Constructive Trust In Australia

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This research paper discusses the main arguments that deal with the issue of doctrinal divergence between the English origin of a constructive trust in comparison to the Australian view on the constructive trust. Within Australia, the constructive trust can be created in conditions where there was no intention to produce a trust. After giving an overview of constructive trusts within Australia, an analysis of Australia’s remedial and institutional approach to constructive trusts will be examined. Finally, this essay will consider several inferences between Australia’s and England's approach and argue Australia’s divergence with regards to the difference in timing and the discretionary nature of both countries.
Australian Courts Approach
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Despite numerous cases following Deane J's notion of the remedial institution, there are a number of authorities in Australia that have recognised that constructive trusts are institutional and will rise when the parties involved in specific behaviour. In Parsons v McBain (2001) 109 FCR 120, when conferring common intention constructive trusts, the Federal Court held that trusts were created by the behaviour of the parties at that time, even if it had a negative effect on third parties. Similarly, Varma v Varma found that a constructive trust comes into being at the time of the behaviour that gives rise to the trust. Though Australia utilises either institutional or remedial elements as stipulated under their ‘remedial institution’ model through judicial discretion, common law authority on this issue is still indecisive with regards to courts having a set precedent upon which they should follow. Providing clarity for courts on constructive trusts is achievable in Australia through either the implementation of a solely institutional view upon constructive trusts or a solely remedial view. Subsequently, avoiding the middle ground of a remedial institution implies that judges must follow guidelines that are in favour …show more content…

Australia’s implementation of remedial institution allows courts to treat constructive trusts as an equitable remedy, that are discretionary in nature. This differs from England Courts where the institutional elements order that trusts arise upon the behaviour of the individuals rather than judicial discretion. Similarly, the use of discretion or lack of discretion by judges has major impacts on third parties who have an interest in the property. Problems within England’s institutional trusts states the possibility to render the action of the law ambiguous and place a greater burden on third parties. Suggestions in Varma v Varma state that courts should consider the influence of their verdict on third parties and provide relief accordingly. Alternatively, the use of discretion within remedial trusts contains issues regarding indecision for third parties where it is prejudicial for creditors who were not aware of a presiding trust but may find their claims cannot be fulfilled because the property is on trust. Similarly, a judge has enabled the power to avoid a constructive trust if it were a remedy, while, if the trust were an institution, it would exist regardless of the judge’s discretion. This refusal of a constructive trust allows judges to cater for third parties as was seen in

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