Constructive trusts - rev notes

Question 1

2 categories of CTs (Lord BW in Westdeutsche)

Answer 1

• Institutional Constructive trusts (ICTs)
• Remedial Constructive trusts (RCTs)

Question 2

ICT (Lord BW in Westdeutsche)

Answer 2

• type of CT that is recognised in English law : arise in certain (fixed) types of circumstances
• the court’s function is merely declaratory
• csq determined by rules of law, not judicial discretion

Question 3

ICT - Incomplete transfers

Answer 3

• Equity will not make an imperfect gift into a trust in order to perfect it / make intention of gift into intention of trust - Milroy v Lord
• BUT where transferor has done all in his power to execute the transfer, and fails due to smth he cannot control (eg registration), equity considers the transfer as complete court might be wiling to use a trust to give effect to the transfer - Re Rose (1952)

Question 4

RCT (Lord BW in Westdeutsche)

Answer 4

• “a judicial remedy the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court”
• not recognised in English law -> Bailey v Angrove

Question 5

ICT - Failure to comply with formality

Answer 5

Rochefoucauld v Boustead :

• S53(1)(b) LPA: declaration of trust of land must be in writing
• C transferred title to some estates to D, orally agreed that D was to held on trust for C, D mortgaged the properties and lost most of them, C asked D to account as trustee - pb = trust not in writing
• Held (CA) : the court will not allow the statute to be used as an instrument of fraud -> there was a trust (debate as to what kind)

Question 6

ICT - specifically enforceable contract of sale = VPCT

Answer 6

Rule = “the moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser” - Sir Jessel MR in Lysaght v Edwards (1876)

=> application of the maxim ‘equity regards as done that which ought to be done’

Question 7

ICT - Pallant v Morgan equity

Answer 7

Pallant v Morgan:

C and D both interested in buying land sold in an auction, their agents agreed that C would not bid for a particular plot, in return for D promising to sell pt of it to C -> D was able to acquire the land at a lower price

=> Held (HC) : D held the land on CT for himself and C jointly

Question 8

ICT - receipt of rights dissipated in breach of trust

Answer 8

Rule: where property has been transferred in breach of trust, recipient will hold the property on CT for the objects of the trust unless he is a BFP for value without notice of the breach

= Foskett v McKeown (2001), see also Re Diplock (1948), Re Montagu’s ST (1987)

Question 9

ICT - mistaken transfers

Answer 9

Chase Manhattan : person who pays money to another under factual mistake retains equitable interest in it held on CT for him

As qualified in Westdeutsche : only if recipient has knowledge of the mistake

+ /!\ ‘retention’ = division of O ≠engraftment of rights

Question 10

ICT - where recognised (14)

Answer 10

• incomplete transfers
• failure to comply w/ formality (land)
• specifically enforceable sale contract
• transfer of rights ‘subject to another’s rights’
• Pallant v Morgan Equity
• Receipt of rights dissipated in breach of trust
• breach of fiduciary duty
• breach of trust
• mistaken transfer
• duress
• undue influence
• failure of consideration
• Common intention CT
• secret trusts

Question 11

RCT - def

Answer 11

“A remedial constructive trust […] 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.” - Lord BW in Westdeutsche (1996)

Question 12

RCT - recognition in English law ?

Answer 12

• Lord Denning attempted to introduce in Husser v Palmer (but only one to do so)
• Lord BW in Westdeutsche : RCTs could be a good idea but whether English law should adopt them will have to be decided in future case (where point not obiter)
• Lord Sumption in Bailey v Angrove (2016) (SC) : “English law is generally averse to the discretionary adjustment of property rights, and has not recognised the remedial constructive trust favoured in some other jurisdictions”