Common Law Countries ’ ( 1991 ) 17 Monash Univ LR 14 . Google Scholar

20. K O'Donovan Sexual Divisions in Law (London: Weidenfeld & Nicolson, 1985). Sexual division of labour refers to the system whereby the parties take on distinct roles of responsibility in which the female partner is the primary partner caring for the family and the male partner is the main wage-earner responsible for bringing home the family's income.

21. Ibid, ch 5; H Land Parity begins at home (London: EOC/SSRC, 1981).

22. Women and Men in Britain 1995 (London: EOC, 1995).

23. Labour Force Survey, Spring Quarter (London: HMSO, 1994).

24. A Morris ‘Women and Labour’ paper presented at the University of Kent, Canterbury, 5 March 1997.

25. New Earnings Survey , 1996 (London: HMSO, 1996).

26. New Earnings Survey , 1995 (London: HMSO, 1995).

27. J Eekelaar ‘A Woman's Place — A Conflict between Law and Social Values’ (1987) Conv 93 at 94.

28. Neave above n 19.

29. O'Donovan above n 20 at 118.

30. Aboven 13.

31. A Bottomley ‘Self and Subjectivities: Languages of Claim in Property Law’ ( 1993 ) 20 JLS 56 . CrossRef Google Scholar

32. Ibid at 62.

33. Ibid at 64.

34. J Pahl Money and Marriage (Basingstoke: Macmillan Education, 1989). Pahl identifies four basic typologies of management systems: the wife-management system; the allowance system; the pooling system; and the independent management system. For further details on the classification of each system, see pp 67–77.

35. Ibid, ch 9.

36. Ibid. pp 104–109. Pahl notes that male control is more common in families with relatively higher income levels and is usually associated with the allowance and independent management systems. Male control is also evident in the pooling system, especially in families with higher income levels or where the man is the sole wage-earner.

37. Ibid, ch 6. See also Pahl , J and Vogler , C ‘ Money, power and inequality within marriage ’ ( 1994 ) 42 ( 2 ) Sociological Rev 263 . Pahl and Vogler found that the orthodox model of households as egalitarian decision-making units only applied to about one-fifth of households in the study. These were predominantly couples who opted for the pooling system. Inequality between men and women over control of and access to the household finances was least in such households and greatest in either low or higher income households where the finances were male-controlled. Google Scholar

38. Ibid , pp 142 – 146 . See also Pahl , J ‘ Household Spending, Personal Spending and the Control of Money in Marriage ’ ( 1990 ) 24 ( 1 ) J Br Sociological Assoc 119 . Google Scholar

39. MidZund Bunk v Dobson [1986] FLR 171.

40. G Moffat Trusts Law (London: Butterworths, 1994) 454, argues that this may amount to asking the courts to reconstruct the terms of the parties' agreement in order to determine whether there is the requisite nexus.

41. Ferguson , P ‘ Constructive Trusts - a Note of Caution ’ ( 1993 ) 109 LQR 114 . Google Scholar

42. Moffat above n 40, pp 454–455.

43. Lawson , A ‘ The things we do for love: detrimental reliance in the family home ’ ( 1996 ) 16 LS 218 . Google Scholar

44. [ 1995 ] 4 All ER 562 . Google Scholar

45. [ 1996 ] 1 FLR 826 . Google Scholar

46. Cf Clough v Killey [1996] 72 P&CR D22, which re-affirms the more conservative approach of Rosset. The court held that, where there is an express common intention as to co-ownership and shares, the court would enforce this and not adopt a broad brush approach in determining the parties' shares.

47. [ 1991 ] 1 WLR 1127 . Google Scholar

48. For criticisms on Hammond v Mitchell , see a Lawson ‘Acquiring a Beneficial Interest in the Family Home’ [ 1992 ] Con v 218 ; P O Hagan ‘Indirect Contributions to the Purchase of Property’ ( 1993 ) 56 MLR 223 ; and Clarke , L and Edmunds , R ‘H v M: Equity and the Essex Cohabitant’ [ 1992 ] Fam Law 523 . Google Scholar

49. Per Scarman LJ in Crabb v Arun DC [1976] Ch 179 at 198.

50. Moffat above n 40, p 459.

51. Warburton , J ‘ Trusts, common intention, detriment and proprietary estoppel ’ ( 1991 ) 5 TLI 9 . Google Scholar

52. Eves: Grant v Edwards; Midland Bank v Cooke .

53. Eekelaar above n 27 at 99.

54. D Hayton ‘Equitable Rights of Cohabitees’ (1990) Conv 370.

55. Ibid at 378.

56. Cf Ferguson above n 41, which provides a critical analysis of Hay ton's comments. See also Hayton , D ‘ Constructive trusts of homes — a Bold Approach ’ ( 1993 ) 109 LQR 485 , providing a reply thereto. Google Scholar

57. Cf Gardner above n 13, who argues that, despite the flexibility of estoppel principles, an estoppel claim cannot arise in the absence of reasonable belief. Thus, in order for the assimilation of constructive trusts and estoppel to found claims based on indirect contributions, it would mean the abandonment of the referability rule which will allow greater invention of facts by the courts.

58. Cf Warburton above n 51, who argues that any attempt to assimilate constructive trusts and proprietary estoppel appears to be an attempt to re-introduce by the backdoor Lord Denning's ‘new model constructive trust’ and will expose claimants and third parties to the same uncertainty which the new model constructive trust was criticised for.

59. Halliwell , M ‘ Equity as Injustice: the Cohabitant's Case ’ ( 1991 ) 20 Anglo-Am LR 500 . CrossRef Google Scholar

60. See Grensley v Cooke [ 1980 ] 1 WLR 1306 , where the claimant was able to rely successfully on her domestic services; cf Coombes v Smith [ 1986 ] 1 WLR 808 and Rosset where such claims were rejected as being sufficient acts of detrimental reliance. Google Scholar

61. Halliwell above n 59 at 521.

62. Warburton above n 51.

63. Halliwell above n 59 at 520, in fact, argues that disentangling estoppel from common intention would pave the way for increased recognition of non-financial contributions, For an interesting discussion on sexuality and detriment, see L Flynn and A Lawson ‘Gender, Sexuality and the Doctrine of Detrimental Reliance’ [1995] Feminist Legal Studies 105.

64. Above n 13.

65. .( 1985 ) 160 CLR 583 . Google Scholar

66. ( 1987 ) 164 CLR 137 . Google Scholar

67. Neave , M ‘ The Unconscionability Principle - Property Disputes between De Facto Partners ’ ( 1991 ) 5 Aust J Fam Law 185 . Google Scholar

68. ( 1989 ) 12 Fam LR 725 . Google Scholar

69. (1990) DFC #95–095.

70. ( 1990 ) 14 Fam LR 97 . Google Scholar

71. Cf Miller v Sutherland ( 1991 ) 14 Fam LR 416 , where no financial contributions were made towards the acquisition of the property but the claimant succeeded on the basis of the substantial renovation work done by her and her family on the defendant's property. There is, however, nothing in the decision to suggest that the unconscionability-based constructive trust will allow purely domestic services to give rise to a similar result. In fact, it is arguable that, although couched in terms of unconscionability, the court's reasoning was not very different from that taken in Eves , where the plaintiff wielded a fourteen pound hammer. The nature of the non-financial contributions were perceived as going beyond typical ‘women's work’ and were capable of economic valuation. Google Scholar

72. Bryan , M ‘ Constructive trusts and unconscionability in Australia: on the endless road to unattainable perfection ’ ( 1994 ) 8 ( 3 ) TLI 74 . Google Scholar

73. Arthur v Public Trustee ( 1988 ) 90 FLR 203 and Bryson v Bryant ( 1992 ) 29 NSWLR 188 Google Scholar . Refer also to Riley , J ‘The Property Rights of Home-makers under General Law: Bryson v Bryant ’ ( 1994 ) 16 Sydney LR 412 . Google Scholar

74. Cf Green v Green ( 1989 ) 17 NSWLR 343 , where, despite the claimant's lack of financial contribution, her claim succeeded. The court was prepared to infer a common intention from the casual statements made by the deceased as well as to give detrimental reliance a broad interpretation. Bryan suggests that this case illustrates the fact that ‘common intention’ has still survived the introduction of the unconscionability-based constructive trust (above n 72 at 74). Google Scholar

75. ( 1980 ) 117 DLR (3d) 257 . Google Scholar

76. ( 1986 ) 29 DLR (4th) 1 . Google Scholar

77. Dickson J explains (at 274) that the ‘absence of juristic reason’ condition is satisfied ‘where one person in a relationship tantamount to spousal prejudices herself in the reasonable expectation of receiving an interest in the property and the other person in the relationship freely accepts benefits conferred by the first person in circumstances where he knows or ought to have known of that reasonable expectation it would be unjust to allow the recipient of the benefit to retain it’.

78. [ 1993 ] 101 DLR (4th) 621 . Google Scholar

79. Farquhar , K , ‘ Unjust Enrichment, Special Relationship, Domestic Services, Remedial Constructive Trust: Peter v Beblow ’ ( 1993 ) 72 Can Bar Rev 538 . Google Scholar

80. Gardner above n 13 at 273–274.

81. Scane , R ‘ Relationships “Tantamount to spousal”, Unjust enrichment and Constructive trusts ’ ( 1991 ) 70 Can Bar Rev 260 at 278 . Google Scholar

82. ( 1989 ) 61 DLR (4th) 14 . Google Scholar

83. Birks defines free acceptance as one ‘where a recipient knows that a benefit is being offered to him non-gratuitously and where he, having, the opportunity to reject, elects to accept’ ( P Birks Introduction to the Law of Restitution (Oxford: Clarendon Press, 1986) 265). For Birks, free acceptance not only establishes the enrichment but also the unjust factor. This argument has been challenged by both Burrows and Mead: A S Burrows ‘Free Acceptance and the Law of Restitution’ (1988) 104 LQR 576; G Mead ‘Free Acceptance: Some Further Considerations’ (1989) 105 LQR 460. Using Birks' example of the window-cleaner, Burrows, who is supported by Mead, contends that the window-cleaner, in offering his unrequested services, is assuming the role of risk-taker in expecting payment from the recipient. The law of restitution should not be expected to undertake the task of protecting that risk ((1988) 104 LQR 576 at 578). However, Burrows agrees with Birks that there is an unjust enrichment in the situations where services are rendered, albeit unrequested, to the recipient under a mistake.

84. Scane above n 81 at 295.

85. For a detailed discussion of the issue of proprietary link, see Scane above n 81 at 287–304. Cf Gardner's argument that incorporating trust and collaboration within the unjust enrichment analysis will remove problems relating to voluntariness and subjective devaluation by the defendant. It would seem that trust and collaboration raises a similar presumption as that discussed by Scane.

86. Paciocco , D ‘ The Remedial Constructive Trust: a Principled Basis for Priority over Creditors ’ ( 1989 ) 68 Can Bar Rev 315 . Google Scholar

87. M Welstead ‘Domestic Contributions and Constructive Trusts: The Canadian Perspective’ (1987) Denning LJ 151.

88. ‘ Cases like Pettkus (20 years), Sorochan (42 years), Pirie v Leslie ( 1988 ) 29 ETR 246 (Man QB) (nine years) and Boucher v Koch ( 1988 ) 14 RFL (3d) 443 (Alta CA) (20 years) all illustrate how the length of the relationship may be an influential factor in determining whether equitable relief is to be granted. Google Scholar

89. [ 1989 ] 2 NZLR 327 . Google Scholar

90. [ 1993 ] 3 NZLR 159 , CA. Google Scholar

91. [ 1995 ] 1 NZLR 277 , CA. Google Scholar

92. [ 1992 ] 3 NZLR 612 , HC. Google Scholar

93. Above n 81.

94. Daily Mail, 6 November 1996.

95. Above n 59.

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• Volume 18, Issue 3
• Simone Wong (a1)
• DOI: https://doi.org/10.1111/j.1748-121X.1998.tb00023.x

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A discussion of resulting and constructive trusts in the UK

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This paper was first presented on 19 October 1996 at a joint seminar of the Scottish Law Commission, the Faculty of Law, University of Edinburgh, and the Law School, University of Strathclyde, on the subject of Constructive Trusts. Although trusts are a distinctively Common Law institution, seemingly incompatible with Civilian concepts of property, trust law has been received in the mixed South African legal system. But constructive trusts have found no place in South African trust law, and in the view of the author, rightly so. A South African trust is a means of administering property, with the beneficiary receiving only a protected personal right. Trusteeship is seen as a quasi-public office involving the management of property, tending to inhibit the growth of constructive trusteeship. Much of the work performed by the constructive trust can be achieved through the law of obligations, while the acceptance of the institution can produce anomalous results in insolvency. The South African experience suggests that Scots law should continue to reject the constructive trust.

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Bribes and the Institutional Constructive Trust

This essay explores the analytical reasons for arguing that a bribe or a secret commission received by a fiduciary is held on a Constructive trust for the Claimant. Further, it questions the idea that Remedial forms of Constructive Trust should always be rejected in favor of the Institutional Constructive Trust recognized by English law. 

C an one claim a proprietary Constructive Trust rather than equitable compensation in cases involving bribes received by a Fiduciary? 

“the notion that the rule should not apply to a bribe or secret commission received by an agent because it could not have been received by, or on behalf of , the principal seems unattractive. 

The whole reason that the agent should not have accepted the bribe or commission is that it put him in conflict with his duty to his principal”

Prof Alastair Hudson argues:

I argue that Principles of Equity should be supple enough to recognize not just the enduring pre-existing proprietary  rights of a claimant whose property has been the subject of unconscionable dealings by a defendant who may have stolen it or received it under a mistaken belief that it was his or hers’; (Consider Lord Sumption’s analysis in Bailey v Angove’s Pty Ltd [2016] UKSC 47). 

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• Practical Law

Constructive trust

Practical law uk glossary 5-107-6322  (approx. 5 pages).

• A holds funds that he knows have been paid to him by mistake.
• A holds an asset that he has obtained by means of fraud.
• A and another person (B) share a common intention that B should have a beneficial interest in an asset, and B has acted to his detriment on the basis of that intention. This is known as a common intention constructive trust and is often argued in disputes about the ownership of property occupied by cohabitees, as in the leading cases of Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53 .
• Trusts in commercial transactions: Constructive trusts .
• Tracing, following and constructive trusts
• Remedies: restitution: Tracing .
• Co-ownership and severing a joint tenancy: Stack v Dowden and Jones v Kernott .
• Trusts and Fiduciary Relationships