Resulting and Constructive Trusts

Resulting trusts arise by operation of law, returning beneficial ownership to the transferor or their estate. Lord Browne-Wilkinson in Westdeutsche Landesbank v Islington LBC [1996] AC 669 identified two categories:

Category A — Automatic resulting trusts: These arise where an express trust fails or does not exhaust the beneficial interest. The undisposed-of beneficial interest results back to the settlor. For example, if a trust for "my children" fails because the settlor has no children, the property is held on resulting trust for the settlor.

Category B — Presumed resulting trusts: These arise where property is transferred for no consideration, or where one person contributes to the purchase price of property acquired in another's name. The law presumes the transferor did not intend to make a gift, and the transferee holds on resulting trust proportionate to the contribution.

The presumption of resulting trust is rebutted by the presumption of advancement, which applies to transfers from husband to wife and from father to child (but not mother to child at common law). The Equality Act 2010, s.199 would abolish the presumption of advancement, but this provision has not been brought into force.

The common intention constructive trust (CICT) is the primary mechanism for establishing beneficial interests in the shared home. The law was developed through a series of landmark decisions.

In Lloyds Bank plc v Rosset [1991] 1 AC 107, Lord Bridge identified two routes to establishing a CICT: (1) express common intention — evidence of an agreement, arrangement, or understanding that the property would be shared, coupled with detrimental reliance; or (2) inferred common intention — where the claimant made direct contributions to the purchase price, from which the court could infer a common intention to share.

Lord Bridge's narrow approach was criticised for excluding indirect contributions (such as paying household bills). The law evolved significantly in Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53.

In Stack v Dowden [2007] UKHL 17, the House of Lords held that where property is registered in joint names, the starting point is that equity follows the law — the beneficial interest is presumed to be held in equal shares. This presumption can be displaced by evidence that the parties intended different shares, assessed by reference to the "whole course of dealing" between them.

Baroness Hale identified relevant factors including: financial contributions, responsibility for outgoings, arrangements for household expenses, individual financial arrangements, and the nature of the relationship. The focus is on the parties' shared intentions, actual, inferred, or imputed.

In Jones v Kernott [2011] UKSC 53, the Supreme Court confirmed the Stack v Dowden framework and clarified that where the parties' actual intentions cannot be ascertained, the court may impute an intention as to shares — asking what fair-minded people would have intended in the parties' position. This was a significant development, as imputation goes beyond inference (deducing actual intention from conduct).

For sole name cases, the claimant must still establish a common intention to share beneficial ownership (the first hurdle) before the court considers quantification. Capehorn v Harris [2015] EWCA Civ 955 confirmed that the Stack/Kernott framework applies to sole name cases with appropriate modifications.

English law recognises the institutional constructive trust, which arises by operation of law when the relevant circumstances exist — the court merely declares its existence. This contrasts with the remedial constructive trust (used in Canada, Australia, and the US), which the court imposes as a remedy at its discretion.

Key categories of institutional constructive trust include: (1) mutual wills — where two parties agree to make wills in particular terms and not to revoke them, the survivor holds on constructive trust for the agreed beneficiaries (Re Cleaver [1981] 1 WLR 939); (2) secret trusts — where a testator communicates a trust obligation to a legatee who accepts it; (3) vendor under a specifically enforceable contract — the vendor holds the property on constructive trust for the purchaser from the date of exchange; and (4) unauthorised profits by fiduciaries — profits made in breach of fiduciary duty are held on constructive trust (Keech v Sandford [1726] Sel Cas Ch 61).

Proprietary estoppel arises where: (1) the claimant has been given an assurance (express or implied) regarding rights in property; (2) the claimant has relied on that assurance; and (3) the claimant has suffered detriment as a result of that reliance. It would be unconscionable for the property owner to deny the claimant's rights.

In Thorner v Major [2009] UKHL 18, the House of Lords held that the assurance need not be express — it may be inferred from conduct over many years. A farmer who worked on his cousin's farm for 30 years in the expectation of inheriting it was entitled to the farm by proprietary estoppel.

The remedy in proprietary estoppel is flexible and proportionate. The court may grant the full expectation (transfer of the property), a lesser interest, or monetary compensation. In Jennings v Rice [2002] EWCA Civ 159, the Court of Appeal held that proportionality between the expectation and the detriment is the key consideration.