ICT & RCT
A constructive trust (CT) is similar to any other trusts, where the legal title of an
identifiable property is held by the constructive trustee for the beneficiaries. However, there is a
main distinctive feature of CT, where it arises from operation of law, without regard to the
intentions of the parties. There are some factors which trigger a CT, for instance, Lord Denning
in Eves v Eves applied the CT as a mechanism to create equitable property rights where justice
and good conscience demanded it. This essay will also go on to discuss those other factors
below. Moreover, Sir Terence Etherton in “Constructive trusts: a new model for Equity and
unjust enrichment’ (2008) stated that, “The search for an acceptable, universally acknowledged,
principle for the establishment of a constructive trust, which gives coherence to past decisions
and provides a clear guide for the future, will certainly prove elusive in relation to the many
different areas of law and fact in which constructive trusts arise.”
Following that, it seems that CT has been imposed in English law in several occasions
but it must be noted that those cases can either be categorised as a genuine CT case or a false CT
case. A genuine CT case includes those in a vendor-purchaser relationship where the vendor will
hold the title on trust for the purchaser the moment a contract is formed. This is illustrated in
cases like Lysaght v Lysaght and Jerome v Kelly. Besides, rights acquired by the operation of
rule as per Re Rose is also considered a genuine one. Equitable wrong due to breach of trust such
as receiving secret commission as per FHR European Ventures LLP v Cedar Capital Partners
LLC which gives rise to CT is regarded genuine as well. A trust of mistaken payment as per
Chase Manhattan Bank v Israel-British Bank is yet another genuine CT case. These last two
cases though are controversial in decisions but no doubt still a true CT and not express trust. On
the other hand, a false CT can be seen in cases where third party is liable to account as
constructive trustee such as Dubai Aluminium v Salaam or Williams v Central Bank of Nigeria.
Here, third parties involved in a breach of trust are held to be liable as constructive trustee and
thus personally liable to restore the trust with money as if they were a trustee. In fact, there is
only a personal liability and no actual rights are being held by the third parties for the claimant.
Furthermore, the case of Rochefoucauld v Boustead where it was clearly identified as an express
trust but ended up being treated as CT is also considered a false CT.
As such, those genuine CT will be regarded as institutional constructive trust (ICT). In
this context, it is an orthodox mode of analysing these trusts, which are treated as arising by
operation of law on the occurrence of a certain event where a constructive trust has previously
been recognised. Meanwhile, those false CT will fall under remedial constructive trust (RCT).
Judges can only award a remedy in their discretion, consider that it is appropriate that the
defendant should held property on trust for the claimant. As a consequence, it occurs by virtue of
the exercise of judicial discretion and thus being distinguished from the ICT. English law
generally does not recognise this kind of CT. Nevertheless, it is noteworthy to know that RCT is
recognised in other jurisdictions such as Canada, Australia and New Zealand.
Hence, question might be asked as to whether UK should recognise RCT. In answering
this question, one needs to consider whether it is appropriate for the proprietary consequences of
the constructive trust to be recognised or to be modified via the exercise of judicial discretion. In
A constructive trust (CT) is similar to any other trusts, where the legal title of an
identifiable property is held by the constructive trustee for the beneficiaries. However, there is a
main distinctive feature of CT, where it arises from operation of law, without regard to the
intentions of the parties. There are some factors which trigger a CT, for instance, Lord Denning
in Eves v Eves applied the CT as a mechanism to create equitable property rights where justice
and good conscience demanded it. This essay will also go on to discuss those other factors
below. Moreover, Sir Terence Etherton in “Constructive trusts: a new model for Equity and
unjust enrichment’ (2008) stated that, “The search for an acceptable, universally acknowledged,
principle for the establishment of a constructive trust, which gives coherence to past decisions
and provides a clear guide for the future, will certainly prove elusive in relation to the many
different areas of law and fact in which constructive trusts arise.”
Following that, it seems that CT has been imposed in English law in several occasions
but it must be noted that those cases can either be categorised as a genuine CT case or a false CT
case. A genuine CT case includes those in a vendor-purchaser relationship where the vendor will
hold the title on trust for the purchaser the moment a contract is formed. This is illustrated in
cases like Lysaght v Lysaght and Jerome v Kelly. Besides, rights acquired by the operation of
rule as per Re Rose is also considered a genuine one. Equitable wrong due to breach of trust such
as receiving secret commission as per FHR European Ventures LLP v Cedar Capital Partners
LLC which gives rise to CT is regarded genuine as well. A trust of mistaken payment as per
Chase Manhattan Bank v Israel-British Bank is yet another genuine CT case. These last two
cases though are controversial in decisions but no doubt still a true CT and not express trust. On
the other hand, a false CT can be seen in cases where third party is liable to account as
constructive trustee such as Dubai Aluminium v Salaam or Williams v Central Bank of Nigeria.
Here, third parties involved in a breach of trust are held to be liable as constructive trustee and
thus personally liable to restore the trust with money as if they were a trustee. In fact, there is
only a personal liability and no actual rights are being held by the third parties for the claimant.
Furthermore, the case of Rochefoucauld v Boustead where it was clearly identified as an express
trust but ended up being treated as CT is also considered a false CT.
As such, those genuine CT will be regarded as institutional constructive trust (ICT). In
this context, it is an orthodox mode of analysing these trusts, which are treated as arising by
operation of law on the occurrence of a certain event where a constructive trust has previously
been recognised. Meanwhile, those false CT will fall under remedial constructive trust (RCT).
Judges can only award a remedy in their discretion, consider that it is appropriate that the
defendant should held property on trust for the claimant. As a consequence, it occurs by virtue of
the exercise of judicial discretion and thus being distinguished from the ICT. English law
generally does not recognise this kind of CT. Nevertheless, it is noteworthy to know that RCT is
recognised in other jurisdictions such as Canada, Australia and New Zealand.
Hence, question might be asked as to whether UK should recognise RCT. In answering
this question, one needs to consider whether it is appropriate for the proprietary consequences of
the constructive trust to be recognised or to be modified via the exercise of judicial discretion. In
