Constructive and Resulting Trusts

Charles Mitchell, Charles Mitchell

• Editorial: Hart Publishing
• Año: 2010
• ISBN:
  9781847317599
• Edición: 1
• Categoría: Law
• Categoría: Estates & Trusts Law

Constructive and resulting trusts have a long history in English law, and the law which governs them continues to develop as they are pressed into service to perform a wide variety of different functions, for example, to support the working of express trusts and other fiduciary relationships, to allocate family property rights, and to undo the consequences of commercial fraud. However, while their conceptual flexibility makes them enormously useful, it also makes them hard to understand. In the twelve essays collected in this volume, the authors shed new light on various aspects of the law governing constructive and resulting trusts, revisiting current controversies, bringing new historical material to the fore, and offering new theoretical perspectives.

PART I
CONTSTRUCTIVE TRUSTS

1

The Words Which Are Not There: A Partial History of the Constructive Trust

PAUL MATTHEWS

If it is intended to have a resulting trust, the ordinary and familiar mode of doing that is by saying so on the face of the instrument; and I cannot get, out of the language of this instrument, a resulting trust except by putting in words which are not there.¹

A. INTRODUCTION

History is many things. According to Dionysius, history is philosophy drawn from examples.² According to Thomas Carlyle, it is the biography of great men.³ According to Sellar and Yeatman, it is what you can remember.⁴ And, according to Henry Ford, it is more or less bunk.⁵ It seems to me that all of these views have some truth in them, even the last.⁶ But I have to deal with the history of a legal idea, rather than that of a nation, a place or a person. And unfortunately I am no historian, though I do claim to be (and at least earn my living as) some sort of lawyer.

The legal idea the history of which I am to attempt to describe is that of the constructive trust. So the first task might be thought to be to ascertain the exact meaning of the phrase ‘constructive trust’. This is, however, easier said than done. Indeed, the whole of this book is devoted to elucidating the concept of the constructive trust and its bedfellow the resulting trust. Waiting for a conclusive view before looking at the history would not only be potentially a lengthy process, but also a speculative one, indeed perhaps even existential as well. I need a shortcut.

According to Wittgenstein,⁷ the meaning of a word is not what it stands for or designates, but the use that it has. Defining meaning is done by defining use. So what use is the phrase ‘constructive trust’? Assuming that we know what we mean by the idea of the ‘trust’ in the first place, why do we need to distinguish between the ‘constructive trust’ and other sorts of trust?

B. THE DISTINCTION BETWEEN EXPRESS AND CONSTRUCTIVE TRUSTS

The usual answer that lawyers give to this kind of question is that different rules apply to things that are different in a legally relevant way. We know that express private trusts require a settlor who intends to create a trust, and a trustee (being a person of full age) who agrees so to act. The trust may require certain formalities in order to be validly created, the trustee has certain duties, and claims against the trustee for breach of those duties may or may not be subject to limitation periods. But already, as we think of these rules for express trusts, we can see that constructive trusts have-or at least may have-different rules from those for express trusts.

This is fundamentally because we think of the express trust as one where the settlor and the trustee (who may of course be the same person) expressly intend to create a trust structure, whereas the persons fulfilling those roles in a constructive trust may not. To put it another way, express trusts are created by the will of the parties, whereas constructive trusts are imposed by law. And, for example, it would not make much sense to provide that trusts imposed by law in response to wrongdoing could not be enforced unless proved by writing signed by the wrongdoer. In this chapter, we shall consider the development of the constructive trust idea by reference to some (but by no means all) of these points of distinction.

The main categories of purely constructive trust which may be recognised today (leaving on one side cases known as resulting trusts) are the following: (1) trusts created by statute;⁸ (2) where an express trustee passes trust property to a successor trustee; (3) where an express trustee pockets trust property for himself; (4) void distributions to beneficiaries, etc;⁹ (5) where trust property is alienated in breach of trust to a third party who is not a bona fide purchaser for value of a legal estate without notice; (6) fruits of trust property;¹⁰ (7) tracing into proceeds of express trust property; (8) property which a trustee has a duty to try to get for trust;¹¹ (9) property which a trustee has a duty not to get for himself;¹² (10) specifically enforceable contracts for the transfer of property rights¹³ (including marriage settlements);¹⁴ (11) mutual wills;¹⁵ (12) proprietary estoppel;¹⁶ and (13) common intention constructive trusts.¹⁷

In some of these cases (especially (2)-(5)) there is already an existing express trust. Where the legal ownership of the asset concerned does not change, it seems better to say that that trust continues in relation to the trust property, rather than that a new (constructive) trust is imposed on property which purports to leave the express trust. But where (as may happen in (4) and ex hypothesi does happen in (5)) the trust property is alienated in breach of trust to a person who is not the express trustee (and does not agree to become such), and who is not a bona fide purchaser of a legal estate for value without notice, that person may become a trustee and so far as he or she is concerned the trust will be constructive rather than express.¹⁸ In other cases ((6)-(9)) there is property which never was the subject of any express trust but which comes into the hands of an express trustee in circumstances in which it should be treated as trust property. The remaining cases are not about existing trust property (or its products or substitutes) at all, but are about something which admittedly belongs (and has always belonged) to someone else and is merely claimed from that person because of obligation-generating conduct on his part or on that of a predecessor in title. They stand at the crossover between property and obligation. I have deliberately not tried to deal with cases arising from fraud or innocent misrepresentation, though there is a case for saying that they too involve a kind of constructive trust.¹⁹

I cannot deal with the history of all of these different manifestations of the constructive trust. So I am going to concentrate on three topics only: formalities, limitation, and the relationship between the doctrine of proprietary estoppel and the so-called common intention constructive trust. The third of these is the most topical, and occupies the greatest part of the chapter.

C. HISTORICAL MATERIAL

The distinction between express and constructive trusts is not easily visible in early legal materials. There are, for example, very few cases before the second half of the seventeenth century where a trust was held to exist which was not an ordinary express trust. Neil Jones refers²⁰ to three late-sixteenth-century cases of transfer to another which we might today regard as presumed resulting trusts (because of the absence of consideration for the transfer). But that really is about it. I have looked at (for example) St German’s Doctor and Student,²¹ and his Replication and Little Treatise,²² but have found nothing on constructive uses or trusts. Yet it seems clear that, before the Statute of Uses, there were uses which resulted to the grantor by operation of law. This continued after the Statute,²³ even though in some cases such uses were ‘executed’ by the Statute so that the legal estate in the land did not pass at all.²⁴

Perhaps this just goes to show the value of Wittgenstein’s point. There was no reason to distinguish such cases. Either there was a use or a trust, or there wasn’t.

In the second half of the seventeenth century we find constructive trust cases arising more frequently, even though the phrase ‘constructive trust’ itself does not appear in the reports until much later.²⁵ Thus, in Holt v Holt²⁶ executors renewed a lease forming part of the deceased’s estate for their own benefit, rather than for that of the beneficiaries, but ‘it was agreed by the whole Court, that in case of an Executorship in Trust, the Renewal of such a Lease shall go to the Benefit of Cestuy que Trust’.²⁷

The first judgment that I have been able to find apparently making use of the distinction between express and constructive trusts is that of Lord Finch of Daventry LC in Cook v Fountain.²⁸ Lord Finch later became Lord Nottingham,²⁹ and, since he is better known by that title to trust lawyers, I will anachronistically use it in referring to him even before he received it. The date of the judgment in the case of Cook v Fountain-1676-is important, because it pre-dates the enactment of the Statute of Frauds in 1677.³⁰ Nottingham was perhaps the first important lawyer to try to bring intellectual order to the trust institution and to the learning then available on it.

In Cook v Fountain the defendant held certain leases and a rentcharge, granted to him by the plaintiff’s predecessor in title. The plaintiff claimed that they were held by the defendant on trust for him. After considering a mass of evidence, the Lord Chancellor (and other judges)³¹ held that the plaintiff succeeded as to the leases but failed as to the rentcharge. But during the course of his judgment, he said this:

I should now come to particulars, and consider where and in what...