Land Law Essay Help: Constructive Trusts

Land Law Cases referred to in this section:
McKenzie v McKenzie (2003) EWHC 601 (Ch)
Bannister v Bannister [1948] 2 All ER 133, CA
Mollo v Mollo (1999) EGCS (Transcript at (22) - (23)
Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372 [2000] 2 All ER 117

A constructive trust will only arise when it would be fraudulent for the owner of a legal estate to deal with the ownership in such a way that it infringes upon the rights which have in some way been 'bargained away' informally to another. The constructive trust is to 'arise out of, and is equity's way of giving effect to, the common intentions of the parties regarding allocation of the beneficial ownership' (McKenzie v McKenzie (2003) EWHC 601 (Ch) at (70)). The trust is held by a person in circumstances where it would be inequitable to allow him to assert full beneficial ownership of the property (Bannister v Bannister [1948] 2 All ER 133, CA).

Note that Constructive Trusts give effect to common intention whereas resulting trusts are based on the intention of the contributor of purchase monies (and are therefore based on unilateral intention). Also, a resulting trust relates only to cash contributions - any other type of contribution, occuring before or after the acquisition of title, will be regulated by the rules relating to constructive trusts (see for example Mollo v Mollo (1999) EGCS (Transcript at (22) - (23)).

A constructive trust will arise where there is some arrangement in place which sees an advantage to one party, or detriment to the other, gained or suffered as a consequence of the arrangement or understanding, which leads to the conclusion that it would be inequitable or unconscionable to allow the acquiring party to retain the property for himself, in a manner inconsistent with the arrangement or understanding which enabled him to acquire it (See Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372 at 398, [2000] 2 All ER 117 at 139, CA, per Chadwick LJ). The existence of both advantage and detriment is not essential: either will do. What is essential is that the circumstances make it inequitable for the acquiring party to retain the property for himself in a manner inconsistent with the arrangement or understanding on which the non-acquiring party has acted.

There are three elements, then, which are necessary for the finding of a constructive trust:

  • bargain - or common intention
  • change of position or detrimental reliance
  • equitable fraud or unconscionable denial of rights.

A constructive trust will either be an 'express bargain' constructive trust or an 'implied bargain' constructive trust.

See also...
Proprietary Estoppel
Promissory Estoppel
Implied Trusts
Resulting Trusts
Express Bargain Constructive Trusts
Implied Bargain Constructive Trusts

 

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