Constructive Trust for Equity, Trust & Probate. Please excuse my English.

1. CONSTRUCTIVE TRUSTS
Equity, Trust & Probate

2. INTRODUCTION
• Arises by the operation of law & not by intention of
parties, express/ implied.
• Characteristics ;
• Arises by operation of law & not intention of parties
• Not depend on express intention & presumed intention
of the settlor.
• Eg; a gift from husband to wife can’t be revoked by
Constructive Trust.
• Depends on the conduct of the parties.
• A trustee transfers money to B. B knew about it as
as trusted money. Thus B automatically be a trustee
to A under the constructive trust.

3. CIRCUMSTANCES GIVING RISE TO
CONSTRUCTIVE TRUST
• Be categorised in traditional & modern categories.
• TRADITIONAL CATEGORY.
1. Can’t get unauthorised profits from the trust.
• Keech v Sandford - Property becomes a trust property whenever the trustee obtains it by
the knowledge acquired in position as trustee.
• The trustee took a lease form himself after lessor refused to renew lease for the trust as the
beneficiary is an infant. Trustee held to be a constructive trustee & such action was
accountable to the trust in respect of profit gained.
• Boardman v Phipps - Mr. B was a solicitor to the trust. He views that the trust was
ineffectively managed due to the trustees minority shareholdings. Realised that there was no
money to buy extra shares, He & one of the beneficiaries bought necessary shares &
reorganized the company. It was done in good faith. Held- B is a fiduciary as a solicitor to the
trust, he was a constructive trustee of the profit made on the personal shareholdings.
• AG of Hong Kong v Reid - Reid is a senior civil servant to the HK govt. He received bribes
in the course of his employment & bought a land property in NZ.It was held that any property
acquired by using the money was said to be a trust property.
• There’s constructive trust. thus can go for both personam & property claim.
• Libster v Shibs - Court held that Libster does not hv any property claim to the bribe. A
person taking bribe is not liable as CTrustee on the ground the liability being personal.

4. CIRCUMSTANCES GIVING RISE TO
CONSTRUCTIVE TRUST
• 2. Using Statute as Instrument of Fraud
• Bannister v Bannister - D sold and conveyed 2 adjoining
cottages to P on the basis that she could continue occupy it on a
free basis as long as she liked. When he sought to evict her on
basis that she has no right of occupation, she successfully
counter-claimed for declaration that P held the cottage on trust
for her lifetime. The court held that the D is considered as
constructive trustee and that he can’t use statute as instrument
of fraud.
• 3. Mutual Will
• Where 2 persons agreed to make will for the benefit of the same
person.
• If one of party revoked the will after the death of anor party, thus
the person executing the deed will hold property as trust
property.

5. CIRCUMSTANCES GIVING RISE TO
CONSTRUCTIVE TRUST INTRODUCTION
• 4.Vendor of land
• When two parties agreed to sale the land, Equity will look at the vendor as a CT
holding the property for the purchaser who is regarded as the owner.
• Shaw v Foster - ‘The vendor was a trustee of property to the purchaser, the
purchaser be regarded as the real beneficiary of the Trusted property.’
• Wong Siew Choong S.B v Anvest Coorperation S.B - In exchange of contracts/
completion, the vendor holds the property as Constructive Trustee.
• 5.Unlawful Conduct (Acquisition property by killing)
• If a person benefits from an unlawful conduct, the constructive trust will be imposed
on him.
• Re Crippen - D inherited the assets of his wife after murdered her. A CT will be
imposed for the benefit of those next entitled under the wife’s will.
• Re Siqsword - A son caused the mother’s spine to fractured which cause her
death. Assuming he caused the death of his mother, he wont be able to inherit all
the will given to him.
• Re K - The wife murdered her husband as her ownership of the joint matrimonial
home had been deprived. she held a half share for herself and the other was given
to the husband’s next of kin.

6. CIRCUMSTANCES GIVING RISE TO
CONSTRUCTIVE TRUST
• 5. Strangers
• Stranger who not appointed & who infringes the trust by takin it upon himself may be regarded as CT.
• 3 circumstances;
• Trustee de son tort (Trustee of his own wrongdoing)
• Liable if they intermediate with the trust funds.
• Mara v Brown - State mind of the Stranger is irrelevant
• Knowing assistance/ dishonest assistance/ accessory liability.
• Stranger who helps in the assistance of the trustee for committing fraud/dishonesty may be liable as CT.
• It is necessary to show that the stranger has knowledge of the existence of the trust.
• Barnes v Addey - Held that stranger must knowingly participated in the principle wrongdoer’s fraudulent breach of
trust.
• Royal Brunei Airlines S.B v Tan - No need any longer to show that breach caused by fraud. D will still be liable
personally as a CTrustee since he had dishonest caused/ permitted the company to commit BOT, knowing that
company was not authorised to such activity.
• Tan was a principal shareholder & managing director of a travel company. BLT was an agent to Brunei Airlines & was
required to pay the money received in a separate acc. This was not done fro this money was transferred to BLT normal
acc, was used for BLT business purposes. The result BLT falling into arrears in respect of its arrangement with the
airline. Held; D is liable personally as CTrustee since he had dishonestly caused/permitted the company to commit
BOT, knowing that the company was not authorised to do so.
• Baden Delvaux - Listed out 5 types of knowledge, concluded that the 1st three types of knowledge may be described
as actual knowledge (Actual knowledge; Wilfully shuts one eyes to the obvious; wilfully & recklessly failing to make
inquiries as an honest & reasonable person would make) & the last two is constructive knowledge (knowledge of
circumstances which indicate the facts to an honest & reasonable person & knowledge of circumstances which would
put an honest & reasonable person on inquiry.)
• Claimant needs to show 3 things;
• D has requisite knowledge
• Given the knowledge, D had acted in a way that is contrary to the normal acceptable standards of honest conduct
• D must in some sense be dishonest himself.

7. CIRCUMSTANCES GIVING RISE TO
CONSTRUCTIVE TRUST
• Knowing receipt & dealing/recipient liability
• Liability imposed on stranger that receive trust property knowing that his possession is in breach of
trust/ where he receives t.p without knowledge of any breach of trust but subsequently he becomes
aware of the trust but nevertheless acts in a manner inconsistent with it.
• A personal claim, which do not depend on the proof that D still has the property in possession.
However, degree of knowledge required plays a role before the liability is imposed.
• Re Montagu’s Settlement held that the 1st three degree stated in Baden Delvaux is relevant to
impose liability under this concept. A stranger will not be taken to hv knowledge of fact he once knew
but had genuinely forgotten- thus actual knowledge is required.
• Agip (Africa) Ltd v Jackson - ‘Knowing receipt’ can’t arise if the party acts as an agent and
construe the trust property according to the principal’s instruction. Held that the party will not be
liable until they know abt the breach of trust.
• El Ajou v Dollar Land Holdings etc - The dishonesty/want of probity involving actual knowledge is
not precondition of liability. Not to be held liable unless he went for further inquiries in circumstances
which an honest & reasonable man would realised that the money is a trust money.
• Need to prove that money/ trust property received. Knowledge is not important. Trust property
should not be kept/ else amount to unjust enrichment.
• Belmont Finance Corporation v Williams Furniture Ltd (No.2) - The co’s direstors who
participated in unlawful share purchase scheme were liable bcs they knew/ ought to hv known all the
facts which established the improper use of the funds. Immaterial that the directors did not act
fraudulently.

8. CIRCUMSTANCES GIVING RISE TO
CONSTRUCTIVE TRUST
• MODERN CATEGORIES
• Family Arrangements
• Normally on cases where husband deserted wife.
• Eves v Eves - Involves an unmarried couple. Where the house was under the name of the husband
solely. At the time of purchase he told the woman that if she is 21y/o he would have put her name
under the house, bcs it was to be their joint home. He admitted an excuse for not putting her name
under the joint names. Court inferred that there was understanding between them/common intention
that the woman would have some proprietary interest in it.
• There is common intention even the name was under the bf’s name thus, it is held to be actually a
joint-home.
• Lim Kim Chiu v Chan Poh Yuk - the married couple, P&D, were now separated. Land was bought
solely under the name of D. Court allowed the claim brought by P and held that since there was
common intention thus the properties were held to be divided equally.
• Woo Swee Har v Bin Kim & Ors - P & d bought a land, and both had contributed to the purchase
price.They built a house on the land, however it was conveyed to 3rd party. P claimed (wife) that
property was trust property & the 1st D as the trustee of the property. Claimed the conveyance of land
was null&void as at the time the D was unsound mind. te court allowed the claim as the beneficial
interest was 80.15%.
• Lloyds Bank v Rosset - The court had rejected the New Model Constructive Trust as there is no
discretion to impose the C.T simply to achieve fair result. There must be either direct financial
contribution from the person/both parties share a common intention to share the property & aggrieved
party has acted to her detriment in reliance upon it.

9. CIRCUMSTANCES GIVING RISE TO
CONSTRUCTIVE TRUST
• License.
• Who is licensee? A person who is physically present on land whether in occupation/not but
without any proprietary interest in land.
• The doctrine of estoppel may give a licensee the proprietary interest in land as a
consideration for licensee who has been encouraged to act in his/her detriment.
• Issue: Whether the contractual licensee has a proprietary interest? If yes he will be protected
against 3rd Party.
• Binions v Evans - Employer agreed to allow an employee’s widow to stay at the cottage rent
free for life. The cottage was sold at reduced price, expressly subjected to her interest. The
court had regarded her interest as a license, binding on the purchaser under a c.t.
• Applied in D.H.N Foods Ltd v Tower Hamlets London - CT had enabled a contractual
licensee to e treated as having a sufficient interest to qualify for compensation on compulsory
purchase of land.
• Registered Land
• Williams & Glyn’s Bank Ltd v Boland - The concept of notice has no relevancy in dealings
with registered land. The land registration system has mentioned that the notice has no part
to play. However, some argues that it is still applicable if only the party wanted to use statute
as an instrument of fraud.
• You will be the true owner if registered under your name ( Indefeasibility of title )

10. WHETHER CT IS INSTITUTIONAL/ REMEDIAL
IN NATURE
• Remedial CT establishes on the discretion of the judge
rather than the application of rule.
• The equitable obligations that operates to the prejudice of
third parties lies under the discretion of the judges -
Westdeutsche Landesbank Girozentral v Islington IBC
• In other words Institutional CT arising through settled law
from the date of circumstances which gives rise to it.
• Court’s funct to declare such trust arises in the past.
• Remedial CT - Judicial remedy giving rise to an enforceable
equitable obligations; the extend to which operates
retrospectively to the prejudice of 3rd P lies in the discretion
of the court. AG of HK v Reid - Still can go for proprietary
claim.

11. The end