Implied Trusts; Resulting Trusts, Constructive Trusts and Remedies for unjust enrichment

An implied trust is created without a clear statement of trust by a settlor and rather from an intention presumed or imposed by the courts when a certain set of facts occur.

Resulting Trusts

A resulting trust occurs where the court presumes a trust was intended. A resulting trust occurs from the legal presumption of an intent to create a trust by the person who buys real estate or holds personal property (e.g., money) in the name of or for another; the holder of the property is deemed to be a trustee provided he or she is a stranger or not a relative to the purchaser. If there is a close family relationship between the person giving the funds and the receiving party, the presumption of advancement applies instead. The law is unclear as to whether or not a resulting trust is created if a person transfers existing property to another instead of making a new purchase though a case could be made for presumption.

A resulting trust can also occur from the failure of an express trust. For example, in Re Gillingham Bus Disaster Fund (1958) Ch. 300, the mayor of an English town appealed to the constituents to create a fund to help victims of a terrible bus crash but it was later found that all damages would be paid by the insurance company. The court determined that the surplus monies should be returned to the persons who had given it.

Constructive Trusts

A constructive trust is an equity-based remedy that occurs where the court imposes a trust upon a certain situation of facts. Constructive trusts are often described as corrective or even punitive. Types of constructive trusts include fiduciary gains, breach of confidence, strangers to the trust and constructive trusts to redress mistake or fraud and the remedial constructive trust.

A remedy for fiduciary gains could be imposed on a person who profited in a fiduciary position. The fiduciary can be anyone in a fiduciary capacity, including an attorney, guardian, corporate director, partner and agent, and not just a trustee. For example, a power of attorney for property who uses the grantor’s funds for personal gain may be found by the court to be in breach of the trust. The misuse (for personal gain) of confidential information or taking of a bribe or commission by a current or former company director could lead to a court action for constructive trust.

The court would also impose a constructive trust in the case of a breach of confidence. In Lac Minerals Ltd. v. International Corona Resources Ltd., Canada’s Supreme Court established that a breach of confidence occurs when (1) the information conveyed was confidential; (2) that is was communicated in confidence; and (3) that it was misused by the party to whom it was communicated.

Another situation where a constructive trust would be imposed includes strangers to the trust, which is where an outsider meddles with a trust. Constructive trusts can also result because of mistake or fraud such that trust property must be returned to the settlor.

From the 1980 Supreme Court of Canada decision in Pettkus v. Becker, a remedial constructive trust results where:  

  • Someone has benefited or been “enriched;”
  • at the expense of another (a corresponding deprivation); and
  • the enrichment is “unjust” or without legal justification. Courts like to talk of an “absence of any juristic reason” to justify the enrichment of the defendant at the expense of the party claiming constructive trust.

In Peter v. Beblow, 1993 the Supreme Court of Canada added that the connection between services rendered and the property must be direct and sufficient.

The use of constructive trusts is used sometimes in the corporate arena but is now quite rare in family law because new legislation in almost all provinces allows the spouses to petition the court for a division which can take into consideration all factors and order a division based on fairness. It still is useful, however, in common-law relationships and has been used to resolve a property dispute in failed homosexual relationships (Forrest v. Price (1992) 48 ETR 72).

It should also be remembered that if no express trust can be found because of the absence of one of the three certainties or conveyance, it may still be possible to find a constructive trust.

Unjust Enrichment 

Unjust enrichment is a legal mechanism typically brought by an individual who has provided property, money or care to someone else in the expectation they would receive something in return. For example, if someone held a property in trust for you but did not fulfil his obligation, you could make a claim for unjust enrichment.

In order to establish unjust enrichment, the following conditions must be satisfied:

  • Benefit – such as a caregiver receiving a 50% interest in a property for no consideration;
  • Corresponding Loss – such as the expectation that a caregiver would assist and take care of elder, which if not done, resulted in a loss of 50% of the property that once entirely belonged to her; and
  • Absence of a juristic reason – there is no legal reason for the benefit and loss, such as a contract, disposition of law, donative intent or other legal or equitable obligation.

Proof of these three conditions will depend on the notes in the file as well as testimony. The court looks to evidence of one’s intent at the time of the transfer to indicate her or she did not intend to gift the property to the other. In this case, the onus would be on the defendant to demonstrate that the transfer of the property was intended to be a gift in order to rebut the presumption.  If the court is satisfied the one has been unjustly enriched, the court can invoke a remedy of a declaration of constructive trust to hold that the party who received the interest is holding 50% of the property in trust and that the interest in the property be returned.

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