constructive trusts

Question 1

what are constructive trusts?

Answer 1

trusts which are imposed by the court where equity feels it is justified

Question 2

how do constructive trusts arise?

Answer 2

“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 to another” - Paragon Finance Plc v DB Thakerar & Co [1999] Per Millett LJ

Question 3

when is it imposed on the legal owner of property?

Answer 3

when they have dealt with that property unconscionably

Question 4

what does it do for the wronged person?

Answer 4

gives them a proprietary interest in the trust property

Question 5

what was the constructive trust in Rochefoucauld v Bousted [1897]?

Answer 5

intended trustee acquired property for the supposed beneficiary but the trust was improperly created
trustee held property on constructive trust

Question 6

what was the constructive trust in FHR European Ventures LLP v Cedar Capital Partners LLC [2014]?

Answer 6

an agent received a bribe or secret commission as a result of his position held it on constructive trust for his principal

Question 7

in relation to constructive trusts of the family home, which case is the starting point and what does this case say?

Answer 7

Gissing V Gissing [1971]:
there needs to be:
1. evidence of a common intention to share
2. detrimental reliance
burden of the proof is on the non-owner
‘the court cannot ascribe intentions which the parties never had’

Question 8

what happened in Eves v Eves [1975]?

Answer 8

• Eves was told that the house could not be in joint names as she was under 21
• Lord Denning = she did work in the house and garden, more than many wives would do
• common problem - man and woman set up a house before getting married but the relationship breaks down before marriage = in law there is no claim
• constructive trusts solves this
• constructive trust gave her half the share in the house

Question 9

what is the leading case in establishing whether there is a constructive trust where only one name has gone on the land registry?

Answer 9

Lloyds Bank v Rosset [1991]
- the common intention to share could arise expressly or by implication
- examples of implied intention through parties’ conduct:
- direct financial contributions to the purchase price are necessary in order to imply a common intention
- it is at least extremely doubtful whether anything less will do

Question 10

what are the Institutional Constructive trusts (rationale 1 - the preferred view in England and Wales)?

Answer 10

• they arise by operation of law on the date of the originating circumstances
• the court merely recognises its existence
• rules of law determine the consequences
• because of these rules of law there is no discretion as to the consequences

Question 11

what are some examples of constructive trusts?

Answer 11

Rochefoucauld v Bousted [1897]
FHR European Ventures LLP v Cedar Capital Partners LLC [2014

Question 12

what is said about detrimental reliance?

Answer 12

there must be contributions of financial value - Burns v Burns
valuable work has been sufficient such as physical labour (Cooke v Head 1962), unpaid contribution to family business (Chan v Leung 2003)
paying other bills so that the owner can meet mortgage payments - Grant v Edwards

Question 13

what is the overlap between constructive trusts and resulting trusts?
and what is the difference in how the shares are calculated?

Answer 13

both generally involve a contribution to the purchase price
- under resulting trusts the beneficial entitlement is calculated mathematically in proportion to the contribution to the purchase price
- shares in constructive trusts are determined by a number of factors that may result in the share being much greater than the amount contributed

Question 14

what is the overlap between constructive trusts and proprietary estoppel?

Answer 14

both require detriment and work on the basis that it would be unconscionable for the legal owner to deny the existence of the beneficial interest

Question 15

what is the difference between proprietary estoppel and constructive trusts?

Answer 15

• the remedy for estoppel is at the discretion of the court - it is the minimum necessary to satisfy the equity
• if a constructive trust can be found, the claimant may get much more

Question 16

what is a sole-name case?

Answer 16

if the legal estate is held in one name, the non-owner needs to establish that the legal owner holds it on a constructive trust

Question 17

what is a joint-name case?

Answer 17

in the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved - Lady Hale at para 58 Stack v Dowden

Question 18

what is the only query in joint ownership cases?

Answer 18

quantifying the shares
if there is no express declaration an equitable joint tenancy will be presumed
equal shares are presumed

Question 19

what were the principles set out in Stack v Dowden by the house of lords?

Answer 19

• where a family home is bought in joint names the presumption is that they own the property as joint tenants in law and equity
• that presumption can be displaced by evidence that their common intention was different
• common intention to be objectively deduced from the conduct and dealings between the parties
• each case will turn on its own facts

Question 20

what must you show to displace the 50/50 presumption?

Answer 20

that the parties intended their beneficial interests to be different
OR
the initial intentions of the parties have changed
in finding this intention the courts look at the whole course of conduct of the parties
burden of proof is on the party trying to establish unequal shares