How are resulting and constructive trusts formed?

Question

How are resulting and constructive trusts formed?

Answer

In the event that a trust does not meet the requirements of s53(1) of the Law Property Act, s53(2) enables the court to imply resulting and constructive trusts.

There are two types of a resulting trust –automatic and presumed resulting trusts. An automatic resulting trust will result when a settlor attempts to transfer property to their trustee yet the trust fails. Through an automatic trust, the settlor will own the property in equity. A presumed resulting trust will arise in the voluntary passing of the property to another (not a gift) or the purchase of property in the name of another (contributes to the purchase price but not seen as legal owners of the property). These presumptions can be rebutted in the event that another intention is indicated.

A constructive trust is implied at law by the court in the event that the property is held by one from another demonstrating unconscionable conduct (Westdeutsche Landesbank v Islington LBC [1996]). Further, a constructive trust is formed irrespective of the intentions of the parties. The courts will do what they can to invoke fairness. An example of when intentions are considered for a constructive trust is in the family home context; there is a common intention constructive trust.

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