Resulting Trusts

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Introduction

A resulting trust is always for the benefit of the original owner of the property.

Resulting trusts arise where the beneficial title in property reverts to, or never leaves, the original legal owner of the property. It may never leave the legal owner where the nature of the transaction is not to pass the beneficial title with the legal title; or may revert where the reasons for the transaction no longer exist or never existed.

In some cases, the beneficial title will revert because there is nowhere else for it to go, other than to the Crown in bona vacantia

Type A and B resulting trusts

In In re Vandervell’s Trusts (No 2), Megarry J explained resulting trusts, drawing a distinction between presumed resulting trusts and automatic resulting trusts:

  • Where we have a transfer where there is an intention to retain beneficial title then on the basis of that presumption beneficial title remains with the original owner (presumed Resulting Trust); on the other hand, automatic Resulting Trusts arise by operation of law

More recently, Lord Browne Wilkinson in Westdeutsche Landebank v Islington LBC [1996] set out the same categories as McGarry J but uses the nomenclatures A and B

  • He said where one makes a voluntary payment to someone, the law presumes you did not intent to make a gift (law requires positive evidence to make a gift); the recipient will thus hold it on resulting trust (a presumed resulting trust)
  • On the other hand, if you have an express trust and there is no beneficial owner then by operation of law the settlor is the beneficial owner under a resulting trust (automatic resulting trust)

There are three main sets of circumstances where resulting trusts may arise:

  • Incomplete or Imperfect express Trusts (Type B/automatic) e.g. unallocated beneficial interest will give rise to an automatic resulting trust
  • Transfer without Value (Type A/presumed)
  • Purchase Money Resulting Trust of Property (Type A/presumed)

Type B - Incomplete, imperfect or invalid trusts

Summary

Where property is transferred on trust, but the trust cannot be performed, the beneficial title will result back to the settlor

Equitable title cannot remain in the air (as Lord Wilberforce said in Vandervell v IRC [1967]) → Equity abhors a beneficial vacuum i.e. if there is no beneficial owner of property equity will find an owner (usually under a resulting trust, to the original owner)

Following failure of a trust, the beneficial title is left hanging. There are then 3 possibilities:

  • The property belongs beneficially to the trustee; → this would destroy the foundation of equity so this will not happen
  • The property goes to the Crown bona vacantia; → crown will not take beneficial title if there is someone with a better claim
  • The property reverts to the original settlor.

See the following cases:

Failure to declare the trust

Where property is transferred to another on express trust, but there remains some beneficial interest in the property that is not dealt with by the declaration of trust, that interest results to the settlor.

Vandervell v Inland Revenue Commissioners [1967] → If A intends to give away all his beneficial interest in a piece of property and thinks he has done so but, by some mistake or accident or failure to comply with the requirements of the law, he has failed to do so, either wholly or partially, there will, by operation of law, be a resulting trust for him of the beneficial interest of which he had failed effectually to dispose.

Exhaustion of Objects

Where money has been left for the benefit of persons who have died, and there is, due to the imperfect drafting of the trust instrument, no provision for the vesting of the trust property, the trust property will result to the settlor or settlors.

See the cases of In re the Trusts of the Abbott Fund [1900] and Re Gillingham Bus Disaster Fund [1958]

Trusts for the benefit of a person for a particular purpose

In cases where a trust is for the benefit of a particular person, and there is an attached purpose, the purpose will be construed as the motive for the gift, and will not prevent the beneficiary from taking the benefit after the purpose is exhausted: Re Sanderson's Trust (1857) e.g. where someone give you money at Christmas to buy books, the purpose is a motive and not a binding obligation

See the case of Re Osoba [1979]

Dissolution of Unincorporated Associations

When an unincorporated association is wound up, a question may arise as to how any surplus assets are to be disposed of. In some circumstances, the money will be held on resulting trust for those who have contributed; or to the members at the time of distribution.

Type A – ‘Presumed’ resulting trusts

Transfer of Property without Consideration

Remember, equity will not aid a volunteer

  • A volunteer is someone who receives something for nothing

“Equity tends to be suspicious of gifts and often asks the recipient of an apparent gift to prove that it was intended as a gift. The failure to do so means that it will be held in trust for the apparent donor. In other words, the apparent gift creates a presumption of resulting trust.” Chambers R. “Resulting Trusts” (1997) OUP p.11

  • So, with a voluntary transfer of property, the onus is on the recipient to prove the gift was intended
  • If this cannot be shown, the recipient holds it on resulting trust for the donor

Where a person transfers property to a third party, without value, the transferee may hold the property on resulting trust for the transferor. In general, where a person transfers money, land or other property to another person without payment, one might think that, without any evidence otherwise, it would be reasonable to presume that the transfer was a gift. However, equity presumes that there is no gift unless there is evidence.

See the cases of Fowkes v Pascoe (1875) and Re Vinogradoff [1935]

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CONTENT

Voluntary transfers of land

Law of Property Act 1925 s.60(3): "In a voluntary conveyance a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee."

  • So, if you transfer land without value there is no presumption of a resuling trust → the court will look at evidence to decide if gift is intended or not

In Ali v Khan [2002], Sir Andrew Morritt VC said the following: "I should also refer to Lohia v Lohia [2001]. This case establishes that the presumption of a resulting trust on a voluntary conveyance of land has been abolished by s 60(3) Law of Property Act 1925. It was not suggested that this proposition precludes a party to the conveyance from relying on evidence from which a resulting trust may be inferred."

  • Court can hear evidence from both parties, but no presumption when there is voluntary transfers of land

In Prest v Petrodel Resources Ltd [2013] houses had been conveyed to a company for a nominal sum. The Supreme Court held that the company held the houses on resulting trust for the transferor: "The only question is who did hold the beneficial interest. Flat 4, 27, Abbey Road was transferred by the husband, who had originally bought it in his own name in 1991, before PRL was incorporated. There is therefore an ordinary resulting trust back to the husband, which is held by him subject to the charges in favour of Ahli United Bank and BNP Paribas."

  • The Law of Property Act s.60(3) was overlooked by the Supreme Court in this case → So the court relied on the presumption, rather than on the Law of Property Act s60(3)

The Presumption of Advancement

Where a man transfers property (realty or personalty) to his wife or his son or daughter without value, there is a presumption that the transfer is a gift (the presumption is of a GIFT, not a resulting trust → the burden of proof is reversed i.e. on the donor that he did not intend a gift).

Note that the presumption does not apply to transfers from wife to husband or mother to child, or to more distant relations

See the cases of Tribe v Tribe [1996] and Gascoigne v Gascoigne [1918]

The presumption of advancement will be abolished by the Equality Act 2010 s.199 at a date to be appointed. In the meantime, it is still valid: see Ullah v Ullah [2013] EWHC 2296 (Ch)

  • So presumption of advancement still good law → but at some point the govt will get around to commencing s199

Where the presumption applies, the transferee will take the property absolutely. It is a rebuttable presumption, so if the transferor is able to show that the transfer was not intended as a gift, by showing other intentions, the presumption will not apply.

  • Courts don't require much evidence that a gift was intended

Type A – Purchase money resulting trust

Summary

Where two people contribute money towards the purchase of property and the property is held in one person's sole name, the legal owner will hold the property on resulting trust for both contributors in shares proportional to their contribution to the purchase price.

"The clear result of all the cases, without a single exception, is that the trust of a legal estate, whether freehold, copyhold or leasehold; whether taken in the names of the purchasers and others jointly, or in the names of other without that of the purchaser; whether jointly or successive - results to the man who advances the purchase money." Per Eyre CB in Dyer v Dyer (1788)

See the case of Tinsley v Milligan [1994]

  • They held that, as both had contributed to the purchase price, the house was held by Tinsley on resulting trust for Tinsley and Milligan, in shares proportional to their contribution to the purchase price and mortgage payments.

However, this approach is no longer applied to cases involving family homes (Tinsley v Milligan involved a business situation):

  • You get a Common Intention Constructive Trust trust instead, not a resulting trust
  • The court is not bound to deal with the matter on the strict basis of the trust resulting from the cash contribution to the purchase price, and is free to attribute to the parties an intention to share the beneficial interest in some different proportions: Midland Bank v Cooke [1995] (Waite LJ)
  • The resulting trust will still apply to property bought as an investment, rather than as a family home.

The Resulting Trust in the Law of Restitution

The exact nature of the resulting trust has been the subject of extensive academic debate over the past 25 years. In particular, Professor Birks, formerly of Oxford University, attempted to incorporate the resulting trust into a model of restitution based on unjust enrichment.

  • Birks thinks when you want money back, all remedies should be incorporated into a model of restitution based on unjust enrichment that combines common law and equity

“[A]ll resulting trusts affect restitution to the provider of what would otherwise be the unjust enrichment of the recipient.” R. Chambers, Resulting Trusts p.93.

  • He says existing case law can fit into restitution based on unjust enrichment

The reason that restitution lawyers were keen to adopt trusts as part of the law of restitution was because a trust creates a proprietary interest which allows the claim to survive the insolvency or bankruptcy of the legal owner; and which allows the claimant to take any increase in value of the property, thus reversing the unjust enrichment at the claimant’s expense.

A key part of this was the model of resulting trusts proposed by Robert Chambers, under the guidance of Professor Birks. This model unified resulting trusts under the principle that a resulting trust would arise whenever A transferred property to B without an intention that A should benefit B.

While this model worked well and received judicial support, particularly from Lord Millett, in that it covered both presumed and automatic resulting trusts, in Westdeutsche Landesbank v Islington LBC, the House of Lords rejected the resulting trust approach in a restitution claim brought under a contract which was void for illegality.

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