⇒ Constructive Trusts arise by operation of law
⇒ They can arise irrespective of the intention of the parties. But it is possible to bring them about by creating a situation in which they arise.
⇒ There are no well-defined circumstances in which a court will determine a constructive trust
⇒ But there are common circumstances in which constructive trusts have been found (see below)
⇒ The weak unifying factor to all circumstances in which a constructive trust arises, is usually the legal owner has conducted himself in such a way it would be unconscionable for them to maintain their property
⇒ LJ Millet: ‘A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property to assert his own beneficial interest in the property and deny the beneficial interest of another’ Paragon Finance v Thakerar 
⇒ There exists an institution/remedial dichotomy
⇒ The institutional approach limits constructive trusts to defined sets of circumstances, so limits the judge’s discretion in deciding when and how to adjust a person’s beneficial interest
⇒ In Westdeutsche Landesbank v Islington, Lord Browne Wilkinson said an institutional constructive trust “arises by operation of law as from the date of circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past”
⇒ Most common law countries use the remedial approach (e.g. Australia), but the English courts have been more cautious/restrictive preferring the institutional approach
⇒ During the 1970s the court of appeal, led by Denning, said court need not be so formulaic, viewing constructive trusts as “imposed by law whenever justice and conscience require it” (Hussey v Palmer 1972)
⇒ Later English decisions rejected this “new model” of constructive trusts e.g. Lloyds Bank v Rosset 
⇒ Also see the case of FHR European Ventures LLP v Cedar Capital Partners LLC 
⇒ Constructive trusts will give rise to equitable interests:
⇒ Equitable remedies such as tracing and account will be available to the beneficiary
⇒ There is no obligation to invest or to observe the usual duty of care for a constructive trustee → it is unreasonable to impose such obligations in cases in which they did not know that they were a trustee
⇒ The duties of constructive trustees aren’t that clear and will vary by the circumstances
⇒ Privacy and Loyalty (P. Birks, 1997):
⇒ Lonrho v Fayed (No 2): “it is a mistake to suppose that in every situation in which a constructive trust arises the legal owner is necessarily subject to all the fiduciary obligations and disabilities of an express trustee” (Millet J)
⇒ Constructive trusts arise in a wide variety of circumstances.
⇒ There is no requirement for the legal owner to have acted in any way dishonestly or discreditably - it is not dishonest to be paid money by mistake. It may be unconscionable to keep the money after the mistake has been bought to the attention of the recipient.
⇒ Common circumstances giving rise to constructive trusts:
⇒ Constructive trusts are the major remedy for a breach of fiduciary duty – these constructive trusts are institutional
⇒ See the case of Keech v Sandford (1726), for example
⇒ If by mistake, the claimant conveys title to the wrong person, or the wrong property is conveyed to the intended person, or the claimant is otherwise induced to act by reason of mistake, the transfer can be set aside.
⇒ Constructive trusts can arise from Mutual Wills. A Mutual Will is where two or more people agree to make wills and not to revoke those wills without mutual consent i.e. they intend their wills to be mutually binding
⇒ If first to die performs, then it will be unconscionable for second to deviate from terms.
⇒ However, it is not necessary the parties be beneficiairies of the other party’s will or that they should leave property to the same person(s): they just need to agree where property should go
⇒ Following the death of the first party, the second party holds the property on a constructive - Olins v Walters
⇒ There must be an agreement between the parties not to revoke their wills i.e. intention
⇒ This agreement must amount to a clear contract in law
⇒ Conduct may infer an agreement to create a Mutual Will, but usually it is cited in the Wills itself that the wills are mutually binding
⇒ If the Mutual Will is broken by the first person, their estate is liable in damages: Robinson v Ommanney
⇒ For a long time it was assumed no remedy could be obtained against the second party to die, due to the privity doctrine → however, it may now be possible for the beneficiary to enforce the contract in his own right under the Contracts Act 1999
⇒ Nevertheless, if a Mutual Will creates a trust in favour of a beneficiary they can enforce the trust against the survivor: In the Goods of Heys  and s7(1) Contract Act 1999
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⇒ Contract to sell land is specifically enforceable where damages is inadequate
⇒ The vendor, on conclusion of a sale, holds it on constructive trust for the purchaser.
⇒ The Vendor must take reasonable care of property until the transfer is completed (Englewood v Patel 2005)
⇒ This is because we have a split of interests — legal and equitable.
⇒ Not the same as trustee and beneficiary, since each have their own interests. But enforceable like duties of a contract
⇒ Does not passpan to sub-purchaser.
⇒ Secret trusts take effect on the testators death and do not comply with the requirements of the Wills Act.
⇒ With a secret trust the testator normally leaves property to someone, prima facie an outright gift.
⇒ BUT, the donee in the circumstance of a fully secret trust has agreed to take on certain trusts
⇒ A half secret trust is where property is left on trust in a will but without specifying the terms of the trust i.e. the will doesn't say where the property should go
⇒ Fully secret trusts are frequently identified as constructive trusts (Oakley 1997), whereas half-secret trusts are often considered to be a species of express trust because they are disclosed on the face of the will (Martin 1997)
⇒ Hudson argues all secret trusts ought to be considered constructive trusts effected to provide an exception to the Wills Act 1837 and thus prevent a legatee under a will from asserting an unconscionable beneficial title to property
⇒ Usually to keep the identity of the beneficiary secret, or to benefit an illegitimate child with a mistress
⇒ Where the testator is undecided about dispositions.
⇒ Secret trusts may be enforceable despite not conforming with the Wills Act.
⇒ Constructive trusts are imposed where property is gained through fraud (Rouchefoucauld v Boustead 1897)
⇒ However, if there is fraudulent misrepresentation, the constructive trust will not arise unless the contract is voided: Lonrho v Al Fayed (No 2)  → this is because the victim of the fraud may wish to affirm the transaction despite the fraudulent misrepresentation
⇒ Bribes and secret comission are essentially synonymous
⇒ Any bribe taken by a fiduciary will be held on constructive trust by that fiduciary for the beneficiaries of her fiduciary office → this principle has, however, been doubted in recent cases
⇒ In Lister v Stubbs, it was held that the claimant could not claim title to the property acquired by the bribes
⇒ Reading v Attorney General  took a different view, where the court seemingly awareded a propriety remedy over the bribes
⇒ In Attorney General of Hong Kong v Reid , the Privy Council overruled Lister v Stubbs and held that a proprietary constructive trust is imposed as soon as the bribe is accepted by its recipient
⇒ But then Sinclair Investments v Versailles Trade Finance Ltd  came and cast doubt on the Reid principle → the court of appeal held in this case that there should be no constructive trust as to maximise assets available to unsecured creditors
⇒ A constructive trust will be imposed in circumstances in which the claimant has refrained from exploiting some commercial opportunity in reliance on some agreement or pre-contractual understanding reached with the defendant i.e. ‘the equity in Pallant v Morgan’
⇒ Pallant v Morgan : the defendant and the plaintiff (i.e. claimant) owned adjacent land. Some woodland was for sale and the parties agreed that the defendant would bid for it for them both, with the exact proportions on which the land was to be held to be agreed later. The defendant succeeded but the parties were unable to agree how to divide the land. The judge did not make an order for specific performance, however, where property was obtained by one party as part of a joint enterprise, the property was held on constructive trust for both parties.
⇒ Also see the case of Banner Homes v Luff Developments 
⇒ A person cannot benefit from their crime: a killer will become a constructive trustee of any property acquired from the killing, and will be held for the next entitled
⇒ Murder → you cannot benefit if you murder someone (In the Estate of Crippen 1911)
⇒ Criminal killing
⇒ Manslaughter → the general rule is that all forms of manslaughter count (cf. statutory relief, below), although Re K (Deceased) 1986 says involuntary manslaughter is not included
⇒ Dunbar v Plant (Suicide Pact) → a suicide pact survivor may be able to get property still
⇒ There are a number of ways in which a killer can get money/property from killing someone...
⇒ Intestacy → if the murdered person has no will but under state rules the murderer would have got the property, they cannot get that property
⇒ Life insurance
⇒ Pension → killed husband and should get a widowers pension
⇒ Joint tenants (on trust 50/50) → usually 100% goes to survivor, but when you have killed someone 50% is retained by survivor and other half is held on constructive trust for the beneficiaries
⇒ Life tenant (postpone enjoyment until victim’s life expectancy) → so determine how long the person should have lived and should wait that time until you can get the property
⇒ Grandchildren? → The law did say that if a person kills their parents, the grandchildren of the person killed could not get the benefit either: this was felt a bit unfair
⇒ Estates of Deceased Person Act 2011 → this says property will skip the killer and go to the next person in line (which could potentially be the grandchildren)
⇒ Forfeiture Act 1982 → forfeiture means you cannot benefit if you kill someone, but s.2 Forfeiture Act gives the court the power to modify the application of the principle in individual cases
⇒ Under s.2 Forfeiture Act 1982 the court can consider:
⇒ Judicial commentary on “where the justice of the case requires” held to include:
⇒ Chadwick v Collinson & Ors  → judgement unequivocally shows that only in the most extreme and mitigating circumstances will the court disapply the forfeiture rule
⇒ Third parties (“strangers” to trusts) can be made constructive trustees in three ways:
⇒ See the relevant topic notes on these...
⇒ A trustee de son tort is a person who has intermeddled in the affairs of the trust without proper authority and has, in effect, become a trustee through his or her wrongdoing.
⇒ To qualify as a trustee de son tort the person must have assumed some measure of control of the trust property.
⇒ Honesty is irrelevant i.e. you don't have to be deceitful to qualify as a trustee de son tort
⇒ This is where a trustee disposes of trust property in breach of trust and someone (the defendant) dishonestly assists in that
⇒ So the defendant here has not received trust property - if he had done, that would be knowing receipt
⇒ As the defendant has no received trust property a constructive trust is not possible and only personal remedies are available
⇒ If someone receives property knowing it was conveyed in breach of trust, they be liable to return the property and they may also be personally liable to compensate for any loss caused
⇒ Where one of the partners is the sole legal owner of property, the other partner may have a proprietary interest in the property on 4 grounds: an express trust; a purchase money resulting trust; a Common Intention Constructive Trust; or by Proprietary Estoppel.
⇒ Where parties have entered into a relationship with a common intention (expressly or impliedly) that property is to be held between them in a particular way, equity may enforce that common intention by the imposition of a constructive trust as it would be unconscionable to allow the other party to deny the beneficial interest of the claimant
⇒ In the absence of evidence of express agreement, inferences of a common intention to grant a beneficial interest will arise when the party has made a direct financial contribution to the acquisition of the property
⇒ Indirect contributions, such as homemaking, will not be considered unless there was an express agreement to recognize them.
⇒ Perhaps the most difficult issue is where the legal owner has responsibility for and meets all the mortgage payments, but is only in a position to do so because the other partner is meeting other household expenses, such as utility bills, maintenance etc.
⇒ A constructive may arise on the same facts as a proprietary estoppel → In both cases, it would be inequitable to deny the claimant's proprietary rights → there is some support for the notion that both doctrines should be merged into a single law of restitution.
⇒ A constructive trust will arise at the time that the necessary conditions are met and will be retrospective; while estoppel concerns asserting an equitable claim against the “true owner.”
⇒ While a constructive trust is institutional rather than remedial, estoppel may be remedial.
⇒ Proprietary estoppel requires the elements of representation, reliance and detriment.
⇒ See the case of Crabb v Arun District Council 
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