Week 10 Cases Constructive Trusts Continued

Week 10 Cases Constructive Trusts Continued

1. Re Goodchild [1996] 1 WLR or Goodchild v Goodchild

   • Under topic of Mutual Wills: Prerequisites for the Imposition of a Constructive Trust
   • FACTS: Husband and wife made identical wills in each other's favour with a provision for their son. Ultimate intention was to benefit the son. Wife's mistaken belief that the wills were mutually binding. After the wife's death, the husband married the defendant and made a new will leaving the entire estate to her (as opposed to the son as set out in the first will)
     • The son brought this case (he was the plaintiff) after his father died, seeking a declaration that after the death of his mother, his father held her estate on trust for the plaintiff (the son) and that after the father died the defendant (his new wife) held his estate similarly. The plaintiff also sought an action seeking an order under the Inheritence Act 1975 for reasonable financial provision to be made for him out of the testator's estate.
       • HELD: Carnwath J accepted that where there is a CLEAR AGREEMENT or other EVIDENCE that wills are intended to be MUTUALLY BINDING, the law will give effect to that intention by way of a "floating trust" which becomes irrevocable after the death of the first intestator and crystallises on the death of the second.
         • HELD: However, in these circumstances it was held that the evidence FELL SHORT of establishing such an agreement between the testator and his first wife and the wills were NOT mutually binding.
           • Carnwath J stressed that the onus of proof lay on the plaintiff and said that there must be evidence of "a specific agreement OUTSIDE the wills not just some loose understanding or sense or moral obligation."
             • Court of Appeal upheld that the wills were not mutually binding.

2. HKN Invest Oy v Incotrade Pvt Ltd [1993] 3 IR 152

   • Under heading of Future Developments of the Constructive Trust: The Attitude of the Irish Courts to the New Model Constructive Trust
     • Lord Denning pioneered a development in the English Court of Appeal in the late 1960s and early 1970s. In Hussy v Palmer [1972] Lord Denning MR stated that a constructive trust would be imposed "whenever justice and good conscience require it" and he subsequently described this extension of the existing law in Eves v Eves [1975] as a "constructive trust of a new model."
       • Lord Denning's creation has met with some degree of limited approval in this jurisdiction, although some recent authority suggests that a more precisely defined doctrine would be preferable - as mentioned in Dublin Corporation v Ancient Guild of Incorporated Brick and Stone layers [1996]
   • Costello J stated that a CONSTRUCTIVE TRUST will arise when the circumstances of the case are such as to render it INEQUITABLE for the LEGAL OWNER of property to deny another's title to it and agreed that: "where a person holds property in circumstances which in equity and good conscience should be held or enjoyed by another he will be compelled to HOLD THE PROPERTY in trust for another."
     • FACTS: A claim by the plaintiffs who had obtained judgment AGAINST the defendants (namely a company and the individuals responsible for conducting its affairs) and who sought to be allowed to complete execution of this judgment.
       • In relation to monies received by way of COMMISSION on PRE-incorporation contracts, Costello J held that although the individual defendants concerned might NOT have been fiduciaries at the time they received this commission, these FUNDS were held on TRUST for the COMPANY, and COULD NOT be the subject of a garnishee order.
         • A GARNISHEE ORDER: is a court order requiring the employee to WITHOLD part of the wages owed to an employee (the debtor) and pay the amount instead to that employee's creditor or the court in satisfaction of a DEBT WHICH IS DUE.
           • HELD: Costello J held that the monies received AFTER incorporation were held by the individual defendants as fiduciaries on a CONSTRUCTIVE TRUST for the company and he made an ORDER declaring that the liquidator was beneficially entitled to proceeds of BOTH SETS of contracts as the ASSETS of the company.
             • This demonstrates the ready acceptance of the "good conscience" approach by Costello J, reminiscent of Lord Denning's "new model."

3. Murray v Murray [1996] 3 IR 251

   • This is another example of a case where a constructive trust was imposed because "justice and good conscience" demand it
   • The plaintiff (the nephew of the defendant - defendant was plaintiff's uncle) had lived in a property belonging to his uncle with his aunt (the defendant's sister). The plaintiff (the nephew) had paid the initial deposit on it. The aunt during her lifetime had paid the mortgage installments and most of the outgoings on the property.
     • After the Aunt's death the plaintiff (the nephew) who was her next of kin, claimed that he was entitled to the BENEFICIAL INTEREST in the property, and argued that in the circumstances it would be UNCONSCIONABLE for the defendant to rely on his legal title.
       • Barron J stated: "It is I think quite clear that the law will impose a constructive trust in all circumstances where it would be unjust and unconscionable not to do so."
         • In his view, the case of Hussey was the authority for the proposition that in certain circumstances where equity so required, "a debt may be secured by the device of a CONSTRUCTIVE TRUST on the property created by the money involved."
           • He HELD that in the circumstances the PLAINTIFF was entitled to 3/4's of the beneficial interest in the property and that he was a TENANT IN COMMON of the premises with the DEFENDANT.
             • The lack of any evidence of the fat that the AUNT INTENDED to earn a beneficial interest for herself as a result of the contributions she had made seemed to preclude Barron J from finding that these contributions gave rise to a resulting trust and instead he turned to the more flexible constructive trust to provide a remedy.
               • Mee is critical of this approach stating that Murray case shows the NEW MODEL CONSTRUCTIVE TRUST in its worst light. In his view the absence of intention should probably have precluded even a constructive trust arising, but its inherent vagueness made it more plausible for Barron J to provide the plaintiff with a remedy.