The Doctrine of Constructive Trusts
The doctrine of constructive trusts occupies a central position within English equity, functioning as a judicial mechanism through which the courts intervene to prevent unconscionable conduct and unjust outcomes. Unlike express trusts, which depend upon the intention of the settlor, or resulting trusts, which arise from presumed intention, constructive trusts are imposed by operation of law irrespective of the parties’ wishes. Their primary purpose is not to give effect to intention but to prevent the legal owner of property from acting unconscionably by denying another’s beneficial interest. As such, constructive trusts are best understood as a remedial response to wrongdoing or inequity, reflecting equity’s long-standing concern with conscience and fairness.
The theoretical foundation of constructive trusts lies in equity’s jurisdiction over conscience. This was articulated by Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, where his Lordship explained that a constructive trust arises where it would be unconscionable for the holder of the legal title to deny the beneficial interest of another. Although the claim in Westdeutsche ultimately failed due to the absence of the defendant’s knowledge at the relevant time, the case remains significant for its emphasis on conscience and the circumstances in which equity will intervene. It also illustrates the tension within English law between intention-based reasoning and the automatic imposition of constructive trusts, a tension that continues to shape judicial and academic debate.
One of the most prominent contexts in which constructive trusts arise is that of common intention in domestic property disputes. In such cases, equity recognises that parties may share an understanding as to beneficial ownership despite the legal title being held by one or both of them. The leading authority is Stack v Dowden [2007] UKHL 17, in which the House of Lords held that where property is jointly owned, the starting point is that equity follows the law, but this presumption may be displaced by evidence of a different common intention. The court emphasised that the parties’ entire course of conduct must be examined, including their financial arrangements and personal dealings, to ascertain their true intentions. This approach was further refined in Jones v Kernott [2011] UKSC 53, where the Supreme Court confirmed that where it is clear the parties’ intentions have changed over time, and those intentions cannot be inferred from evidence, the court may impute an intention that the parties would reasonably have had. These cases mark a significant evolution in the law, allowing equity to respond flexibly to the realities of modern domestic relationships.
Constructive trusts also play a crucial role in cases involving fraud, breach of fiduciary duty, and the misapplication of property. Where a person acquires property through dishonest means, equity will not permit them to retain the benefit. In Foskett v McKeown [2001] 1 AC 102, the House of Lords reaffirmed that beneficiaries of a trust may trace misappropriated funds into substitute assets and claim a proprietary interest in them through a constructive trust. The case demonstrates the proprietary strength of constructive trusts, as they allow claimants to assert rights over specific property rather than being confined to personal remedies. This function is particularly significant in insolvency contexts, where proprietary claims take priority over unsecured creditors.
A closely related doctrine is proprietary estoppel, which often gives rise to constructive trusts as the appropriate equitable remedy. Proprietary estoppel arises where one party makes an assurance or representation, another relies upon it to their detriment, and it would be unconscionable for the representor to resile from it. In Thorner v Major [2009] UKHL 18, the House of Lords confirmed that assurances need not be explicit, provided that the conduct reasonably conveyed a promise or expectation. Where proprietary estoppel is established, the court may impose a constructive trust to satisfy the equity in a manner proportionate to the claimant’s reliance and detriment.
Despite their practical utility, constructive trusts remain a source of doctrinal controversy. One key area of debate concerns the status of remedial constructive trusts. Unlike some other jurisdictions, English law has traditionally resisted recognising constructive trusts as discretionary remedies imposed retrospectively to achieve justice. This resistance was evident in Westdeutsche, where the House of Lords favoured an institutional approach, under which constructive trusts arise automatically when certain conditions are met. However, decisions such as Stack v Dowden and Jones v Kernott suggest a gradual movement towards a more flexible, outcome-oriented approach, blurring the line between institutional and remedial models.
In conclusion, the doctrine of constructive trusts represents one of equity’s most powerful and adaptable tools. It enables the courts to intervene where strict adherence to legal ownership would result in injustice, particularly in cases involving domestic property disputes, fiduciary wrongdoing, and detrimental reliance. While the doctrine’s reliance on concepts such as unconscionability inevitably introduces a degree of uncertainty, it is precisely this flexibility that allows equity to respond to the complexities of modern legal relationships. Constructive trusts therefore remain an essential feature of English law, embodying equity’s enduring commitment to fairness, conscience, and justice.
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