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Martin Notes Constructive Trusts Arises by operation of law and not by reason of the intention of the parties, express or implied Parameters left deliberately vague, so as to allow judges greater discretion General statement: where a person holds property in circumstances in which in equity and good conscience it should be held or enjoyed by another, he will be compelled to hold the property on trust for the other - Beatty v Guggenheim Modern developments have caused Lord Millett to say that "at present the land of constructive trust has become such a fertile source of confusion that it were better abandoned" Overlap with resulting trusts Normally it makes little difference which label is used: formality rules apply (or don't to either type) In the context of conflict of laws, it has been said that a RT involves the claim of an equitable owner to assert a continuing proprietary interest in his own property While a constructive trust may be imposed in appropriate circumstances where a breach of fiduciary obligation has given rise to an equity between the parties Constructive trust usually regarded as a residual category, which is called into play when no other is available James v Williams Existence or terms of the trust Imposition of a constructive trust is often a determination that previously declared trusts are enforceable against someone other than the original trustee, or extend to additional property A wrongful recipient of trust property takes it subject to the existing trusts But the doctrine may also cover the way in which a person who knows they are trustee will hold the property, i.e. in the case of mutual wills, whether they hold subject to the trust, or the agreement Duties of a constructive trustee Not necessarily the same as those of an express trustee, i.e. in respect of investments etc lohnro v al fayed (no2) Duties probably vary with circumstances, and will be greater for a fraudulent trustee than for others Distinction between constructive trusts, accountability and proprietary remedies Circumstances giving rise to CT may also give rise to other remedies CT should be distinguished from "tracing", which is an equitable proprietary action against a fiduciary for an account
Where an express or constructive trustee has property vested in him, but wrongfully disposes of it, he will commonly be regarded as retaining his status as trustee But the absence of trust property means that the remedy against him is personal only But where no trust property has ever been vested in D (i.e. where liability arises from dishonestly assisting the trustees in a breach of trust), he cannot properly be called a trustee D is accountable, but if he has insufficient assets, C will be unable to obtain compensation in full But, it may be possible to show that the property wrongly obtained and disposed of is now represented by money or other property in the trustee's or a 3 rd party's hands This can then be "traced" - i) If D becomes insolvent, C takes priority over general creditors, for this is kept out of insolvency by a trust ii) If money has been invested successfully by D, C is entitled to a share of the investment which is proportionate to the share which the trust money contributed to the invested fund Tracing may be available against a person who is not liable as constructive trustee, i.e. an innocent volunteer who takes subject to the trust, but has neither actual nor constructive knowledge of it Remedial CT If C merely wishes to have the property returned, question is whether a constructive trust need be considered as anything beyond a means of demanding the return of the property to which he is entitled in equity I.e. in America, the duty in this case is simply to convey the property to those entitled, not to hold on trust for them This is an equitable remedy which is imposed to prevent unjust enrichment; but nb that English cases normally see constructive trust as a substantive institution (Re Sharpe), vindicating a preexisting proprietary right But the PC left open the existence of such a doctrine: Re Goldcorp Exchange, Millett: "equity's intervention must be based on principle; there must be some relationship between the relief granted and the circumstances which gave rise to it"
..."there is neither room nor need for the remedial constructive trust" but nb that Lord B-W suggested that introduction of remedial constructive trust provides a satisfactory bases for developing proprietary restitutionary remedies - Westdeutsche Landesbank Re Polly Peck (in administration) has been said to "bang the door shut on the remedial constructive trust'" - Swadling and Birks When a constructive trust exists i) Unauthorised profit by a trustee or fiduciary
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