There are two types of constructive trust: institutional and remedial.

An institutional constructive trust is one that arises by operation of the principles of equity and whose existence the Court simply recognises in a declaratory way. An institutional constructive trust arises upon the happening of the events which bring it into being. Its existence is not dependent on any order of the Court. Such order simply recognises that it came into being at the earlier time and provides for its implementation in whatever way is appropriate.

An institutional constructive trust (which may be protected by caveat) can arise when the proceeds of a fraud are used to acquire a registerable interest in land: Attorney-General for Hong Kong v Reid; Trustees Executors Ltd v Eden Holdings 2010 Ltd.

An institutional constructive trust can arise where there has been a non-consensual transfer of an interest in land from a vendor to a purchaser, as a result of a fraud perpetrated on the vendor by the purchaser. Where this is the case the vendor is able to claim an institutional constructive trust in respect of the vendor’s interest in the property that has been defrauded.

A remedial constructive trust is one imposed by the Court as a remedy in circumstances where, before the order of the Court, no trust of any kind existed. That is a remedial constructive trust depends for its very existence on the order of the Court; the order of the Court, creating, rather than simply confirming the existence of the trust.

For these reasons constructive trusts, unlike say express trusts, do not depend on the intention of the parties.

Constructive trusts are a means to enforce accountability and to avoid money or other property being retaned by the “wrong” party.

References:

• Fortex Group Ltd (in rec & in liq) v MacIntosh [1998] 3 NZLR 171
• Commonwealth Reserves I v Chodar [2001] 2 NZLR 374
• Attorney-General for Hong Kong v Reid [1994] 1 NZLR 1 (PC)
• Trustees Executors Ltd v Eden Holdings 2010 Ltd [2010] NZCA 626
• Paugra Holdings Limited (in liq) v Harvestfield Holdings Ltd  [2014] NZCA 164