Constructive trusts:

The expression ‘constructive trust’ is a form of equitable relief which is derived from a trust relationship and provides remedies akin to the existence of an express trustee for breach of trust.  The constructive trust is explained more fully under our tab ‘Asset Protection and Trusts Law’. A constructive trust is not a formal trust, rather it is a trust that is imposed by the Court when certain circumstances warrant its existence.  Thus it does not require certain statutory formalities; and it can be implied from the circumstances.  A qualified Commercial Lawyer in this regard may assist in determining whether this form of relief is applicable to you.

The reason behind providing constructive trust relief is that, in the absence of such relief, a person may secure or maintain an interest in property or money that it is contrary to equitable principle for that person to obtain or retain. Constructive trust relief is appropriate where the Court finds that a person could not in good conscience retain for himself or herself a benefit, or the proceeds of a benefit, he or she has appropriated in breach of his or her contractual or other legal or equitable obligations to another. To this end, the constructive trust arises by operation of law, often regardless of actual or presumed intention. 

The Court will not impose or declare a constructive trust if, in the circumstances, it considers that:

the plaintiff’s ordinary legal remedy provides adequate and appropriate relief; or

another form of equitable relief will satisfy the demands of justice and good conscience. 

A common scenario where a constructive trust may arise is where property is registered in the name of one party (A) and another party (B) makes contribution towards the property. The contribution made by (B) could be by working on the property or contributing towards the mortgage repayments, usually but not always where a promise has been made to party (B) or party (B) has been working towards a common intention or agreement, to the detriment of party (B).  In the event that (A) dies without leaving any benefit in the property to (B), the Court may declare that an appropriate remedy would be for (B) to have an interest in the property or to receive some form of reward for the contribution (B) has made to the property. 

In general terms, the rationale for constructive trust relief is that, in the absence of such relief, a person may secure or maintain an interest in property or money that would be such that it would be contrary to equitable principles for that person to maintain that interest. Constructive trust relief can be appropriate where the Court finds that a person could not in good conscience retain for himself or herself a benefit, or the proceeds of a benefit, where he or she has so retained the benefit or proceeds in breach of his or her contractual or other legal or equitable obligations to another. 

You may contact our firm to speak to an Asset Protection Solicitor or Trusts Lawyer to seek further advice on whether a constructive trust may be relevant in your circumstances, or if you otherwise require legal advice about a potential constructive trust scenario. You may book an appointment with us by telephone on 02 9233 4048 or by email to info@navado.com.au.  

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