a thesis - Institute of Advanced Legal Studies

CONSTRUCTIVE TRUSTS. 113
40 Ch. D. at p. 381). " It is that a stranger to the trust receiving
money from the trustee which he knows to be part of the trust
estate is not liable as a constructive trustee, unless there are facts
brought home to him which show that to his knowledge the money
is being applied in a manner which is inconsistent with the trust;
or (in other words) unless it be made out that he is party either to
a fraud, or to a breach of trust on the part of the trustee."
Again, the substance of Mr. Justice Kekewich's judgment in
In re Barney (1892, 2 Ch. 265) is that before a person can be
declared a constructive trustee, it must be shown that he has
actually participated in fraudulent conduct on the part of the
trustee, or that trust property is [in breach of the trust, as he
knows] either actually vested in him, or so far under his control,
that he is in a position to require it to be vested in him.
It seems, moreover, from the case of Coleman v. Sucks and Oxon
Union Bank (1897, 2 Ch. 243), that an agent receiving trust money
from a trustee is not liable as a constructive trustee merely because
he knows the money he is receiving is trust money. He must
know that it is a breach of trust for the trustee to pay it to him.
(See pp. 254 and 255 of the report.)
The following cases illustrate the application of these principles
:—
Illustrations.
A.— Cases in which Agent held liable as Trustee.
1. A., a trustee, keeps a trust account and a private account with
B. and C., bankers. A., being indebted to B. and C. on his private
account, draws a cheque on the trust account and pays it to the
credit of his private account. B. and C. know that the moneys represented
by the cheque are trust moneys. They are liable as constructive
trustees to refund the amount to the beneficiaries. Panncll
v. Hurley (1845), 2 Coll. C. C. 241. Foxton v. Manchester, fyc.
Hanking Co. (1881), 44 L. T. 406, is similar. Both cases are distinguished
in Coleman v. Bucks and Oxon Union Bank, (1897) 2 Ch.
243.
2. A. and B., trustees holding a fund in trust for C. for life, remainder
for D. for life, with remainder over, open a trust account
with X. and Y., their bankers, and pay to the credit of the account a
sum of 7701. D. owes X. and Y. 7501. on a bill of exchange, and
being unable to pay it, at the suggestion of X. and Y., and without
H. *