Rochefoucauld v Boustead
Court of Appeal
Citations: [1897] 1 Ch 196.
Facts
The claimant owned estates in Ceylon, subject to significant mortgages. The mortgagees put the estates up for auction. This was something mortgagees could do at the time.
The defendant initially agreed with the claimant and a third-party to bid on the estates. If he succeeded, he would buy them subject to her interest. The agreement was never a binding contract, and the third-party ultimately pulled out of the deal. Nevertheless, the defendant successfully bought the property at auction. The transfer deed made no express declaration of trust in the claimant’s favour.
The defendant proceeded to manage the estates. He occasionally paid the claimant money from the estates’ profits in line with their original agreement. Later, without the claimant’s consent, the defendant mortgaged the estates to a third-party. The defendant then became bankrupt. The new mortgagee sold the estates to recoup their money.
The claimant argued that the defendant bought the estates on trust for her, subject to a lien representing the money he paid. Accordingly, he was liable to account for the proceeds of the sale. The defendant’s trustee-in-bankruptcy rejected this. While the claimant did not formally renounce her claim, she did not pursue a formal claim for an account in court until 14 years later.
Issue(s)
- Did the defendant purchase the estates on trust for the claimant?
- Was any trust defeated by the fact that the trust was not made in signed writing (as required by formalities statutes)?
- Was the claimant’s suit barred by the defendant’s bankruptcy (which had since been discharged)?
- Was the claimant’s suit barred by a limitation period or the defence of laches due to the excessive delay?
Decision
The Court of Appeal held that the defendant had purchased the estates having agreed to acknowledge the claimant’s rights as beneficiary. It would be fraudulent for him to renege on the agreement. Equity will not allow formalities statutes to be used as an instrument of fraud. Accordingly, the defendant held the estates on trust for the claimant.
This kind of trust did not fall within the statutes of the time. Therefore, it was not barred by any statutory limitation period or bankruptcy provision. Even though the claimant had delayed in bringing her claim, the defendant was aware of her claim and she had done nothing in the meantime to make him believe she had abandoned it. Laches was therefore no defence.
This Case is Authority For…
This case establishes the Rochefoucauld v Boustead form of constructive trust. This arises when the defendant receives property on the understanding that they will hold it on trust for a particular beneficiary, or subject to their rights, but the requirements for an express trust are not met.
Other
Delay in bringing a claim is not a defence where the claimant has done nothing to make the defendant believe they have abandoned their claim or acquiesce in the status quo.
