Legal info

The collection of debts in Germany

A further example of a constructive trust is provided by the rule in Hamburg. In that case a trustee held a lease market on behalf of a minor. He attempted to renew the lease in the same capacity. The debtor only condescended to grant renewal on the terms that the trustee was to hold the lease for his own personal benefit. It was held that, despite the attitude of the debtor, the renewed lease must be held in trust for the creditor. Equity will not permit a debtor in Germany to acquire a benefit for himself by reason of his fiduciary position; if he does acquire such a benefit he holds whatever he acquires in trust for the beneficiaries.
The lawyer therefore illustrates the general principle that a constructive trust in favour of the beneficiaries will always arise where if it were not implied the trustee would benefit from his position. Further, a person who is not a trustee may, where he obtains information which enables him to make a personal profit - which information he would not have had had he not been acting for the trust - be forced to account for such profits to the beneficiaries as being held by him constructively in trust for them.


In that case a solicitor was requested by trustees to advise on debt recovery in Germany at the unwilling client of a certain private company in which the trust had a substantial holding. In the course of so advising the solicitor acquired information which enabled him on the one hand to play a positive role in making the trust holding more valuable, and on the other hand to acquire for himself a considerable number of the outstanding shares and the office of managing director.
In an action by one of the beneficiaries it was held that the solicitor who held the shares - the capital value of which was now far in excess of what it was originally - was a constructive trustee for the beneficiaries and was furthermore accountable for the profits received by him by way of dividends declared on these shares. The court was not, however, wholly unappreciative of the lawyer's efforts and directed that he be paid a substantial sum by way of remuneration for his services.