constructive trust

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A trust that arises by operation of the law. It is a form of implied trust and is exempt from compliance with formalities by section 53(2) of the Law of Property Act 1925. There are two recognized types of constructive trust: the institutional constructive trust and the remedial constructive trust. English law recognizes only the former. An institutional constructive trust automatically comes into being when certain circumstances arise; for example, when a person in a fiduciary position makes an unauthorized profit or when a stranger meddles in a trust. In a domestic setting, a constructive trust may be found to exist when the legal owner of property attempts to deny the rights of another person (usually a cohabitee) who has contributed either directly or indirectly to the purchase of the property, or where the legal owner tries to deny an express agreement to share ownership of the property (Lloyds Bank v Rosset [1991] 1 AC 107 (HL); Oxley v Hiscock [2004] 3 All ER 703 (CA); Stack v Dowden [2007] UKHL 17. By contrast, a remedial constructive trust is a tool of the court that is used at the discretion of the judge to provide a remedy. In those jurisdictions that recognize them, remedial constructive trusts are often used to reverse the unjust enrichment of the defendant, thereby giving effect to restitution. English law has not been prepared to accept the remedial constructive trust (Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL).

Subjects: Law.

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