The creation of express, resulting and constructive trust in banking transactions

George Demetriades

Journal of Financial Crime, 2018, vol. 25, issue 2, 277-286

Abstract: Purpose - This paper aims to analyse the circumstances where an express, resulting or constructive trust may arise in banking transactions, taking in consideration relevant case law. Bankers in certain situations could become a trustee or a fiduciary in relation to their customers. Emphasis is given on the issue of constructive trust as, after many years of inconsistent case law, a recent decision of the Supreme Court clarifies this controversial issue. Design/methodology/approach - The paper is focused primarily on examining relevant cases and judicial reasoning to identify the circumstances leading to the creation of express, resulting or constructive trust in banking transactions. Findings - In certain circumstances, the banker could become liable as a trustee under equity. An express trust may arise between a banker and a customer in cases where the customer gives the money to the bank to fulfil a specific purpose. Where the bank is not able to fulfil this purpose, a resulting trust may arise and will hold the money as a resulting trustee. There are some exceptional situations, where the bank can be liable as a constructive trustee. An agent who receives benefits in breach of his fiduciary duty holds those benefits on trust for his principal. Practical implications - Knowledge of the legal position and the circumstances that can lead to the creation of express, resulting or constructive trust is essential for both bankers and their clients to protect their interests. The flexibility of equitable remedies can be used to fill in the gaps or deficiencies in the common law. Clients of banks or even third parties in the case of constructive trust can be in a very advantageous position in circumstances where a trust for their money is created. Originality/value - The paper takes in to consideration all updated academic papers and modern court decisions. The analysis provided in the paper can be very useful for bankers, their clients and practitioners. The paper clarifies the application of equity law and the creation of trust in certain banking transactions.

Keywords: Banking; Bribe; Constructive trust; European ventures; Quistclose (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-08-2017-0073

DOI: 10.1108/JFC-08-2017-0073

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