Not every trust is the product of a deliberate settlor sitting down to draft an instrument. A vast and important category of trusts is born not of intention but of conscience — trusts that equity raises, and sometimes imposes, by operation of law. The two great limbs of this category are the resulting trust, which sends a beneficial interest back to the person who provided it, and the constructive trust, which equity fastens on a defendant to prevent unconscionable retention of property. This article unpacks both concepts, walks through the classic English authorities and the corresponding provisions of Chapter IX of the Indian Trusts Act, 1882, and explains why Indian law — having abolished the benami device and renamed these creatures "obligations in the nature of trusts" — treats them rather differently from England.
Express, implied, resulting and constructive: locating the family
Trusts are conventionally divided according to how they come into being. An express trust is created by the declared words of a settlor, written or oral; in Fitzgerald v. Stewart an express trust was described as one created not by facts and circumstances but by express words. By contrast, an implied trust is gathered from the presumed intention of the owner of property and is raised by construction of law rather than by declaration. Resulting and constructive trusts sit within this second, non-express world, but they are not the same thing, and the distinction matters in the examination hall.
A resulting trust is a species of implied trust. It arises where equity infers that a person who transferred property, or paid for it, did not intend the recipient to take the beneficial interest; the beneficial interest therefore "results" — literally jumps back — to the transferor or his representatives. A constructive trust, by contrast, is imposed by the court irrespective of, and often against, the intention of the parties, purely to satisfy the demands of justice. As Snell put it, a constructive trust is raised by construction of equity to satisfy the demands of justice without reference to any presumable intention of the parties. The practical line, drawn in the classic Indian texts, is this: an implied (resulting) trust rests on the presumed intention of the parties, whereas a constructive trust is created by the court regardless of intention. For the broader framework of how equity intervenes on conscience, see our note on Equity Acts in Personam.
The resulting trust: beneficial interest that comes home
A resulting trust occurs, in the words of the standard learning, where equity regards property held by a trustee as belonging in equity to the person who transferred it. It arises where the circumstances raise an inference that the transferor did not intend the person taking the legal title to enjoy the beneficial interest. The beneficial interest reverts to the transferor.
The textbook illustration runs thus: if X settles a fund of Rs 1,00,000 for the maintenance of A, but A dies before any of it is spent, the trust fails for want of an object and a resulting trust arises in favour of X or his legal representatives. The settlor parted with the legal title for a defined purpose; when that purpose can no longer be served, equity will not let the trustee keep the windfall, nor will it treat the property as ownerless. It results back. The same logic governs a trust that fails for uncertainty, for illegality of object, or where a settlor exhausts only part of the trust property and says nothing about the surplus.
The rationale is consistent with equity's refusal to allow a trustee to take beneficially what was never meant for him. A settlor who places property in a trustee's hands is presumed to retain the beneficial interest to the extent that he has not effectually disposed of it; the trustee takes the bare legal title and nothing more. The resulting trust is therefore best understood not as a positive gift back to the settlor but as the natural consequence of an incomplete disposition — the beneficial interest, never having truly left the settlor, simply re-emerges. This is why a resulting trust needs no formalities and no fresh declaration: it is the default to which equity returns whenever an attempted disposition of the beneficial interest runs out before the whole interest is exhausted.
Automatic and presumed resulting trusts
English equity recognises two broad situations in which a resulting trust arises. The first is the automatic resulting trust, which springs up wherever an express trust fails to dispose of the entire beneficial interest — the gap is filled by a resulting trust to the settlor. The leading modern statement is that of Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v. Islington London Borough Council [1996] AC 669, where the House of Lords explained that a resulting trust does not depend on a continuing intention but responds to the absence of any intention to benefit the recipient, and that the trust gives effect to the conscience of the legal owner.
The second is the presumed resulting trust, which arises from a voluntary conveyance or a purchase in the name of another. Where A buys property and has it conveyed into the name of B, equity historically presumed that B held on resulting trust for A, the person who paid. This was the doctrine applied in the great matrimonial-property cases of Pettitt v. Pettitt [1970] AC 777 and Gissing v. Gissing [1971] AC 886, where the House of Lords wrestled with whether a spouse who contributed to the purchase price of the family home took a beneficial share by way of resulting or constructive trust. The presumption is rebuttable; it yields to the contrary presumption of advancement where the payer is under an equitable obligation to provide for the transferee, as a father for his child or a husband for his wife.
The constructive trust: conscience finds a formula
The constructive trust is the more dramatic instrument. It is not created by words or by circumstances giving rise to a presumed intention; it is imposed by the court to prevent injustice. In certain circumstances the legal owner of property must, according to the principles of equity, hold it on trust for another — and it would be impossible in such circumstances to observe the formalities of an express trust. Where it would be an abuse of confidence for the owner to retain the property for his own benefit, a trust is fastened on him irrespective of his intention.
The most quoted judicial description belongs to Cardozo J in the New York Court of Appeals in Beatty v. Guggenheim Exploration Co., 225 N.Y. 380 (1919): "A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee." The constructive trust thus operates squarely on conscience — the very domain in which equity has always claimed jurisdiction, as explained in our note on the maxim that he who seeks equity must do equity.
Keech v Sandford: the fountainhead
No discussion of constructive trusts is complete without Keech v. Sandford (1726) Sel Cas Ch 61. A lease of the profits of Romford Market was held on trust for an infant. As the lease neared expiry the trustee, Sandford, sought to renew it for the benefit of the infant beneficiary; the lessor refused to renew in favour of a child but was willing to grant a fresh lease to the trustee personally. Sandford took the new lease for himself. When the infant, Keech, came of age he sued to recover it.
Lord King LC held that the trustee held the renewed lease on constructive trust for the infant and must account for the profits, even though the lessor would never have renewed in the infant's favour and the trustee had acted without any fraud. "This may seem hard," said the Lord Chancellor, "that the trustee is the only person of all mankind who might not have the lease; but it is very proper that the rule should be strictly pursued and not in the least relaxed." The case is the fountainhead of the strict "no-conflict" and "no-profit" rules: a fiduciary who exploits his position is converted into a constructive trustee of the gain, and liability does not turn on dishonesty, bad faith or actual loss to the beneficiary. The Indian textbook example — a trustee who obtains the renewal of a lease held by him as trustee is bound to hold it on trust — is simply Keech v. Sandford restated.
Two features of the decision deserve emphasis for examination purposes. First, the rule is prophylactic: it forbids the very possibility of a conflict, not merely proven abuse, because the temptation to prefer self over beneficiary is too dangerous to police case by case. Second, the rule is irrebuttable in the renewal-of-lease situation — the trustee cannot escape by proving that the beneficiary would never have obtained the renewal, nor that he acted in perfect good faith. This severity is what makes Keech the parent not only of the law of trusts but of the wider law of fiduciaries, reaching company directors, partners, agents and solicitors alike, a breadth later confirmed in cases such as Bray v. Ford [1896] AC 44, where Lord Herschell described the no-profit principle as an inflexible rule of equity.
Boardman v Phipps: the rule applied with full rigour
The strictness of the rule was confirmed two and a half centuries later in Boardman v. Phipps [1967] 2 AC 46. The trustees of a family settlement held a minority shareholding in a private company. Boardman, the trust's solicitor, and Tom Phipps, a beneficiary, attended the company's meetings on the trust's behalf, formed the view that the company was poorly run but had hidden value, and — using information and an opportunity that had come to them in their fiduciary capacity — purchased a controlling block of shares in their own names. Their efforts greatly improved the company, benefiting the trust as well as themselves.
The House of Lords held, by a majority, that Boardman and Phipps were accountable to the trust as constructive trustees for the personal profit they had made, because the information and opportunity had come to them through their fiduciary position and there existed a possibility — not necessarily an actuality — of conflict between their personal interest and their duty. Significantly, the majority recognised that the defendants had acted honestly and had conferred a real benefit on the trust, and so allowed them generous equitable remuneration for their skill and labour. The case demonstrates the unforgiving reach of the constructive trust over fiduciary gains, and its disciplinary logic dovetails with the maxim that equity will not suffer a wrong to be without a remedy.
The Indian scheme: "obligations in the nature of trusts"
Indian law handles resulting and constructive trusts through a deliberately re-engineered vocabulary. Section 3 of the Indian Trusts Act, 1882 defines a trust as an obligation arising out of "a confidence reposed in and accepted by the owner" — language that, as the commentators note, refers to express trusts only. Resulting and constructive trusts as known to English law fall outside this definition. Instead they are dealt with in Chapter IX of the Act, headed "Of Certain Obligations in the Nature of Trusts." The drafters consciously avoided the fiction implicit in the phrase "constructive trust" and instead spoke of persons being bound by obligations in the nature of trusts for the benefit of another.
This is a substantive, not merely cosmetic, choice. Because Indian law does not recognise the English notion of double ownership — as the Privy Council confirmed in Tagore v. Tagore (1872) 9 Beng LR 377, equitable ownership distinct from legal title is unknown in India — the obligor under Chapter IX is not a trustee holding a divided estate. He is a legal owner saddled with a personal statutory obligation to hold or transfer the property for another's benefit. For the way Indian courts have absorbed English equity selectively, see our note on equity in India, pre- and post-independence, and the gateway Equity and Trust Law notes hub.
Section 88: advantage gained by a person in a fiduciary character
The Indian counterpart of Keech v. Sandford and Boardman v. Phipps is Section 88 of the Indian Trusts Act, 1882. It provides that where a trustee, executor, partner, agent, director of a company, legal adviser or other person bound in a fiduciary character to protect the interests of another, by availing himself of that character, gains for himself any pecuniary advantage, or where any such person enters into dealings under circumstances in which his interest is or may be adverse to that of the other and thereby gains a pecuniary advantage, he must hold that advantage for the benefit of the person whose interests he was bound to protect.
The illustrations to Section 88 are essentially codifications of the English rule: an agent who deals on his own account in a matter of his agency, or a trustee who renews a lease for himself, must hold the gain for the beneficiary. The Supreme Court applied this fiduciary-advantage logic in Canbank Financial Services Ltd. v. Custodian, (2004) 8 SCC 355, treating securities or sale proceeds received by a broker on a client's behalf as held under a trust-like obligation that the fiduciary cannot retain for himself. Section 88 thus carries forward, in statutory form, the strict no-profit principle of the constructive trust.
The rest of Chapter IX: a map of constructive obligations
Section 88 is only one cell of a larger grid. Section 80 lays down where an obligation in the nature of a trust is created. Section 81 deals with a transfer where it does not appear that the transferor intended to dispose of the beneficial interest — the classic resulting-trust situation — and Section 82 dealt with a transfer to one for a consideration paid by another, the purchase-money resulting trust. Section 83 covers a trust that is incapable of execution or that is executed without exhausting the trust property, again producing a resulting trust of the surplus. Sections 84 and 85 dealt with transfers and bequests for an illegal purpose; Section 86 with a transfer under a rescindable contract; Section 87 with a debtor who becomes his creditor's representative; Section 89 with an advantage gained by exercise of undue influence; and Section 90 with an advantage gained by a qualified owner such as a tenant for life or co-owner.
Sections 91 and 92 give statutory force to equitable doctrines of notice and the maxim that equity looks on that as done which ought to be done: a person who acquires property with notice of an existing contract affecting it, or who contracts to buy property to be held on trust and then buys it, must hold it for the persons entitled. Section 93 dealt with an advantage secretly gained by one of several compounding creditors, and the now-repealed Section 94 was the residual clause covering constructive trusts in cases not expressly provided for, directing that the obligor hold the property for the benefit of the person who would in equity be entitled. Section 95 attaches to the obligor the same duties, and Section 96 the same liabilities and disabilities, as a trustee proper — so far as the nature of the case admits.
The benami earthquake: how the 1988 Act gutted the resulting-trust sections
A point of acute examination importance is that several Chapter IX provisions no longer exist. Old Sections 81 and 82 gave legislative recognition to the benami practice — the holding of property by one person on behalf of another who provided the money — by creating purchase-money resulting trusts. These were repealed, along with Sections 94 and others, by the Benami Transactions (Prohibition) Act, 1988 with effect from 19 May 1988, the legislature's aim being to abolish the benami device rather than to bless it with a resulting trust. A candidate who confidently recites "Section 82" as live law will lose marks; the provision stands repealed.
The temporal reach of the 1988 Act was settled in R. Rajagopal Reddy v. Padmini Chandrasekharan, (1995) 2 SCC 630, where a larger Bench of the Supreme Court held that Section 4 of the Benami Act operates prospectively, applying to suits, claims and actions instituted after its commencement, and overruled the earlier contrary view in Mithilesh Kumari v. Prem Behari Khare, (1989) 2 SCC 95, which had treated the bar as retrospective. The result is a layered position: a real owner whose suit was already pending before 19 May 1988 was not shut out, but pleas raised after that date are barred. The repeal of the benami resulting-trust sections is the single most important modern qualification on the Indian law of resulting trusts.
Secret trusts: a borderline between express and constructive
A revealing borderline case is the secret trust, often examined alongside resulting and constructive trusts. A secret trust is not disclosed on the face of a will: a testator bequeaths property to a legatee on the latter's promise to hold it for some other person, the undertaking lying outside the formalities of the testamentary instrument. Where the terms of the trust are communicated to and accepted by the legatee during the testator's lifetime but appear nowhere in the will, it is a fully secret trust; where the will discloses that the legatee takes as trustee but withholds the terms, it is a half-secret trust.
The doctrinal puzzle is why equity enforces such a trust at all, given that it offends the formality requirements of the law of wills. The orthodox justification is that equity will not allow a statute — here the Wills Act and its Indian analogues — to be used as an instrument of fraud. If the legatee, having induced the testator to leave property on the faith of his promise, were then permitted to keep it for himself, he would perpetrate exactly the abuse of confidence that the constructive trust exists to prevent. Many writers therefore classify the enforced secret trust as constructive in nature, imposed to defeat the legatee's fraud, while others treat it as an express trust operating outside the will ("dehors the will"). Either way, the secret trust illustrates the same principle as Keech and Section 88 — that equity fastens an obligation on a conscience that would otherwise retain property unconscionably.
Distinguishing resulting from constructive trusts
Because both arise by operation of law, students frequently conflate them. The distinctions repay careful memorisation. A resulting trust responds to the absence of intention to benefit the recipient and sends the beneficial interest back to the provider; it is intention-sensitive in the sense that it can be rebutted by proof that a gift or advancement was intended. A constructive trust is imposed to prevent unconscionable retention and operates irrespective of, and frequently against, the holder's intention; it cannot be defeated merely by showing that the defendant intended to keep the property.
The textbook contrasts are worth setting out cleanly. As between an express and a constructive trust: the former arises by the acts and declarations of the parties and requires compliance with formalities, whereas the latter arises by operation of law and needs no formalities. As between an implied (resulting) trust and a constructive trust: both are creations of law, but the resulting trust is grounded in the presumed intention of the parties, while the constructive trust is created by the court irrespective of intention. In substance, the resulting trust restores; the constructive trust restrains.
Institutional and remedial constructive trusts
A further refinement, important for a top-tier answer, is the distinction between the institutional and the remedial constructive trust. The institutional constructive trust — the orthodox English and Indian model — arises automatically by operation of law whenever the requisite circumstances exist; the court merely declares that the trust already arose at the relevant moment, and its existence may affect third parties from that earlier date. Keech v. Sandford and Section 88 produce institutional constructive trusts.
The remedial constructive trust, by contrast, is a discretionary judicial remedy imposed by the court as the response to unjust enrichment, taking effect from the date of the court's order. It is well developed in the United States — the line of authority running from Cardozo J's formulation in Beatty v. Guggenheim — and has been acknowledged but not fully embraced in England. The English courts in Westdeutsche Landesbank v. Islington and later cases have been cautious about the remedial variety, conscious of its impact on creditors in an insolvency. Indian law, working through the fixed categories of Chapter IX, is essentially institutional: the obligation in the nature of a trust arises by force of the statute when its conditions are met, not as a discretionary remedy crafted afresh by the judge.
Worked examples and common fact-patterns
It helps to rehearse the recurring fact-patterns. Failed express trust: a settlor gives money to trustees for a purpose that fails — the fund results to the settlor (resulting trust; cf. Section 83). Surplus after purpose served: money is raised for a specific object, the object is achieved and money is left over — the surplus results to the contributors. Purchase in another's name: historically a presumed resulting trust, but in India now governed by the Benami Act's prohibition rather than by a resulting trust. Fiduciary profit: a trustee, agent or director who exploits his position to gain — constructive trust of the gain under Keech, Boardman and Section 88. Receipt with notice of a contract: a buyer who takes property knowing of a prior contract holds for the contracting party (Section 91).
A final example ties the threads together. Suppose a managing agent of a company, while negotiating a contract for the company, secretly takes a personal commission from the counter-party. He has gained a pecuniary advantage by availing himself of his fiduciary character. Under English law he is a constructive trustee of the bribe; under Indian law Section 88 fastens on him an obligation in the nature of a trust to hold the commission for the company. The conscience of equity, in Cardozo J's phrase, finds its formula — whether expressed as a constructive trust in London or as a statutory obligation in Bombay. To revise the underlying maxim-based reasoning, return to the twelve classical maxims of equity.
Frequently asked questions
What is the difference between a resulting trust and a constructive trust?
A resulting trust sends the beneficial interest back to the person who provided the property where the law infers no intention to benefit the recipient — it is grounded in presumed intention and can be rebutted by proof of a gift. A constructive trust is imposed by the court to prevent unconscionable retention of property, irrespective of and often against the holder's intention. In short, a resulting trust restores; a constructive trust restrains.
What did Keech v Sandford decide?
In Keech v. Sandford (1726), a trustee of a lease held for an infant took a renewal of the lease for himself after the lessor refused to renew in the child's favour. Lord King LC held the trustee held the renewed lease on constructive trust for the infant and must account for the profits, even absent fraud and even though the lessor would never have renewed for the child. It is the foundation of the strict no-conflict and no-profit rules governing fiduciaries.
How does the Indian Trusts Act, 1882 deal with constructive and resulting trusts?
Section 3's definition of a trust covers express trusts only. Resulting and constructive trusts are dealt with separately in Chapter IX, headed "Of Certain Obligations in the Nature of Trusts" (Sections 80 to 96). The drafters avoided the English fiction of a "constructive trust" and instead imposed personal statutory obligations in the nature of trusts, consistent with the fact that Indian law, per Tagore v. Tagore, does not recognise English-style double ownership.
What does Section 88 of the Indian Trusts Act cover?
Section 88 covers advantage gained by a person in a fiduciary character. A trustee, executor, partner, agent, director, legal adviser or other fiduciary who, by availing himself of his position, gains a pecuniary advantage — or who deals where his interest is adverse to the beneficiary's and gains thereby — must hold that advantage for the beneficiary. It is the Indian statutory embodiment of the rule in Keech v. Sandford and Boardman v. Phipps.
Are the purchase-money resulting trust sections of the Indian Trusts Act still in force?
No. Old Sections 81 and 82, which recognised benami purchase-money resulting trusts, were repealed (along with Section 94 and others) by the Benami Transactions (Prohibition) Act, 1988 with effect from 19 May 1988. In R. Rajagopal Reddy v. Padmini Chandrasekharan (1995), the Supreme Court held that the Benami Act operates prospectively, overruling the contrary view in Mithilesh Kumari v. Prem Behari Khare (1989).
What is the difference between an institutional and a remedial constructive trust?
An institutional constructive trust arises automatically by operation of law whenever the requisite circumstances exist; the court merely declares it, and it may bind third parties from the earlier date. A remedial constructive trust is a discretionary judicial remedy for unjust enrichment that takes effect from the date of the court's order. English and Indian law are essentially institutional; the remedial form is well developed in the United States but treated with caution in England, partly because of its impact on creditors.