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of the mistake may well have given rise to a constructive trust”Justification = D’s conscience had been affected by its knowledge of themistake whilst it was in possession of the moneyoClark v CutlandCompany director wrongly transferred company assets to his pension trusteesTrustees were later notified of the company’s claimUnauthorised/ secret profits by fiduciary and conflicts of interest oGeneral principleKeech v SandfordAn infant had inherited the lease with Sandford entrusted to look after thisproperty until the child maturedThe lease expired before the infant turned adultThe landlord refused to renew the leaseSandford then took a new lease for his own benefitThe infant sought the lease to be assigned to himHeld –oA trustee of a lease may NOT renew a lease for his own benefit but holdsthe renewed lease upon a constructive trust for the beneficiarieso“[I]t is very proper that rule should be strictly pursued, and not in theleast relaxed; for it is very obvious what would be the consequence ofletting trustees have the lease” (per Lord King LC)Bray v Ford“It is an inflexibleruleof the court of equity that a person in a fiduciaryposition … is not, unless otherwise expressly provided, entitled to make aprofit; he is not allowed to put himself in a position where his interest andduty conflict”oCases that illustrate the operation of the general ruleBoardman v PhippsTrustees held a minority sharing in a private company which was not beingefficiently managedBoardman had acted as solicitor to the trust (fiduciary) and decided that thebeneficiaries would be in a better position if the trustees had control of thecompany, but no trust $ was available to buy the extra shares3
LAWS2016 Equity and trusts lawConstructive trustsBoardman and one beneficiary therefore bought the necessary sharesthemselves and reorganized the company. All was done in good faith and withthe object of enhancing the trust holdingBoth the personal & trust holdings increased in valueHeld – HLoBoardman was constructive trustee of profit made on his personalshareholdingoOpportunity to make profit arose out of his fiduciary relationship withthe trustee and certain confidential information had been used in theprocesso**Equitable compensationwas ordered from the trust in recognition ofthe work and skill involvedFHR European Ventures LLPFHR purchased the issued share capital of Monte Carlo Grand Hotel SAMfrom Monte Carlo Grand Hotel Ltd (“vendor”) for €211.5mCedar acted as FHR’s agent negotiating the purchase (i.e. fiduciary duties toclaimants)Cedar had also made agreement with vendor, pursuant to which theyreceived €10m when the sale completedFHR commenced action to recover the €10m from Cedar & other parties,claiming that since cedar owed fiduciary duty, it was not allowed to make asecret commission