Constructive trusts

TR.06 — Constructive Trusts

A constructive trust arises by operation of law, imposed by the court regardless of intention to prevent unconscionable conduct or unjust enrichment. It is not an express trust (so the certainties and the s.53(1)(b) LPA 1925 writing formality do not apply — s.53(2) exempts resulting and constructive trusts).

Core categories and tests

1. Common intention constructive trusts (family home). The key SQE area. Where legal title is in one party's sole name but a non-owner claims a beneficial share:

• Acquisition of a beneficial interest requires (a) an express common intention (a discussion, even imperfectly remembered) plus detrimental reliance, or (b) an inferred common intention drawn from the whole course of conduct — direct financial contributions to purchase/mortgage are the clearest route (Lloyds Bank v Rosset; Stack v Dowden; Jones v Kernott).
• Quantification: where the parties' intention as to shares is unclear, the court asks what is fair on the whole course of dealing (Jones v Kernott).
• Joint legal owners: equity follows the law — a presumption of equal beneficial shares — rebuttable only by evidence of a different common intention (Stack v Dowden).

2. Other constructive trusts:

• Profits from breach of fiduciary duty / bribes — held on constructive trust (FHR European Ventures v Cedar Capital — bribes/secret commissions are proprietary, not merely a debt).
• Strangers to a trust — knowing receipt (receiving trust property with knowledge) and dishonest assistance (assisting a breach; test is objective dishonesty — Royal Brunei v Tan; Ivey v Genting).
• Secret/half-secret trusts; the rule in Pallant v Morgan; vendor under a specifically enforceable contract.

Common traps and distinctions

• Constructive vs resulting trust: a resulting trust reflects contribution to purchase price by share; a common intention constructive trust looks at the whole course of conduct and can produce non-arithmetic shares. Stack/Jones favour the constructive trust in the domestic context — resulting-trust arithmetic dominates commercial/investment purchases.
• No formalities: don't apply certainties or s.53(1)(b) — s.53(2) saves it.
• Detrimental reliance is essential for the express-agreement route; an agreement alone is not enough.
• Dishonest assistance needs no receipt; knowing receipt needs no dishonesty — keep the elements separate.
• Improvements/renovations alone rarely found an inferred intention (cf. Rosset), though relevant to quantification.