Express, Resulting, and Constructive Trusts: The Three Categories of Canadian Trust Law and Why the Difference Matters

The trust is one of the most distinctive and powerful inventions of the common law. It is a mechanism for splitting ownership of property into two parts: legal title, which is held by a trustee who controls and administers the property, and equitable title, which is held by a beneficiary who is entitled to the benefit of the property. This split allows property to be managed by one person for the benefit of another, with the trustee bound by fiduciary duties enforceable in court. From holding assets for minors and pension funds, to structuring tax planning, to providing a remedy for unconscionable conduct, the trust performs an extraordinary range of functions in modern Canadian law.

Yet trusts are not all the same. Lawyers and judges classify trusts into several categories that arise in very different ways and serve very different purposes. Express trusts are deliberately created by a settlor who intends to establish a trust. Resulting trusts are implied by law in circumstances where property is transferred without consideration and there is no clear evidence of an intention to make an outright gift. Constructive trusts are imposed by courts as a remedy for unconscionable conduct, breach of fiduciary duty, or unjust enrichment, regardless of the parties’ intentions.

The differences between these categories matter. They affect when a trust will be found to exist, what evidence is required to prove or rebut it, what remedies are available, and how the trust interacts with other areas of law including bankruptcy, family property, and corporate fiduciary duties. For litigators, understanding which category of trust is in play is the first and often the most consequential step in framing a claim or a defence.

This article provides an overview of the three principal categories of trusts in Canadian common law: express trusts, resulting trusts, and constructive trusts. It is written for parties facing a dispute over the existence or scope of a trust, for lawyers framing claims that involve trust concepts, and for anyone wanting to understand the architecture of trust law and how it shapes commercial and personal disputes. Our commercial litigation practice and breach of fiduciary duty practice regularly handle disputes involving express, resulting, and constructive trusts in Ontario.

The Architecture of the Trust: Common Concepts

Before turning to the different categories of trusts, it is helpful to understand the basic architecture that all trusts share. Every trust involves three roles, three forms of title, and a set of fiduciary obligations.

The Three Roles

A trust involves three distinct roles, although in some cases the same person may occupy more than one. The settlor is the person who creates the trust by transferring property and establishing the terms on which it is to be held. The trustee is the person who holds legal title to the trust property and is responsible for managing it in accordance with the trust’s terms. The beneficiary is the person for whose benefit the property is held and who holds the equitable interest in the property. In a typical inter vivos trust, the settlor transfers property to a third-party trustee for the benefit of one or more named beneficiaries. In a testamentary trust, the testator (the equivalent of a settlor in a will-based context) directs the executor (who acts as trustee) to hold property for named beneficiaries upon their death.

The Split Between Legal and Equitable Title

The defining feature of a trust is the split between legal and equitable title. The trustee holds legal title, meaning the formal, registered ownership of the property in the eyes of the world. The beneficiary holds equitable title, meaning the beneficial interest in the property, the entitlement to its income, its eventual distribution, or both. This split is what allows the trustee to manage property for the benefit of someone else, and what allows courts to enforce the trustee’s obligations against them on behalf of the beneficiary.

Fiduciary Duties

The trustee’s role carries with it a set of fiduciary duties: the duty of loyalty, the duty of care, the duty to act in the best interests of the beneficiary, the duty to avoid conflicts of interest, and the duty to account for all dealings with the trust property. These duties are central to the law of trusts and are enforced through equitable remedies including injunctions, accounting, tracing, and (where the trustee has breached the trust) personal liability for losses.

Express Trusts: Deliberate Creation

The express trust is the most familiar type of trust and is deliberately created by a settlor or testator who intends to establish the trust. Examples include trusts established to hold property for minors, pension funds, mutual funds (often structured as unit trusts), trusts established under wills to manage an estate’s residue, and trusts established for tax planning or asset protection purposes.

For an express trust to be valid and enforceable, several requirements must be met. The settlor must have legal capacity. The transfer of property to the trustee must be properly perfected, meaning the formalities required to convey legal title must be observed (such as registration for real property or endorsement and delivery for shares). And, most importantly for purposes of disputes about whether a trust has been validly created, the so-called “three certainties” must be satisfied.

The three certainties were established in the English case Knight v. Knight in 1840 and have been consistently applied by Canadian courts ever since. The Ontario Divisional Court reaffirmed their continuing importance in Milne Estate v. Toronto Lawyers Association, and they appear regularly in modern Canadian appellate jurisprudence. The three certainties are certainty of intention, certainty of subject matter, and certainty of objects.

Certainty of Intention

The settlor must have manifested an intention to create a trust, as distinct from making an outright gift, lending the property, or merely expressing a wish or hope about how the recipient should use the property. The use of the word “trust” is not required, but the totality of the settlor’s words and conduct must demonstrate an intention to impose fiduciary obligations on the recipient to hold and manage the property for the benefit of someone else. Courts examine the language used (imperative versus precatory), the surrounding circumstances, and the conduct of the parties in determining whether the necessary intention is present.

The distinction between trust language and mere precatory language (a request, wish, or hope rather than a binding direction) can be subtle and is often the focus of litigation. A direction that “I give my house to my son to hold in trust for my daughter until she turns 25” creates a trust. A direction that “I give my house to my son in the hope that he will share its benefits with my daughter” does not, because the language is precatory rather than imperative.

Certainty of Subject Matter

The trust property must be identifiable with certainty. This requirement has two aspects. First, the property that forms the subject of the trust must be clearly identified. A trust of “all my property” is sufficient if the settlor’s property can be ascertained, but a trust of “a portion of my assets” without further specification is not. Second, where there are multiple beneficiaries, the share of the trust property to which each is entitled must be clear, either as specific amounts or as proportionate shares of the whole.

The Supreme Court of Canada considered the certainty of subject matter requirement in Re Beardmore Trusts, holding that the trust property must be clearly identifiable from the trust instrument. Where the property is described in general terms and the description does not allow it to be located, the trust will fail for uncertainty of subject matter, and the property will pass according to the rules that would apply in the absence of the purported trust.

Certainty of Objects

The beneficiaries (or “objects”) of the trust must be identified with sufficient certainty for the court to enforce the trust. Where the trust is a “fixed trust” (one where each beneficiary takes a defined share, such as “to my three children in equal shares”), the test is the “complete list” test: it must be possible to draw up a complete list of the beneficiaries. Where the trust is a “discretionary trust” or “trust power” (one where the trustee has discretion to choose among a class of potential beneficiaries), the more flexible “is or is not” test (also called the “individual ascertainability” test) applies: it must be possible, of any given person, to determine whether they are or are not within the class of potential beneficiaries.

The leading authority on the “is or is not” test is the House of Lords decision in McPhail v. Doulton, which has been adopted in Canada. The Canadian application of the test, with attention to “administrative workability” and “evidential uncertainty,” continues to be developed in trust litigation.

Other Requirements

In addition to the three certainties, an express trust must satisfy the formalities required for the creation of a trust in the relevant jurisdiction. In Ontario, trusts of land must comply with the writing requirements of the Statute of Frauds. Testamentary trusts must comply with the requirements of the Succession Law Reform Act. The trust property must be vested in the trustee, meaning that the legal title must be effectively conveyed. And the trust must not be created for an illegal or fraudulent purpose.

Resulting Trusts: Implied by Law

A resulting trust is a trust that arises by implication of law, not by the deliberate intention of a settlor. The name comes from the Latin resultare, meaning “to jump back” or “to bounce back,” which captures the essential idea: when property is transferred in certain circumstances, equitable title “bounces back” to the transferor, even though legal title has been transferred. The transferee holds legal title, but holds it in trust for the transferor.

Resulting trusts are typically classified into two broad categories: automatic resulting trusts and presumed resulting trusts.

Automatic Resulting Trusts

An automatic resulting trust arises when an express trust fails or does not exhaust the entire beneficial interest in the trust property. The classic case is a settlor who transfers property to a trustee for an express trust, but the trust is void (for example, because it fails the three certainties test or is for an illegal purpose), or the trust does not dispose of all of the equitable interest. In those circumstances, the equitable interest that was not effectively transferred to a beneficiary “bounces back” to the settlor, and the trustee holds the property on a resulting trust for the settlor.

A particularly important type of automatic resulting trust is the “Quistclose trust,” named after the leading English case Barclays Bank Ltd. v. Quistclose Investments Ltd.. A Quistclose trust arises where money is advanced by one party to another for a specific purpose, with the understanding that if the purpose fails or cannot be achieved, the money will be returned to the lender. If the purpose fails, the recipient holds the money on a resulting trust for the lender, who can recover it in priority to general creditors. Quistclose trusts have important applications in commercial lending, deposit-taking, and bankruptcy, and they have been recognized in Canadian law in cases involving deposits for specific transactions, escrow funds, and project-specific financing.

Another category of automatic resulting trust arises where there is a surplus of trust funds remaining after the trust purpose has been fulfilled. If the settlor has not specified what is to happen to the surplus, it returns to the settlor by way of resulting trust.

Presumed Resulting Trusts

A presumed resulting trust arises where one person gratuitously transfers property to another (or pays the purchase price for property to be put in another’s name) without any apparent reason. Equity presumes, in the absence of evidence to the contrary, that the transferor did not intend an outright gift but rather intended the transferee to hold the property on trust for the transferor. The transferee holds legal title, but the equitable interest is presumed to remain with the transferor. The presumption is rebuttable by evidence showing that the transferor actually intended a gift.

The Supreme Court of Canada considered the presumption of resulting trust in detail in Pecore v. Pecore, a case involving a gratuitous transfer from a father to his adult daughter. The court held that the presumption applies to gratuitous transfers between adults, including transfers from a parent to an adult child. The presumption can be rebutted by evidence of the transferor’s actual intention at the time of the transfer, including evidence of statements made by the transferor, the parties’ relationship, and the surrounding circumstances.

The Presumption of Advancement

The presumption of advancement is the inverse of the presumption of resulting trust. It applies in certain limited relationships where, instead of presuming that the transferor intended to retain the equitable interest, the law presumes that the transferor intended to make a gift. Historically, the presumption of advancement applied to transfers from a husband to his wife and from a parent to a minor child. In Pecore, the Supreme Court of Canada limited the presumption of advancement to transfers from a parent to a minor child, and abolished it for transfers from a husband to his wife (which had already been displaced by family property statutes in most provinces) and for transfers from a parent to an adult child.

The presumption of advancement is now a relatively narrow doctrine in Canadian law. In most cases involving gratuitous transfers between adults, the presumption of resulting trust applies, and it is for the transferee to rebut the presumption by showing that a gift was intended.

Rebuttal of the Presumptions

Both the presumption of resulting trust and the presumption of advancement are rebuttable by evidence. The court considers evidence of the transferor’s actual intention at the time of the transfer, including statements made before, during, and immediately after the transfer. Evidence of intentions formed long after the transfer is generally given less weight, though it may still be relevant. The transferee bears the onus of rebutting the presumption of resulting trust on a balance of probabilities, and conversely the transferor bears the onus of rebutting the presumption of advancement.

Where the rebuttal evidence relies on an illegal or fraudulent purpose (for example, a transfer to a family member to avoid creditors), Canadian courts have struggled with whether such evidence is admissible. The Supreme Court of Canada in Nishi v. Rascal Trucking Ltd. and other cases has tended to allow the evidence in, on the basis that excluding it can produce unjust outcomes. But where the evidence reveals a genuinely fraudulent scheme, courts may decline to give effect to the transferor’s claim under the doctrine of ex turpi causa.

Constructive Trusts: Imposed by Courts

The constructive trust is fundamentally different from express and resulting trusts. It is not based on the parties’ intentions, presumed or actual. It is a remedy imposed by courts in circumstances where it would be unconscionable for the legal owner of property to retain it free of obligation to another. The constructive trust converts the legal owner into a trustee for the claimant, who acquires an equitable interest in the property.

The doctrine has its roots in Cook v. Fountain, an English case from 1676, but its modern Canadian shape was given by the Supreme Court of Canada in a series of decisions over the past several decades. The Supreme Court of Canada in Soulos v. Korkontzilas (per Justice McLachlin, as she then was) endorsed the view that “a constructive trust is the formula through which the conscience of equity finds expression,” and that when property has been acquired in circumstances such that the holder of legal title may not in good conscience retain the beneficial interest, equity converts the holder into a trustee.

Canadian law recognizes constructive trusts in three principal situations: where the defendant is a fiduciary, whether per se or ad hoc; where the defendant has been unjustly enriched and a proprietary remedy is appropriate; and as a residual category for novel cases where good conscience requires the imposition of a trust.

Constructive Trusts in Fiduciary Relationships

The most well-established category of constructive trust is the trust imposed to remedy a breach of fiduciary duty. Where a fiduciary acquires property in breach of their duty of loyalty (for example, by appropriating a corporate opportunity, taking a secret commission, or self-dealing), the fiduciary holds the wrongfully acquired property on a constructive trust for the principal.

The traditional categories of per se fiduciaries (those whose role inherently gives rise to fiduciary duties) include trustees, executors, lawyers, agents, partners, and corporate directors. In each of these relationships, the fiduciary’s role inherently involves a duty of loyalty, and any property acquired in breach of that duty is impressed with a constructive trust in favour of the person to whom the duty is owed.

The Supreme Court of Canada’s decision in Lac Minerals Ltd. v. International Corona Resources Ltd. is a leading authority on the imposition of a constructive trust as a remedy for breach of fiduciary duty in a commercial context. The court held that a confidential relationship in which one party stood to benefit from the disclosure of information could give rise to fiduciary obligations and that breach of those obligations justified the imposition of a constructive trust over the wrongfully acquired property.

Ad Hoc Fiduciaries

In addition to the traditional categories of per se fiduciaries, Canadian courts have recognized that fiduciary duties can arise on the facts of a particular case, even where the relationship does not fall within a traditional category. The doctrine of “ad hoc” fiduciaries was developed in cases including Frame v. Smith, Hodgkinson v. Simms, and Galambos v. Perez, and was clarified by the Supreme Court of Canada in Alberta v. Elder Advocates of Alberta Society. The court in Elder Advocates held that to establish an ad hoc fiduciary relationship, the claimant must show that the alleged fiduciary undertook to act in the claimant’s best interests, that there is a defined person or class of persons vulnerable to the fiduciary’s control, and that the alleged fiduciary’s power or discretion can affect the legal or significant practical interests of the claimant.

The ad hoc fiduciary doctrine is significant because it allows courts to extend fiduciary obligations and the constructive trust remedy beyond the traditional categories. It has been applied in cases involving trusted advisors, family members in positions of trust, and parties to commercial relationships where one party has assumed obligations of loyalty toward another.

Constructive Trusts and Unjust Enrichment

The second major category of constructive trust arises in cases of unjust enrichment. The Supreme Court of Canada’s decision in Pettkus v. Becker established that a constructive trust can be imposed as a remedy for unjust enrichment, even in the absence of a fiduciary relationship or other wrongful conduct.

The elements of unjust enrichment are well-established: an enrichment of the defendant, a corresponding deprivation of the plaintiff, and the absence of a juristic reason for the enrichment. Where these elements are made out, the plaintiff is entitled to a remedy, which may be either monetary (restitutionary damages) or proprietary (a constructive trust). The Supreme Court of Canada in Kerr v. Baranow set out the modern approach to choice of remedy in unjust enrichment cases involving domestic relationships, holding that a monetary remedy will generally be sufficient, but that a constructive trust may be available where there is a sufficient connection between the plaintiff’s contribution and the property in question.

The choice of remedy matters because a constructive trust is a proprietary remedy that gives the plaintiff an equitable interest in identified property, with the consequence that the plaintiff can trace the property and recover it in priority to general creditors of the defendant. A monetary remedy makes the plaintiff a general creditor of the defendant, with no priority over other creditors. In a bankruptcy or insolvency context, the difference can be enormous.

The Soulos Test for Wrongful Acquisition

In Soulos v. Korkontzilas, the Supreme Court of Canada set out a test for the imposition of a constructive trust in cases of wrongful acquisition of property. The test requires the claimant to establish that the defendant was under an equitable obligation in relation to the activities giving rise to the assets in their hands, that the assets in the defendant’s hands result from deemed or actual agency activities of the defendant in breach of that equitable obligation to the plaintiff, that the plaintiff shows a legitimate reason for seeking a proprietary remedy, and that there are no factors which would render the imposition of a constructive trust unjust in all the circumstances of the case (including, for example, the protection of bona fide third party interests).

The Soulos test is now the standard framework for analyzing constructive trust claims in Canadian law where the claim is based on wrongful acquisition rather than unjust enrichment.

The Practical Differences Between the Three Categories

The differences between express, resulting, and constructive trusts have important practical consequences for litigation and for the structuring of commercial transactions.

Origin and Proof

Express trusts are deliberately created and require proof of the settlor’s intention, the trust property, and the beneficiaries (the three certainties). Resulting trusts arise by implication of law and require proof of the underlying transaction (a gratuitous transfer or a failed express trust) but no proof of any intention to create a trust; in the case of presumed resulting trusts, the law supplies the missing intention through the presumption. Constructive trusts are imposed by courts as a remedy and do not require proof of any intention at all; the focus is on the conduct of the defendant and the appropriateness of a proprietary remedy.

Limitation Periods

The limitation period applicable to a trust claim depends in part on the category of trust. Claims involving express trusts may be subject to specific limitation rules under the relevant trust legislation or the general limitations statute. Claims for resulting trusts, especially those arising from gratuitous transfers, may be subject to different limitation periods depending on the nature of the underlying transaction. Constructive trust claims may be subject to limitation periods that depend on whether the underlying claim is for breach of fiduciary duty, unjust enrichment, or some other cause of action. The interaction of trust principles with limitation legislation is a frequent source of litigation, and parties should obtain advice on limitation issues at the outset of any potential trust claim.

Remedies

The remedies available in respect of a trust claim depend on the category. For express trusts, the trustee can be compelled to perform the trust, to account for any breaches, and to pay damages or restore property where they have breached the trust. For resulting trusts, the trustee holds the property for the transferor and can be compelled to convey legal title back to the transferor. For constructive trusts, the court has discretion in fashioning the remedy: it can declare a constructive trust, order the conveyance of property, order monetary compensation, or use other equitable tools to achieve a just result.

Interaction with Insolvency

One of the most consequential practical differences between trust claims and other claims is that beneficiaries of trusts (express, resulting, or constructive) typically have priority over the trustee’s general creditors in insolvency. The trust property is not the trustee’s property; it is the beneficiary’s property held by the trustee. As a result, in a bankruptcy or insolvency, the trust property is removed from the bankrupt’s estate and made available to the beneficiary, in priority to general creditors.

This priority is particularly valuable for plaintiffs in unjust enrichment and breach of fiduciary duty cases. A successful plaintiff who obtains a constructive trust over identified property can recover that property in full, even if the defendant is insolvent and other creditors would otherwise be paying pennies on the dollar.

Trust Litigation in Practice

In commercial and personal litigation, trust concepts are often the difference between a successful and an unsuccessful claim. Whether the claim involves a failed business venture where money was advanced for a specific purpose (potentially a Quistclose trust), a director who appropriated a corporate opportunity (a constructive trust for breach of fiduciary duty), a family member who held property gratuitously transferred by a parent (a presumed resulting trust), or a misappropriated investment (a constructive trust for unjust enrichment), the careful analysis of which category of trust applies and the elements that must be proven can be the central legal question.

Trust claims are also frequently combined with other causes of action: breach of contract, breach of fiduciary duty, fraud, conversion, and unjust enrichment all interact with trust principles in various ways. Sophisticated plaintiffs often plead multiple causes of action in the alternative, with trust claims as the means of obtaining the most powerful proprietary remedies and maximising the likelihood of recovery.

For defendants, the analysis is often equally complex. Resisting a trust claim may involve attacking the elements of the underlying claim (for example, the absence of fiduciary duty in a breach of fiduciary duty claim), arguing that the appropriate remedy is monetary rather than proprietary, raising defences such as bona fide purchaser for value without notice, or relying on the absence of identifiable trust property to defeat the claim.

Conclusion

The trust is one of the most powerful legal devices available in the common law, and Canadian law recognizes three principal categories of trusts: express trusts deliberately created by a settlor, resulting trusts implied by law from the circumstances of a transaction, and constructive trusts imposed by courts as a remedy for unconscionable conduct. The differences between these categories are not merely doctrinal. They affect when a trust will be found, what evidence is required, what remedies are available, and how the trust interacts with other areas of law.

For plaintiffs, the choice of category often determines whether a powerful proprietary remedy is available or whether the plaintiff is limited to a monetary award that may be of limited value if the defendant is insolvent. For defendants, the proper analysis of the category and the elements required can be the difference between exposure and a successful defence. For lawyers and litigators, fluency with all three categories is essential for handling the wide range of disputes in which trust concepts arise.