## Facts

- A trustee, D, held the lease of a shop in a market in trust for an infant beneficiary, C.
- As the lease neared expiration, D attempted to renew it for C; the landlord refused, citing concerns about C’s age and inability to provide security.
- D then secured a renewal of the lease in his own name rather than for the trust.
- Upon reaching adulthood, C sued D, seeking assignment of the new lease and an account of profits gained during D’s possession.
- The circumstances revealed a conflict between D’s fiduciary duty and his personal interests.

## Issues

1. Whether a trustee may retain for personal benefit a renewed interest in property previously held in trust, when the renewal could not be obtained for the beneficiary.
2. Whether the trustee’s actions amounted to a breach of fiduciary duty and warranted the imposition of a constructive trust.

## Decision

- The Exchequer Court ruled that D held the new lease on constructive trust for C.
- D was ordered to assign the new lease to C and to account for profits made from the property during the relevant period.
- The court held that even absent explicit fraud, a trustee who benefits from trust property breaches the duty of loyalty.
- The decision enforced a strict standard, disallowing trustees from profiting personally from their role.

## Legal Principles

- Trustees owe a strict fiduciary duty to avoid conflicts of interest and must act solely in the beneficiary’s best interests.
- A trustee who profits from their position concerning trust property will be required to hold the benefit on constructive trust for the beneficiary.
- Constructive trusts arise by operation of law to prevent unjust enrichment and provide proprietary remedies, not merely personal compensation.
- Stringent enforcement of fiduciary obligations is necessary to uphold the integrity of trust relationships, regardless of actual fraud or intention.

## Conclusion

Keech v Sandford established the enduring rule that trustees must not profit from their fiduciary role, reinforcing the primary duty of loyalty and authorizing constructive trusts as proprietary remedies to prevent trustees from retaining gains wrongly acquired from trust property.

Keech v Sandford (1726) Sel Cas King 61