Broadly speaking, a constructive trust is a remedy that certain courts may impose in order to prevent the unconscionable denial of the right of another party in property. A constructive trust can be declared by a court to arise in situations where it would be unconscionable not to.
A common scenario where a constructive trust might arise is where real property (land including any improvements thereon) is registered in the name of one party A, and another party B makes a contribution towards the acquisition, maintenance and/or improvement of the property. The contribution made by B could take the form of paying part of the purchase price to acquire the property including by making mortgage repayments or working on the property to maintain or repair buildings or fixtures, usually but not always where a promise has been made by party A or party B working towards a common intention or agreement, to the detriment of party 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 compensation in recognition of the contribution B has made to the property.
The rationale for the imposition of a constructive trust as a remedy ordered by a court, 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 a circumstance where, for example, they have induced another to confer a benefit to them.
A constructive trust arises from equitable principles. Equity is an important part of legal doctrine which can be relied upon to avoid injustices that might otherwise arise from the strict application of the common law, particularly in the area of contracts and real property law.
If you think you may be entitled to an interest in a property by reason of a constructive trust, speak to a lawyer at Preston Law today.