Of the mistake may well have given rise to a

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

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
