of the mistake may well have given rise to a constructive trust Justification

Of the mistake may well have given rise to a

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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 the mistake whilst it was in possession of the money o Clark v Cutland Company director wrongly transferred company assets to his pension trustees Trustees were later notified of the company’s claim Unauthorised/ secret profits by fiduciary and conflicts of interest o General principle Keech v Sandford An infant had inherited the lease with Sandford entrusted to look after this property until the child matured The lease expired before the infant turned adult The landlord refused to renew the lease Sandford then took a new lease for his own benefit The infant sought the lease to be assigned to him Held – o A trustee of a lease may NOT renew a lease for his own benefit but holds the renewed lease upon a constructive trust for the beneficiaries o “[I]t is very proper that rule should be strictly pursued, and not in the least relaxed; for it is very obvious what would be the consequence of letting trustees have the lease” ( per Lord King LC) Bray v Ford “It is an inflexible rule of the court of equity that a person in a fiduciary position … is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict” o Cases that illustrate the operation of the general rule Boardman v Phipps Trustees held a minority sharing in a private company which was not being efficiently managed Boardman had acted as solicitor to the trust (fiduciary) and decided that the beneficiaries would be in a better position if the trustees had control of the company, but no trust $ was available to buy the extra shares 3
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LAWS2016 Equity and trusts law Constructive trusts Boardman and one beneficiary therefore bought the necessary shares themselves and reorganized the company. All was done in good faith and with the object of enhancing the trust holding Both the personal & trust holdings increased in value Held – HL o Boardman was constructive trustee of profit made on his personal shareholding o Opportunity to make profit arose out of his fiduciary relationship with the trustee and certain confidential information had been used in the process o ** Equitable compensation was ordered from the trust in recognition of the work and skill involved FHR European Ventures LLP FHR purchased the issued share capital of Monte Carlo Grand Hotel SAM from Monte Carlo Grand Hotel Ltd (“vendor”) for €211.5m Cedar acted as FHR’s agent negotiating the purchase (i.e. fiduciary duties to claimants) Cedar had also made agreement with vendor, pursuant to which they received €10m when the sale completed FHR commenced action to recover the €10m from Cedar & other parties, claiming that since cedar owed fiduciary duty, it was not allowed to make a secret commission
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