Constructive Trust

This is our first blog post that centres a topic enforceable by law.

The purpose of this article is to enlighten readers on some ways that law can provide equitable remedies even when there are no express terms to rely on.

Constructive trust interchangeably called CT, is a type of non-express trust that arises by operation of law without regard to the intention of the parties, and it can be applied in different contexts although most constructive trusts are triggered by the defendants unconscionable conduct.

Don’t think too much about the name so we don’t get things mixed up. Think of it as merely an inappropriate label to describe a type of court order.

The distinctive feature of constructive trust is that it does not regard the intention of the parties, this means that a person can trigger the laws on constructive trust without their name on the title of the property they are laying claims to or even prior conversations that they had legal rights to the property – and a court can decide that a constructive trustee has legal right to identifiable property that is held for the benefit of the beneficiaries.

(If the last sentence is confusing, remember that a beneficiary is a person who derives an advantage from something and a trustee is a person with legal obligation to hold property for its intended purpose.)

So, if Brian and Jane are an unmarried couple who have lived together for 6 years in Jane’s legal property, and have both made financial contributions such that Brian feels that Jane’s home is equally his; perhaps they have shared bills, bought furniture and both taken responsibility for the home in like manner as joint owners. – This would be enough to trigger a constructive trust.

Matter of fact, there is no single theory or universally acceptable principle that explains the different circumstances or contexts that must happen before constructive trusts are recognised. It is impossible to prescribe exhaustively the circumstances sufficient to create a constructive trust. Despite this, it has been suggested that CT is a response to the defendants unjust enrichment.

We noted earlier that most constructive trusts are triggered by a defendants unconscionable conduct. To expand on that, it arises whenever the circumstances are such that it would be unconscionable for the owner of the property to assert his own beneficial interest in property and deny the beneficial interest of another.

Following the earlier example, if Jane and Brian break up and she sends him packing without reaching a settlement and Brian feels cheated, he can evoke constructive trust on the basis that Jane has acted unconscionably against him.

The unconscionable conduct here will be making a person to vacate a property which they have invested in whether or not proof of this investment is evidential.

Here, the plaintiff will allege that the circumstances in which the defendant obtained control, make it unconscionable for her thereafter, to assert a beneficial interest in the property.

Think of 'unconscionable' as, not right or reasonable, unreasonably excessive, over the top, extreme, gravely unfair.

Carefully following this analogy, Jane is the trustee because she has legal rights to the property as it is her name that appears on the property document. If it is successfully determined by a court that she indeed acted unconscionably towards Brian as he seeks reparation, he will be an equitable beneficiary and Jane, the constructive trustee.

As we continue, let’s keep in mind that the application of constructive trust is not in any way exclusive to relationships, partnerships or marriages and the above example is only to provide a guide on how this principle may be applied.

There are five distinctive ways in which judges use the language of constructive trust and they are:

i. Institutional constructive trust

ii. Remedial constructive trust

iii. Constructive trust as remedy

iv. Liability to account as a constructive trust

v. Common intention constructive trust

These are all very interesting and distinctive types of CT and they will be recognised where a judge, in the exercise of his or her discretion considers that it is appropriate.

Unlike the other four categories, Common intention CT is recognisably different. This trust is triggered with reference to the express, implied, or imputed intention of the parties. It arises when a prior agreement or understanding has been reached by the parties as to whether they have a beneficial interest in property and if so, what the extent of that interest might be.

This means that unlike others, it does not arise by operation of law and is not up to the discretion of the judge to decide what is fair or what is not.

This trust responds to implied intentions, words and promises that are shown to have been relied on and is especially significant where a couple have cohabited and their home is registered either in the name of them both, or in the name of one of them only.

Common intention is enforceable by law, even if made without formal consideration or financial contribution. When a person relies on a promise or previously declared intention to their subsequent detriment, it is substantial basis to prompt this type of constructive trust.

To sum up, people especially couples are unfairly and unconscionably treated by former partners and due to not having security with regards to legal property and titles, are discouraged from seeking legal remedy. Quite a number of people are unaware that law provides a safety net under the umbrella of constructive trust in many of these circumstances.

Hopefully, readers can explore the different types of constructive trusts and find the one best suited for them to rely on if need be.