Constructive trusts
Constructive trusts

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Constructive trusts
  • Unauthorised profits by fiduciary
  • Specifically enforceable contract
  • Statute as an instrument of fraud
  • Forfeiture rule
  • Joint will or mutual wills
  • Liability of strangers
  • Correction of injustice
  • Implied trusts of the home

Constructive trusts represent one of the three types of trust which do not require to be declared or evidenced in writing. The others are resulting and implied trusts, although it is doubtful whether there is any form of implied trust which is not in fact either a constructive trust or a resulting trust. Constructive trusts arise through operation of law, irrespective of the parties' intentions.

A constructive trust arises:

  1. where a fiduciary makes an unauthorised profit

  2. where a specifically enforceable contract has come into existence

  3. where a statute would otherwise be being used as an instrument of fraud

  4. where the common law forfeiture rule applies

  5. where one or more testators have made a joint will or mutual wills

  6. where a stranger is deemed to have become accountable for trust property

  7. as an exceptional measure to correct injustice

  8. as one aspect of the principles relating to implied trusts of the home

Unauthorised profits by fiduciary

One of the overarching duties of a fiduciary is that they should not personally profit from their position as a fiduciary unless expressly authorised.

There is no comprehensive list of fiduciary relationships which engage the rule against unauthorised profits — profits can include lawful remuneration as well as secret bribes or commissions. Some relationships are automatically fiduciary (eg those between trustee and beneficiary, solicitor and client, company