Limitation—constructive trust claims
Limitation—constructive trust claims

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

  • Limitation—constructive trust claims
  • What is the nature of the constructive trust?
  • Section 21 of the Limitation Act 1980
  • In what circumstances will section 21(1) be applicable to a constructive trustee?
  • Is it necessary to prove dishonesty?
  • What is the test for dishonesty?
  • Actions against third parties under section 21(1)(a)
  • Requirement for 'possession' of trust property under section 21(1)(b)
  • Practical tips

What is the nature of the constructive trust?

There are two categories of 'constructive trustee' as described by Lord Sumption in Williams:

  1. the first category comprises cases where the defendant is not expressly appointed as a trustee, but has lawfully assumed fiduciary obligations in relation to trust property without formal appointment, and the assumption of the fiduciary obligations was independent of and preceded the breach of trust (Paragon, at paras [408]–[409], applied in Williams). Such trustees were described in Williams as 'de facto trustees. They intend to act as trustees, if only as a matter of objective construction of their acts. They are true trustees…'. Lord Sumption continued that others, ‘such as company directors, are by virtue of their status fiduciaries…’. Their obligations, stemming from their role, mean that they too fall within this first category (Williams, at para [9]). Examples of cases involving this category of constructive trustee can be seen in McCormick, Rochefoucald, Pallant and Farrar. By way of illustration, the following are both examples of this first category of constructive trustees:

    1. Mrs A receives property from Mr B in circumstances where the parties intended a trust to be created for the benefit of Miss C. Any subsequent appropriation of the trust property by Mrs A will be a breach of that trust

    2. Mr B, a company