LEGAL PRINCIPLE: EQUITY & TRUSTS – Constructive Trust – Imposed by Equity on Conscience
PRINCIPLE STATEMENT
A constructive trust is imposed by equity on the ground of conscience and is not based on the prior or presumed intention of the parties.
RATIO DECIDENDI (SOURCE)
"A constructive trust, as in this case, is imposed by equity on the ground of conscience and it is not based on the prior or presumed intention of the parties."
EXPLANATION / SCOPE
Constructive trusts differ fundamentally from express and resulting trusts. Express/resulting trusts arise from parties’ intentions (expressed or presumed). Constructive trusts are imposed by equity regardless of intention, based on: unconscionable conduct, unjust enrichment, breach of fiduciary duty, or fraud. The trust arises by operation of law to prevent unconscionable retention of property. Examples: fiduciary acquiring property through breach of duty (holds on constructive trust for beneficiary); person obtaining property through fraud (holds on constructive trust for victim); vendor receiving purchase price while retaining property (holds on constructive trust for purchaser). The “ground of conscience” means equity will not permit unconscionable conduct—the constructive trustee must hold property for the rightful owner despite lacking agreement to do so. This remedial mechanism serves: preventing unjust enrichment, remedying wrongful conduct, and protecting victims of breaches of duty. Courts impose constructive trusts when justice requires, without needing to find actual trust intention.