In the realm of equity, trusts serve as powerful tools for addressing a wide range of legal disputes, particularly those involving property, fiduciary duties, and unjust enrichment. Among the most significant—and often misunderstood—are constructive and resulting trusts. While both are classified as “implied” or “non-express” trusts and are imposed by courts to reflect equitable outcomes rather than the express intentions of the parties, they are conceptually and functionally distinct.
This article explores the nature, basis, and application of constructive and resulting trusts, providing clarity on their distinguishing features and legal consequences.
I. The Concept of Implied Trusts in Equity
Unlike express trusts, which are intentionally created by settlors through clear declarations and the transfer of property, implied trusts arise by operation of law. They are not premised upon the subjective intentions of the parties, but rather imposed by courts to prevent injustice or to give effect to presumed intentions that were not formally expressed.
The two principal forms of implied trusts are:
- Constructive Trusts – imposed to address breaches of equitable obligations or prevent unconscionable retention of benefits.
- Resulting Trusts – imposed to reflect the presumed intentions of parties, often involving a reversion of beneficial interest.
Understanding when and why each applies requires a careful analysis of equity’s role in mediating fairness in the use and distribution of property.
II. Constructive Trusts: Addressing Equitable Wrongs
A constructive trust is an equitable remedy imposed by a court to address conduct that the court deems unconscionable or contrary to equitable principles. Unlike resulting trusts, which arise based on the presumed intent of parties, constructive trusts are imposed irrespective of intention and often serve to address breach of duty, fraud, or other wrongful conduct. Importantly, a finding of unjust enrichment is not a prerequisite.
Key features of constructive trusts:
- Arise from equitable wrongs: This includes fraud, breach of fiduciary obligations, breach of confidence, or knowing receipt of trust property.
- Imposed to prevent unconscionable retention: The court’s focus is on preventing the defendant from retaining a benefit in breach of equitable norms.
- Remedial and discretionary: Constructive trusts are frequently applied as remedies, particularly where monetary compensation would be inadequate.
- Not based on intention: Constructive trusts operate independently of any inferred or actual intention between parties.
Example: A company director diverts a corporate opportunity for personal gain. Even if no one is “enriched” in a strict sense, the court may impose a constructive trust over the proceeds to uphold fiduciary obligations.
In many jurisdictions, including Canada, constructive trusts have been particularly influential in addressing remedial claims in family and commercial contexts, where one party has contributed to an asset or relationship in a manner that equity recognizes as giving rise to a proprietary interest.
III. Resulting Trusts: Reflecting Presumed Intention
Resulting trusts arise when property is transferred under circumstances that suggest the transferee was not intended to enjoy the beneficial interest in the property. In contrast to constructive trusts, resulting trusts are founded on the presumed or inferred intentions of the parties, not on wrongdoing.
Two main categories of resulting trusts:
- Automatic Resulting Trusts: Occur where an express trust fails (e.g., for lack of a beneficiary) and the property “results” back to the settlor.
- Presumed Resulting Trusts: Arise where one party pays for property but title is placed in the name of another, and no intention to gift is proven.
Key features:
- Arise from contribution or transfer: Often where one party pays the purchase price, wholly or partly, but legal title is registered in another’s name.
- Presumed lack of gift: Courts typically presume the contributor did not intend to gift the property, unless a rebuttable presumption (such as advancement in family contexts) applies.
- Focus on intention: Unlike constructive trusts, the court is seeking to give effect to the likely intention of the parties based on conduct and surrounding circumstances.
Example: A parent gives funds to an adult child to buy a house, and the title is placed solely in the child’s name. In the absence of evidence that a gift was intended, a resulting trust may be found in favor of the parent.
IV. Comparative Overview
| Feature | Constructive Trust | Resulting Trust |
| Basis | Breach of duty or unconscionable conduct | Presumed or inferred intention |
| Triggering Event | Fiduciary breach, fraud, breach of confidence | Failure of express trust or contribution to purchase |
| Judicial Role | Discretionary and remedial | Presumptive and intention-based |
| Nature | Remedy to address equitable wrongdoing | Presumption of beneficial interest reversion |
| Presumption of Gift | Typically irrelevant | Rebuttable presumption of no gift |
V. Practical Implications for Legal Practitioners
Legal practitioners must be adept at distinguishing between these two forms of trusts when advising clients, especially in disputes involving family members, joint ventures, or fiduciary relationships. The classification can significantly impact the burden of proof, the availability of defences, and the ultimate outcome of the case.
In particular:
- Evidence of intention is crucial in resulting trust cases.
- Constructive trust claims require a demonstration of unconscionable conduct or breach of duty, not necessarily enrichment.
- The standard of proof may differ: for example, allegations of fraud necessitate clear and convincing evidence.
- In family law and estate contexts, courts are increasingly applying constructive trust doctrines to address unjust outcomes where formal legal title does not reflect equitable contributions.
Conclusion
Constructive and resulting trusts are cornerstones of equitable jurisprudence, yet they operate under distinct principles and purposes. While both provide mechanisms for resolving disputes where formal legal title does not reflect equitable interests, their application hinges on fundamentally different legal theories: one focused on remedying equitable wrongs, the other on presumed intent.
Legal professionals must navigate these doctrines with precision, ensuring that claims are properly framed and supported by relevant evidence to satisfy the equitable standards required by the courts.
Disclaimer
This article is intended for informational purposes only and does not constitute legal advice or establish a solicitor-client relationship. Readers are advised to consult qualified legal professionals regarding their specific circumstances and applicable laws in their jurisdiction.