RECO3037 Chap.3 Resulting and Constructive Trusts
Resulting and Constructive Trusts
Why a trust can exist without any document
The Conveyancing and Property Ordinance normally insists on signed writing before an equitable interest in land can be created. But section 5(2) leaves resulting, implied and constructive trusts untouched, and this chapter is about what that exception allows.
It is the doctrine behind the family flat bought in one person's name with another person's money, and behind most disputes between former partners about who owns a home.
The resulting trust: following the purchase money
When one person pays for property that is put in another's name, equity presumes that the payer meant the named owner to hold it for the payer. The named owner keeps only a bare legal title.
If the payer paid everything, the whole beneficial interest is the payer's; if each paid part, the beneficial shares follow the proportions of the price each paid.
The chapter separates the contributions that raise this presumption, the price itself, the deposit and the purchase costs, and mortgage repayments on an investment property, from household spending, which normally does not count unless the parties expressly agreed that it would.
The constructive trust: conscience and common intention
A constructive trust is imposed by law to stop the holder of the legal title keeping a benefit it would be unconscionable to keep.
It does not depend on what anyone presumably intended at the time of purchase. It can rest instead on a common understanding, inferred objectively, that someone was to have a share, which is how later contributions such as mortgage payments begun years after a purchase are dealt with.
The chapter uses Binions v Evans, where a purchaser who bought knowing of a widow's right to live in the property was held to be a constructive trustee, and it connects the idea back to notice: a buyer with notice of an earlier equitable right holds what he bought as constructive trustee, bound by that right.
What this chapter covers
- 01
Section 5(2) and trusts that need no writing
- 02
The presumed intention behind a resulting trust
- 03
Whole and partial contributions to the price
- 04
Deposits, legal fees and mortgage repayments
- 05
Why household expenses usually do not count
- 06
Unconscionable retention and the constructive trust
- 07
Common intention inferred by a reasonable person
- 08
Binions v Evans and the purchaser with notice
Worked example · free
Working out a beneficial share from the purchase price
- 2Identify the resulting trust and the presumption behind it.
- 2Calculate Ann's share from her contribution to the price.
- 2Calculate Ben's share and state where the legal title stays.
Key terms
- Resulting Trust
- A trust equity presumes when one person pays for property placed in another's name, so the benefit results back to the payer.
- Constructive Trust
- A trust imposed by operation of law where it would be unconscionable for the legal owner to keep the beneficial interest.
- Bare Legal Title
- Legal ownership held entirely for someone else, carrying the power to deal with the property but not the right to its value.
- Beneficial Interest
- The right to the value and enjoyment of property in equity, which may belong to someone other than the legal owner.
- Common Intention
- A shared understanding, inferred objectively from the parties' dealings, that a person is to have a share in the property.
Resulting and Constructive Trusts FAQ
Can I own part of a flat that is registered only in my partner's name?
Yes, if equity recognises a trust. If you paid part of the purchase price, a resulting trust presumes you were meant to hold a share in proportion to your payment. If you contributed later on the strength of an understanding that the flat would be partly yours, a constructive trust may protect you. Either way the legal title can stay in your partner's name.
Do payments for bills and groceries give me a share in the home?
Usually not. The resulting trust looks at payments that acquired the property, such as the price, the deposit and the purchase costs. Household expenses normally fall outside that, unless the two of you expressly agreed that the arrangement would give you rights in the property, in which case the agreement, not the spending, becomes the basis of the claim.
How is a constructive trust different from a resulting trust?
A resulting trust rests on a presumed intention at the time of purchase, usually shown by who paid the price. A constructive trust is imposed by law to prevent unconscionable conduct and can rest on a common intention formed later. It covers a wider range of situations, including a buyer who takes land knowing of someone else's prior equitable right.
Exam move
Take any cohabitation set of facts and sort each payment into one of two columns before reading further: paid towards the purchase, or paid afterwards. The first column feeds a resulting trust and simple arithmetic; the second needs evidence of a common intention.
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