4.12.3.50 Background to Non-Express (Implied) Trusts

Date of effect

This topic has effect to non-express (implied) trusts from 1 January 2002 and covers the following:

  • background, and
  • assessment of non-express (implied) trusts.

Background

In some circumstances the courts recognise that a trust exists even in the absence of the usual documents that are used to set up a trust. Such trusts are created where it would be inequitable for the 'legal owner' to deny the beneficial interest of another. Common intention constructive trusts, resulting trusts are examples of non-express trusts or to use another term implied trusts.

Circumstances where non-express/implied trusts may be created include:

  • Duress or fraud: Where X has transferred ownership to Y in a transaction, which is voidable on the grounds of duress or fraud.
  • Mutual wills: Where X and Y make mutual wills leaving everything to each other and make a contract not to change them, the beneficiaries under the new will of either of them will hold as constructive trustees for the beneficiaries under the revoked will.
  • Uncompleted sale of land: The vendor of the land holds as constructive trustee for the purchaser between the date of contract and the date of transfer on settlement. (This is the reason conveyancers always advise purchasers to take out their own insurance immediately on signing of a sale note).
  • Foreclosure: Where a mortgagee sells the mortgaged property upon the mortgagor's default; after deducting from the proceeds of the sale the expenses of the sale and the amount (including principal, interest and costs) needed to satisfy their claim, they are deemed to hold the balance on trust for the mortgagor.
  • Breach of promise: Where a person makes a promise to a second person and the second person suffers detriment because of their reliance on the promise, then the court may enforce the terms of the promise so that a constructive trust arises in relation to property that is the subject of the promise.

There will be other limited circumstances where it may be appropriate to find the existence of a non-express (implied) trust that is not a constructive or resulting trust. These types of trusts will not be common. They occur where the court presumes from the circumstances that a trust was intended. A legal opinion should be sought to confirm the existence of such a trust.

Note: Special care should be taken to ensure that the implied trust is not a testamentary trust (4.12.3.30) or a protective trust (4.12.3.40).

Assessment of non-express (implied) trusts

Generally the private trusts and companies rules apply to all non-express/implied trusts. This is irrespective of when the non-express/implied trust was created.

Explanation: A non-express or implied trust arises where an individual can establish that in spite of being the legal owner of an asset, that they only hold this asset on behalf of someone else.

For information on the specific non-express trusts:

  • for constructive trusts refer to 4.12.3.51,
  • for resulting trusts refer to 4.12.3.52, and
  • for other non-express (implied) trusts refer to 4.12.3.53.
Last reviewed: 21 September 2015