CONSTRUCTIVE TRUSTS IN OTHER CONTEXTS 1. Preserve a Bs equitable proprietary rights following a breach of trust a.

Penner: Insufficiently precise to call a third party in this kind of situation a constructive TEE. Better to describe the third party recipient as a constructive TEE of an express trust interest because there was an equitable interest from start to finish (began under an express trust).

4 types of constructive trusts that respond to intention perfectionary trusts: 1. Where specific performance of a contract to transfer property is available; i. Traditional rule: Where 2 parties enter into a specifically enforceable contract to sell land, then the vendor will hold the property on constructive trust for the purchaser until it is completed by conveyance from vendor to purchaser. Dugan v Lee Neville v Wilson: Example of a specifically enforceable contract. Sale of shares in a private company are unique. o Investors needed the transfer of equitable interest in the shares to take place without documentation (under oral agreement) did not comply with requirement for writing under s.53(1)(c) LPA. o Equitable interest held by a company and legal title held by two nominees to qualify them as directors. o Company was subsequently wound up but although the equitable interest was an asset to the company, it was not dealt with under the shareholders winding up agreement. Meant that once the company had been wound up, this equitable interest was in danger of being declared bona vacantia. o High Court judge: Bona vacantia go to the Crown. o CA: Shareholders winding up agreement said to give rise to a constructive trust of the shares in favour of the shareholders. o S.53(1)(C)/s.53(2) not affect CT. ii. Most contracts of sale are not specficially enforceable because most personal property is not unique and therefore the common law remedy of damages will usually be sufficient. E.g. Sale of shares in a publically listed company. 2. Cases of incomplete transfers as in Re Rose; i. Re Rose: Equity will not assist a volunteer, imperfect gifts. Rose wanted to create a trust in some shares for the benefit of his family. Wanted to transfer the shares to TEEs who would hold the shares for his family. Rose completed the deed and trust certificates. The directors of the company did not register TEEs as the legal owners of the shares until 2 months later. A few years later, R died, but at the time at which he died, the shares were still treated as his estate if it was registered earlier, but would not be if it did not count from the date of registration. What was the effective date?

 CA: The relevant date was the date of the deed. Because at that time Mr Rose had done everything possible to get rid of the property by delivering it to the registrar to register in the name of the trustees. During 2 month period, R held the shares on CT for the family members. 3. Frustrated joint ventures doctrine in Pallant v Morgan; i. Pallant v Morgan Agreement was made between two adjoining landowners immediately before an auction that Cs agent would refrain from bidding for this particular property at the auction so as not to raise the price too much, hoping that D would be able to get the land at a lower price and that once D had successfully bought the land, they would share it between them in a way that they would agree according to an agreed formula. Some of the details of the formula were left to be agreed later on. D was successful at the auction, but the parties were never able to agree on the details as to how the property was to be split between them. Harman LJ: Although the agreement was too uncertain to be specifically enforceable, D was not entitled to hold the property for himself only. The land was held between the parties jointly, and if they could not agree then it had to be sold again. Constructive trust. ii. Banner Homes case Building site both parties were developers. Neither of the parties could finance/develop the site on their own, and so agreed that the site would be bought for a company created specifically for this purpose joint venture. Realised that purchase of the site would come before any formal agreement, and so the purchase of the site was done by the company which had been set up by D. At the time that D bought the site, C believed that D was going to go ahead with the joint venture. D withdrew from the venture and so developed the site on his own. CA: Accepted that D was not a party to a binding contract with C, nor was he affected by any estoppel. - BUT Lord Justice Chadwick: list of requirements for the case to come within the ambit of Pallant v Morgan (see powerpoint). - Mummery LJ, in London & Regional Investments v TBI Plc: interpreted the doctrine (see powerpoint). iii. Both cases consistent with Cobbe v Yeomans Row. Argument in that case to come within Pallant v Morgan but no possibility of that happening. iv. Crossco No 4) v Jolan Ltd CA: Made an interesting question of the jurisprudential basis of question in equity. (??) Until 9 Apr 2009, A (C) was landlord of property which included a break clause. The freehold in the building was transferred from A to R, but Picadilly, which was part of As group, retained the trading business on the ground floor of the building. Transfer of the building was part of a complex demerger of a group of holdings belonging to a particular a family.

 Transfer of the building had been discussed only briefly amongst the wider discussion of other issues. E-mail note of the agreement which said that R will get the freehold of the building with an assignment of the lease to Picadilly or a new lease with the same terms. At the time of the transfer, neither party was aware of the break clause and neither party became aware of the clause until 20th Apr when R became aware. R wanted to redevelop the ground floor and wanted to operate the break clause to get rid of Picadilly. Picadiilly/A claimed that R could not operate the break clause. - CT principles meant that R could not operate the break clause. Judge rejected As case. Argument: Pallant v Morgan meant that they gave rise to a CICT. Etherton LJ (para 94): All the cases where the Pallant v Morgan equity had been applied could and should b explained as arising from a breach of fiduciary duty. Did not agree that Banner Homes CT was an example of CICT. On the facts of the case, found that R was not holding property on CT for A. No fiduciary relationship, and no unconscionable behaviour. No evidence that R knew that A did not know about the break clause. Not the type of case where CICT could be found. 4. Doctrine in Rochefoucauld v Boustead. i. Rochefoucauld v Boustead R was registered owner of some estates, mortgaged to a Dutch company subject to her equity of redemption. Dutch company wanted the mortgage debt paid off, but she could not afford to do that. Instead of paying it off, arranged with B that he would hold them on trust for her subject to him repaying the purchase price. B became the registered owner, and immediately remortgaged the estate to the Dutch company so that his actual expenditure was much less. He repeatedly mortgaged the estate for the next few years and eventually sold them, without the knowledge of R. R claimed that B had held the property on trust for her. B argued that the then equivalent of s.53(1)(b) prevented her from proving the trust as the agreement between them had been purely oral. Statute cannot be used for fraud R won. Was that trust indeed an express trust as stated by the court and as maintained by Swadling, or is it actually a CT? o Dominant view: CT. o Swadling: Was indeed an express trust by arguing that s.53(1)(b) was merely a rule of evidence which was disapplied by the courts when they found fraud. - Difficult to see how it could be anything other than express. o Ying: Disagrees with Swadling. Argues that on the proper reading of the facts there was no express trust that C could have enforced. - None of the parties involved in the arrangement was

capable of being the settlor of such trust. - C only had limited rights in the estate (equity in redemption), and it was the company who had sold the property. - Dutch company cannot be S because it was not a party to the arrangement, and completely unaware of the arrangement. - Can D be the S? - Courts judgment only focused on the original agreement between the parties, not any express agreement. - Belonged to category of CT that respond to intention and reliance. - Parties intention was that D would hold the property on trust for C. C gave up her equity in reliance of their agreement. ii. CTs arising as a response to intention and reliance (Ying): Secret trusts; Mutual wills; Pallant v Morgan. iii. Perfectionary trusts (Chambers) benefit, though intended, has not yet been achieved can be seen in these categories.: Contracts of sale; Secret trusts; Mutual wills; Incomplete gifts; Division of family property. - note: some of these categories are what Ying would call intention and reliance. CTs responding to UE? 1. Chase Manhattan Bank v Israel-British Bank: Money paid by mistake should be held on CT to prevent benefit to transferor. Remedy was proprietary. i. Criticism: Remedy should be personal? 2. Westdeutsche i. Lord BW: How CTs have been imposed as a result of UI by recipient, fraud. ii. Reason for UE to be controversial is because there is no general agreement that restitutionary remedy should be proprietary instead of personal. How to decide which cases have CT and which the liability should only be personal? iii. Lord BW: Not giving effect to intentions, but rather being imposed against intentions of TEEs. 3. Hayton v Mitchell: In situations like Re Rose (specific enforcement cases) and in shared homes cases, we can see that CTs were imposed to give effect to the parties intentions to transfer beneficial interest from one party to another. 4. Lord BW: Intention is peripheral? 5. CTs operate to rid the party of the benefit they should not have received. 6. A-G for Hong Kong v Reid Where does this leave us? Constructive trusts are imposed in the following circumstances: (see powerpoint) 1. No consensus. 2. Hayton and Mitchell (paras 15-137 15-151) 3.