Constructive Trusts. What are they and why do I care?
A definition: Constructive trusts in English law are a form of trust created by the courts primarily where the defendant has dealt with property in an “unconscionable manner”.
There are some examples in wikipedia at this page that provide insight on the concepts of constructive trusts.
But is there more to constructive trusts than the standard definition implies? Whilst the examples on wikipedia provide insight, this is not quite how such trusts are applied in the everyday court situations. We need to understand how constructive trusts are applied with regard to the PERSON trust since it is nearly always this PERSON trust that will be asked to “appear” in court.
Recall that a PERSON is a trust that is established for the benefit of its users (YOU) and overseen by the TRUSTEES (state) and established usually by an INFORMANT as the settlor. Property is placed into the trust when it is established….any thoughts on what is one of the first items of property entered into the trust? Your body perhaps? The human body is considered merely as a human resource (eg now you know the role of a HR Department) and is the registered property in the PERSON trust (amongst other property). So what does this have to do with constructive trusts?
Technically, you’re the beneficial user of this PERSON trust thereby making use of the benefits that the trust acquires. So why do you end up with the liabilities when things go wrong? Isn’t it the job of the TRUSTEE to take on the liabilities and resolve matters that affect the trust? So shouldn’t the State pay?
Well, yes and no as it depends, and this is where the constructive trusts make an appearance. Almost all court cases are constructive trusts (behind the scenes) which make the defendant a trustee and the prosecution the beneficiary, thus the original roles of beneficiary and trustee become reversed. Thus the matter is against the trustee who has breached their fiduciary duty in managing the property in the trust and the State is seeking a benefit (eg Payment). This is why appearing as a defendant is always going to be a problem as the odds are stacked against them as the trustee is liable. In addition, by pleading “not guilty” can make the situation worse as the defendant (now the “new” trustee) has consented to be there as the trustee – thereby admitting liability but is now refusing to pay thus creating even more controversy (more info here).
It is therefore important to resolve the matter for your PERSON prior to court. This could be achieved using an administrative process on the public or private side. Some have used other methods to resolve a matter by not using administrative processes but instead using an executor letter or turning up to court as the beneficiary. The bottom line is to always stay in honour, resolve the matter as soon as possible and make all parties whole.