CONSTRUCTIVE TRUSTS
A constructive trust is a trust imposed by equity regardless of the intention of the owner of the property: it arises by operation of law. The concept has been applied in a number of situations:
1. It is a rule of equity that a trustee must not permit his interests to conflict with his duties: note particularly, a trustee may not profit from his trust: where he does so he holds the gains on a constructive trust (Keech v Sandford);
2. If a person who is not a trustee obtains information with the help of a trustee which enables him to make a profit, he holds the proceeds on constructive trust: (Boardman v Phipps);
3. If a person receives trust property with knowledge (actual or constructive) that it is trust property, and it is transferred to him in breach of trust, he holds the property as trustee;
4. A person who does not actually receive trust property but assists a trustee to fraudulently dispose of it is liable as a trustee.
Note: Strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, e.g a solicitor who creates a fraudulent document on the instructions of the trustee. They will be liable only if:-
- They receive the trust property; or
- Act in a manner consistent with that of a trustee; or
- Assist with knowledge in a dishonest and fraudulent design on the part of the trustees.