Critically Discuss

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Critically discuss the function of the constructive trust in protecting the involvements of those whose ownership is non reflected by the Land Registry. ( 1500 words )

A constructive trust is one that arises by operation of the jurisprudence, and there are three wide classs of such trust. The first is the constructive trust that arises as a consequence of the just axiom that equity looks upon that as done which ought to be done.

As such, these trusts enhance the rights of the parties to specifically enforceable contracts. The 2nd type of constructive trust arises where a beneficiary’s just proprietary rights have been threatened by a breach of trust. The concluding wide class of the constructive trust arises where an single acquires for the first clip an involvement in the belongings of another as a consequence of their past relationship or traffics with that other individual ( that is, the legal proprietor ) .

[ 1 ] One can see from the beginning that the constructive trust, so, has a potentially of import function to play in land jurisprudence. This essay will discourse and analyze this function, with peculiar mention to the protection of the involvements of those whose ownership is non reflected in the Land Registry ( although such individuals are falling in figure as a consequence of the e-conveyancing revolution ) .

Lpa 1925 S53

One can see that all the three types of constructive trusts can play a function in protecting the involvements of those whose involvements have non been registered in the Land Registry, albeit at different phases in the life of the peculiar involvement.

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For illustration, the first type of constructive trust identified ; that which arises through the operation of the axiom that equity looks upon that as done which ought to be done, can be seen to protect the parties to a belongings dealing which will normally hold two phases. These phases are normally an initial contract of sale, followed later by the formal executing of paperss which transfer the rubric to the belongings in inquiry to the purchaser. The obvious danger to the purchaser in such fortunes is that the seller refuses to honor the contract for sale and does non put to death the paperss to reassign rubric. Obviously at this phase there is no registered involvement on the portion of the purchaser, and as such equity stairss in to help him or her.

Provided the belongings being sold is “unique in the eyes of equity” ( which all land is considered to be ) , equity will let the purchaser an excess redress. Equally long as his common jurisprudence right to action for amendss, the just redress of specific public presentation of the contract will let the purchaser to action for the belongings itself. The concluding behind this is that equity considers the rubric to the belongings to hold been transferred from the seller to the purchaser at the minute the contract of sale is agreed. This is the minute at which a constructive trust comes into being, and the seller holds, in the eyes of equity, the belongings on constructive trust for the purchaser until such times as the transportation of legal rubric is completed, at which stage the involvement will be registered on the Land Registry. This scenario clearly illustrates the nature of the constructive trust as arising by operation of the jurisprudence and protecting the unregistered involvements of purchasers of land.

It can already be seen, so, that the constructive trust represents an informal creative activity of proprietary rights in land. This is something that by and large English jurisprudence has traditionally non favoured. [ 2 ] This is because of the supreme concerns of land jurisprudence for lucidity and certainty in this country. The informal creative activity of rights in land is evidently inherently unsure and hence impinges on these concerns. The constructive trust is a premier illustration of the informal creative activity of rights in land. As has been mentioned, such a trust arises where it would fraudulent for the legal rubric holder of a piece of belongings to asseverate his exclusive good ownership “in disparagement of just rights which have already been bargained off informally to another.” [ 3 ] That is to state that a deal has been made between the legal proprietor and the prospective purchaser of the belongings in inquiry, and that deal renders it conscienceless for the seller to asseverate his ain good rubric to the exclusion of the purchaser. As with other countries of equity, the protection afforded the purchaser by the infliction of a constructive trust will go available merely one time the purchaser has relied upon the deal in inquiry.

The being of constructive trusts in this country is to a great extent coloured by the statutory rejection of mere unwritten gifts or deals, as exemplified in theLaw of Property Act 1925, s53 ( 1 ) ( B ) – ( degree Celsius ) . There is, so, a balance to be struck between this rejection and the demand to protect the bargained involvement of the possible purchaser, despite that interest’s informal beginnings. This balance can be seen as a certain threshold of conscienceless behavior on the portion of the intended seller, beyond which the constructive trust will step in to battle this unconscionability. Put merely, as Nourse LJ did in the instance ofGrant V Edwards( 1986 ) , where the legal rubric holder has entered into an understanding which is later acted upon by the other party, to portion or apportion the good ownership of a peculiar piece of land in some manner, equity will non let the supposed seller unconscionably to deny the good involvement conceded and will therefore “construct a trust to give consequence to it” . [ 4 ] In the more colorful linguistic communication of Justice Cardozo in the instance ofBeatty V Guggenheim Exploration Co( 1919 ) , the constructive trust provides the “formula through which the scruples of equity discoveries expression.”

The fortunes in which a constructive trust will run to protect the unregistered involvements of persons in belongings were set down by Lord Diplock in the seminal instance V 1971 ) . Such fortunes were where “ [ A ] has so conducted himself that it would be unjust to let him to deny to [ B ] a good interest” in his land. This was limited, nevertheless, by the fact that the unjust result which the constructive trust sought to rectify would originate merely if “ [ A ] by his words or behavior has induced [ B ] to move to [ his ] ain hurt in the sensible belief that by so acting [ he ] was geting a good involvement in the land.” [ 5 ] This, so, can be seen both to reflect general just rules that the donee of equity must hold relied to their hurt on something, and besides that the constructive trust’s function in protecting the good ownership of those non reflected in the Land Registry is non every bit wide as it may at first appear. One of the most noteworthy characteristics of the constructive trust is that it is statutorily exempted from any demand of formal authorship and therefore is good placed to protect informal rights, albeit to a limited extent as outlined above ( LPA 1925, s53 ( 2 ) ) .

What type of involvement does the constructive trust grant the purchaser? This will really much depend on the fortunes of the single instance, and this country reflects the flexibleness of the constructive trust. For illustration, the fortunes may be such that the constructive trust grants the purchaser an absolute good involvement ; that is, for illustration, an just fee simple estate. Alternatively, fortunes may be such that it is merely appropriate to confabulate a limited good involvement on the purchaser such as a life involvement. Finally, a constructive trust may allow a ‘fractional’ involvement on the purchaser ; that is an just right to a fraction of the ownership such as a half or a 3rd. When the constructive trust takes consequence, it becomes a ‘trust of land’ and as such is governed by theTrusts of Land and Appointments of legal guardians Act 1986.

The constructive trust is a potentially powerful method of protecting the involvements of those individuals whose involvement are non yet registered in the Land Registry. The flexibleness of the constructive trust is reflected in the broad scope of involvements which it has imposed in assorted fortunes, such as an just fee simple estate inDoohan v Nelson( 1973 ) , a life involvement inBannister V Bannister( 1948 ) , a long rental inYaxley V Gotts( 2000 ) , or an estate contract inLyus V Prowsa Developments Ltd( 1982 ) . The fortunes in which it operates are, nevertheless, limited, and this can be seen as a consequence of the tenseness between rules of English land jurisprudence of certainty and formality and the informal creative activity of belongings rights.


Legislative act

Law of Property Act 1925

Trusts of Land and Appointments of legal guardians Act 1986


Bannister V Bannister [ 1948 ] 2 All ER 133, CA

Beatty V Guggenheim Exploration Co 225 NY 380 ( 1919 )

Doohan V Nelson [ 1973 ] 2 NSWLR 320 V [ 1971 ] AC 886, HL

Grant V Edwards [ 1986 ] Ch 638

Lyus V Prowsa Developments Ltd [ 1982 ] 1 WLR 1044

Yaxley V Gotts [ 2000 ] Ch 162, CA

Secondary beginnings

Bray, J. , Turner, C. and Martin, J. ( 2004 ) Unlocking Land Law ( London: Hodder Arnold )

Gray, K. and Gray, S.F. ( 2003 ) Land Law, 3rdEdition ( London: LexisNexis )

Gray, K. and Gray, S.F. ( 2005 ) Elementss of Land Law ( London: LexisNexis )

Penner, J.E. ( 2004 ) The Law of Trusts, 4ThursdayEdition ( London: LexisNexis )

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Critically Discuss
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