Constructive Trusts

Front 1

What are they?

Back 1

Tend to happen by accident or when the court implies them --> No formalities.

Comes into existence irrespective of the intentions of the parties.

Trust imposed by equity to satisfy good conscience and justice

Front 2

Eng vs Ire

Back 2

Eng more confined in their role, Ire not.

Eng worried abt consistency, Ire not.

Front 3

Two traditional broad categories of constructive trusts as per Keane

Back 3

1 Person is already a trustee and constructive trust arises because has derived profit from trusteeship that isn't entitled to. Note exceptions to rule eg solicitor expressly auth to charge for services.

2 No existing r/ship of trustee-beneficiary no fiduciary duty. Constructive trust arises because part circs person has prop eg secret trusts, mutual wills, person who gets prop by killing anor.

Front 4

Personal Remedy

Back 4

vs person

MONEY

Person stole €10, claim for €10 back.

Front 5

Proprietary Remedy

Back 5

Awarded vs a specific asset

IE if person owes €X but is bankrupt (no money) but asset rich, claim for some of person's property eg painting = €X, house = €X

Front 6

Gabbett v Lawder (1883) 11 LR Ir 295

Back 6

Sets out the fundamental principle, which can be extended.

Church bound to offer lease to trustee/lessee before sale. Trustee refuse and bought land at auction for lower sum.

Court held in circs held land on trust for the trust. Can't keep any adv gained in character as trustee

Front 7

Keech v Sanford (1726) Sel Cas Ch 613,

Back 7

Trustee held lease of market for a minor before leaseexpired. Told couldn’t buy freehold because owner didn’twant to sell to minor trustee scenario. Trustee buy freehold forhimself.

Court held only came by freehold interest because of role astrustee --> held on constructive trust

Front 8

Protheroev. Protheroe [1968] 1 All ER 1111

Back 8

Husb and wife had lease. Husb bought freehold. Had to hold onttrust for wife.

Lord Denning suggest absoluteprohibition against the purchase of the reversion by a fiduciary

Front 9

Moore v McGlynn [1894] 1 IR 74

Back 9

Could have gone either way.

Brother died and apt as trustee with deceased's fam as beneficiaries. Did job well but set up his own business andmoved post office from deceased business to his.

Front 10

Bribes?

Back 10

Only with consent/knowledge of principal can trustee accept bribes.

Front 11

Attorney-General for Hong Kong v Reid [1994] 1 AC 324

Back 11

Employed by HK. Took bribes owed fiduciary duties BUT bought prop in NZ with money wanted to access it.

Court applied principal that use of knowledge acquired as trustee to obtain prop then becomes trust prop

Front 12

Jones 'Bribing the DPP: should he profit from abusing his position?' [1994] Conv 156

Back 12

In Reid also had debts. In constructive trust scenario principal gets paid before creditors. Seems to be an unfair windfall benefit against creditors who have given value.

Front 13

Sinclair Investments (UK) Ltd v Versailles TradeFinance Ltd [2011]3 WLR 1153

Back 13

Went vs Reid --> confused law

Director made a secret profit on a sale of shares had been involved in shady dealings to increase value of his own shares.

Court held that beneficiary not entitled to proprietary interest but entitled to equitable account to anything acquired by breach of duties.

Front 14

Millett [2012] CLJ 583 'BRIBES AND SECRET COMMISSIONS AGAIN'

Back 14

Thinks Sinclair was a bad decision allows for a dishonest fiduciary to retain profit by exploiting the fiduciary relationship for his own benefit without informing the principal

Front 15

Virgo [2011] CLJ 502 'PROFITS OBTAINED IN BREACH OF FIDUCIARY DUTY: PERSONAL OR PROPRIETARY CLAIM'

Back 15

Arg that Sinclair was the correct decision.

Fundamental distinction bet 2 scenarios. 1 Fiduciary enriched himself by depriving the principal of an asset or obtaining an asset where was under a duty to obtain it for the principal. 2 where fiduciary enriched himself by doing a wrong to the claimant.

Receipt of bribe = 2 because was under no duty to obtain it for the principal --> no proprietary right to it --> no constructive trust.

Dislikes Reid because allows principal (no value) get money back ahead of creditors (gave value) and should deal with wrong by giving principal equitable compensation.

Front 16

FHREuropean Ventures LLP v Cedar Capital Partners LLC [2014] 3 WLR 535

Back 16

SC overruled Sinclair and back to Reid. Same judge as Sinclair.

Sale of hotel. Claimant = buyer.Commissioner had deal on the side --> make 10mill commission. Buyerdidn’t know abt secret commission. Company had no assets. Company and Personwere sued.

Deterrence factor nb.

Decision fair --> shouldn't allow bribes.

Unfair --> get everything back ahead of creditors.

Court held benefit acquired was on behalf of principal and would be part strict vs bribes because of their objectionable nature.

Front 17

Whayman [2014] Conv 518

Back 17

describes FHR as: a useful fixed point, even if it does not display a signpost to the next stop.

Front 18

Conaglen [2014] CLJ 490

Back 18

Feels that the FHR judgment re-opens to a significant degree the very debate the SC has sought to quiet.

Front 19

FHR on the position of agents

Back 19

Theagent owes a duty of undivided loyalty to the principal, unless the latter hasgiven his informed consent to some less demanding standard of duty.

Front 20

Summary of nature of fiduciary duty owed by agent to his principal:

Back 20

Sherrardv Barron [1923] 1 IR 21

Def acted as agents of pla: collected rent and made repairs. Def made full disclosure of setting up repairs business.

Court held because of full disclosure = implied consent. Person must make full disclosure of profit made directly or indirectly. If principal expresslyor by course of conduct, impliedly assents --> can keep profits etc...

Front 21

Eg of rigour the principles of nature of fiduciary duty owed by agent to his principal

Back 21

Boardmanv Phipps [1967] 2 AC 46

Trustees = widow, daughter and accountant. Trustee’ssolicitor and anor tried to make money for trust. Bought shares in co and triedto turn around the business. Made money for themselves and for the trust.

Court held not entitled to keep profit but entitled to be paid handsomely for theirefforts.

Front 22

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134

Back 22

Cinema decided it was more profitable to own chain ofcos, directors stepped in and personally bought shares to put up money to allowthem to acquire new cinemas. When sold chain, new owners claim directors profit = breach of fiduciary duty and that they should get the profits.

Court held even though there were good intentions and the company did not suffer, they still benefited because of the special knowledge of their positions. Profit --> company.

Front 23

IndustrialDevelopment Consultants v Cooley [1972]1 WLR 443

Back 23

Def managing director for construction co. Person didn’twant to hire company wanted to hire him as advisor. Faked sick to allow him towork for other on the sly.

Extension of no conflict principle. Only got opp because was director.

Court held that he held the profits from the job on constructive trust for the firm.

Front 24

CMS Dolphin Ltd v Simonet [2001] 2 BCLC 70

Back 24

V pragmatic approachThe line was crossed here. Decided to set up new businessand recruited all previous cos staff and clients.

Court held that was allowed to use skills in new job but had known that had conflict of interest and had exploited that by resigning. The maturing business opps were the company's property.