A refresher on resulting and constructive trusts


A recent case which reviews the principles associated with both resulting and constructive trusts: Borkenhagen v. Kessler (BC Supreme Court).

A couple purchased a rental apartment which they agreed to rent to the husband’s elderly aunt on the understanding that she was welcome to live there until the end of her life or until she chose to move.  They subsequently discovered that the bylaws of the strata didn’t allow rentals and that only owners could live in the building.  They placed the aunt’s name  on title for the sole purpose of overcoming the bylaw restriction.  After the relationship soured, the aunt asserted that she was a legal and beneficial owner of the apartment.  The Court disagreed with the aunt and found that either a resulting or constructive trust existed such that the aunt had no beneficial interest in the apartment.

resulting trust arises when title to property is in one party’s name but that party gave no value for the property and is obliged to return it to the original owner.  There is a presumption of resulting trust where there is a gratuitous transfer.

A constructive trust is imposed where unjust enrichment has occurred.  Unjust enrichment is established where  there has been an enrichment to the defendant, a corresponding deprivation to the plaintiff and the absence of any rationale for the enrichment.  If those three requirements are met, a constructive trust is imposed.