A constructive trust establishes beneficial interests in property, as Rupert Butler & Thomas Horton report
The declaration of a constructive trust presents one of equity’s practical responses to determine proprietary interests where a claimant has acted to his detriment upon a promise as to the ownership of property. The effect is that the legal owner of the property must accept his role as trustee to the extent of the claimant’s beneficial interests. The recent decision of the Court of Appeal in Agarwala v Agarwala [2013] EWCA Civ 1763, [2014] All ER (D) 150 (Feb) fittingly restates the principles of how a constructive trust establishes beneficial interests in property.
Agarwala: the facts
Jaci Agarwala was Sunil Agarwala’s sister-in-law. Due to Sunil’s poor credit rating, he discussed with Jaci the purchase of a property in her name, which was to be converted into bed and breakfast accommodation. In April 2007, the property was purchased in Jaci’s name, who held the legal title, with the mortgage also in her name. It was agreed that Sunil would operate and manage the bed and breakfast business,
