The main principles and factors considered with a constructive trust part one
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This article aims to provide a brief overview on constructive trusts exploring the definition, principles as well as the factors considered by the Court.
Definition
A constructive trust is a legal concept that arises by operation of law rather than by the express agreement of the parties. This trust arises where it would be unconscionable for a person who legally holds title of an asset to deny the beneficial interest of another person in that asset.
It imposes equitable obligations on the legal owner of property to hold it for the benefit of another party, typically to prevent unjust enrichment or to fulfil the presumed intentions of the parties involved.
Principles
The establishment of a constructive trust typically hinges on the following principles:
Contribution: One party may contribute to the acquisition, improvement, or maintenance of property without being recognized as a legal owner. In such cases, equity may dictate that the legal owner holds the property on trust for the contributing party.
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Unjust Enrichment: Constructive trusts are often invoked to prevent one party from unjustly benefiting at the expense of another. Where one party has unfairly obtained property or assets, a constructive trust may be imposed to rectify the imbalance.
Intention: In situations where the parties’ intentions regarding property ownership are unclear or unexpressed, a constructive trust may be established to reflect the intentions of the parties, based on their conduct and contributions.
Common Intention Constructive Trusts
These trusts are founded on the shared intentions of the parties regarding property ownership, even if those intentions were not formally documented. They are often established through evidence of joint contributions or agreements. E.g. (A) and another person (B) share a common intention that (B) should have a beneficial interest in an asset, and (B) has acted to his detriment in reliance of that intention. The leading case law in this area is derived from the seminal cases of Lloyds Bank v Rosset [1991] 1 AC 107, Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53.
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