Sometimes essence resulting trusts have been scrutinized for many

Sometimes resulting trust function outside
the circumstances of express trusts and will arise contrary to the intention of
the settlor. Under a resulting trust, the settlor maintains an equitable
interest in the settled property. This situation can arise in a variety of
circumstances and resulting trusts may overlap with other categories. They are
not concerned with all the rules of express trusts and their establishment is
not dependent on compliance with formalities. In essence resulting trusts have
been scrutinized for many years, the main debate being the role of intention
and whether the beneficial interest stays with the transferor or is returned to
him. According to Meggary J in Re Vandervell’s Trusts (no 2), there are two categories of resulting trusts, automatic
and presumed.1
Under this classification the automatic resulting trust will occur when the
settlor transfers property to the intended trustee but was unsuccessful to discard
of the beneficial interest. These are usually imposed by operation of law and
without regards to intention. On the other hand, presumed resulting trust
occurs when the transfer is not formed on trust, but there is a rebuttable
presumption of trust. These usually arise from voluntary conveyance of property
or by the purchase of property in the name of another. They are also contingent
on the intention of the transferor. However, this analysis was doubted by Lord
Browne-Wilkinson in Westdeutsche
Landesbank Girozentral v Islington London Borough Council.2
He stated that resulting trusts should not be forced by law against the
intention of the trustee but should however allow effect to his common
intention. He sought to establish that there is no difference between the two
distinctions of resulting trusts and that both should be regarded as ‘trusts
giving effect to the common intention of the parties’.3
As well as establishing that it will only take effect when the conscience of
the transferee is artificial due to the becoming aware and that the property received
was not intended for anyone’s benefit.

 

Starting
off, resulting trusts that arise automatically are not contingent on the
intention of the parties and happen as an automatic consequence of the transferor
and his failure to dispose of the beneficial interest. It will arise when there
is an intention to create a valid charitable trust which is expressed as
invalid. To begin with, ineffective declaration of trust, arises when a settlor
makes a declaration of trust, but it fails due to uncertainty of objects,
failure to meet formal requirements or perpetuity. In Morice v Bishop of Durham, it established the principle that you
must have human beings who are able to sue the trustee if something goes wrong
and it is the beneficiary’s role to ensure that the trustee does what they are
supposed to be doing.4
The trust failed here because the objects of trust were uncertain and there was
a failure to specify intentions clearly. In Vanderwell
v IRC, Vanderwell told his trustee to transfer shares to the Royal College
of Surgeons.5
However, the shares were transferred with the condition of a ‘buy back’ policy
under the agreement. The court had to identify whether this alternative to
repurchase the shares was held on resulting trust for Vanderwell and if he had
kept any beneficial interest. Lord Wilberforce held that Vanderwell had allowed
the option to the trustee to be held on trust but the objects had not been
specified. As a result, the express trust was unsuccessful and Vanderwell held
the beneficial interest under resulting trust. In reference to automatic
resulting trust, there was no need for a presumption in this case, the choice
was placed with the trustee company on trust and had not been defined. The
court must not leave a beneficial interest with no one as consequences arise in
law that it must remain with the settlor.

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Moreover,
is when there is failure to dispose of the entire beneficial interest. This
arises when a trust has been created and does not include all of the beneficial
interest in the trust property, everything that has not been included by the
trust is therefore held on resulting trust for the settlor. In Re the Trusts of the Abbott Fund, funds
were put in a will on trust for two daughters. One of the trustees was
dishonest with all the trust funds which was discovered after her death.6
Consequently, the friends of the two daughters raised funds to support them.
After the second surviving daughter had died, there was surplus funds left in
the fund. The court held that the money was held on resulting trusts and not
interpreted as an absolute gift for the contributors since no provision was
provided for the disposal of the funds. In Re
Cochrane, this case consisted of a marriage settlement and an income that
was to be paid to the wife for life on the condition that she lived with her
husband.7
The wife stopped living with her husband and he later died. It was held that
the settlement did not protect the situation of both life interests coming to
an end during the life of the survivor, so therefore there was a resulting
trust of the income to the settlor until the wife’s death. This gap was also
not able to be filled by enforcing a trust of the income for the children. A
resulting trust may also eventuate on the failure of an express trust. An
express trust will sometimes make a disposal of the entire beneficial interest
in the trust property but it may be susceptible to a condition being satisfied
which is not.8
This proposition applies on the basis that the intended beneficiaries do not
have the benefit due to the failure of the express trust or the trustees did
not intend to receive the property absolutely. In Re Ames’ Settlement, the husband’s father had settled property on
trust of a marriage settlement for his son.9
The son proceeded to obtain income from the settlement until his death.
However, Vaisey J established that after the husband’s death, the property was
to be held on resulting trust to the executors of the settlor. Difficult
questions begin to arise as to void transactions and where a factor may stop
legal title from passing which creates no need for a resulting trust.

 

Lastly,
the most problematic area is surplus funds on dissolution of unincorporated
associations. Most of the unincorporated associations do not have a legal
personality and the holding of property in the unincorporated association is very
complicated. In Cunnack v Edwards a
society was established to raise a fun and to provide annuities for the widows
of its deceased.10
In 1879 all the society member had died and by 1892 the last widow who was
benefiting had died. The question was how the remaining surplus funds should be
dealt with. The court of appeal held that there was no application of resulting
trust that existed here. This decision therefore suggests that the courts have
little scope for cases dealing with mutual benefit societies. However, this
position was considered again in Re West
Sussex Constabulary’s widows, Children & Benevolent Fund11.
This case involved a fund which had been created to give benefits to widows
and other members. The funds were given and raised by members’ subscriptions
and other proceeds of entertainment. The constabulary was amalgamated with
police forces and they were unsure of how the fund should be dealt with. Goff J
held that surviving members could not claim due to two reasons. First, the
members had been given everything they contracted for, and secondly, the money
was received by contract and not by trust. The funds resulted in going bona
vancantia to the crown. It was held that funds from collecting boxes and
entertainment could not go on resulting trust due to how small they were and
only donations were allowed. In Air
Jamaica v Charlton, the Privy Council had belief that Air Jamaica’s pension
fund was a trust fund and that the employee’s claim to a pension occurred under
the trusts of a pension scheme.12
When the suspension of the pension fund happened, the surplus in the fund was
held as a resulting trust. They stated that a resulting trust will not be
prevented by evidence simply because the transferor intended to part with the
beneficial interest if he has not in reality acquired in doing so and since it
also reacts to the absence of intention on the part of passing a beneficial
interest the recipient.

 

Furthermore,
the second category stated by Meggary
J in Re Vandervell’s Trusts is presumed
resulting trusts. A presumption is a method of proof and identifying that there
is a presumption only states how the fact is proved and not what it actually is.
There are two main categories in which a presumed resulting trust may arise and
the first is purchasing property in the name of another. This occurs when
property is transferred or given for no consideration. A rebuttable presumption
will arise when there is certainty that the transferee holds the property on
resulting trust for the transferor, unless it gives effect to the presumption
of advancement. However, in most cases the presumption in favor of a resulting
trust will rely upon the circumstances mentioned in evidence as in Fowkes v Pascoe.13
This case involved a testator who had bought shares in the name of herself
and the son of her daughter in law. In her will, she left the rest of her
estate to her daughter. The concerning question was whether the shares that
were bought in the name of the defendant and the testator had been gifted to
the defendant or held by him on resulting trusts for the testator.14
The court accepted that it was a gift because of the close relationship. Therefore,
if evidence proves that a gift was intended, this will give rise to rebut the
presumption of resulting trust and the transferee will receive the property but
the transferor will not be allowed to receive any shares in the beneficial title.

 

In
correlation to personality, the presumption is that a voluntary transfer to a
beneficiary will give rise to a resulting trust in favor of the transferor. As
in the case of Re Vinogradoff, the testatrix
had made a transfer of £800 into
the joint names of herself and her four-year-old granddaughter.15
She remained obtaining dividends until her death. Farwell J held that although
a child may not be a trustee, the presumption of resulting trust applied and
the granddaughter was capable to hold the property on resulting trust for the
estate of the testatrix. This presumed resulting trust resulted by the
transferor’s presumed intention to not dispose of her beneficial interest to a
volunteer. The presumption of resulting trust used to concern land as well as
personality but according to Section 60(3) Law of Property Act 1925 it used to
avoid a presumption of resulting trust from arising.16
When a transferor is able to verify in proportion to evidence that no gift had
been intended, a resulting trust will be found notwithstanding s.60(3). This
section was applied in Lohia v Lohia
where it was held that an unjustified conveyance of an interest in land done by
a child to his father did not cause the presumption of a resulting trust in benefit
of the child.17
The Court of Appeal determined on the facts of the case that there had been no
existing evidence of a family arrangement which created a resulting trust. As
such the courts did not have to state their opinion as to whether section 60(3)
did remove the presumption of a resulting trust from arising.

 

In
most cases, the presumption of advancement will apply. It will usually arise
where a purchaser is the parent or husband of the person the property is being
transferred to. In such cases, various rationales have been provided for the
actuality of the presumption of advancement and for the specific relationships
to which it applies. The gender prejudice of the presumption was very likely to
infringe the European Convention on Human Rights and resulted in the abolition
of the presumption in s.199(1) of the
Equality Act 2010.18 The
first situation the presumption of advancement will apply, is where the husband
makes a transfer to his wife as stated by Malins VC in Re Eykyn’s Trusts.19 He
mentions that where a husband transfers money or other property into the name
of only his wife, then the presumption will be that it was either intended as a
gift or advancement to the wife completely at once. An example of this is in Petitt v Petitt.20
This case concerned Mrs. Petitt who inherited a cottage and was the sole
legal owner. He claimed that he was entitled a beneficial interest in the
cottage due to the improvements he created and brought an action under s17
Married Woman’s Property Act 1882.21 The
House of Lords held that Mr. Petitt would not be entitled to receive anything
as they were unable to conclude any common intention from his behavior. The
second traditional approach of the presumption of advancement is said to apply
only when transfers made by fathers to their children and not to transfers made
by mothers to their children. In Bennet v
Bennet, Sir George Jessel MR explained that the father is under an
obligation to provide for his child and in this case, you would only need to
show that he is the father and the obligation will arise.22 Accordingly,
the presumption of advancement is still founded on the presumed intention of
the parties. The intention of the settlor will be enforced on the basis that
the courts are able to identify intention.

 

There
is also another category which is categorized as ‘Express Resulting Trusts’.
This occurs when the settler has intended the property to stay on trust for him
until a specific event has transpired.23
The main authority for this occurred in Barclays
Bank Ltd v Quistclose Investments Ltd, where money was lent to the beneficiary for a particular purpose which
was to pay dividends to shareholders.24
In the leading judgment, Lord Wilberforce stated that the fact there had been a
loan agreement did not compose a trust. The liability to pay interest would
result when the money had been used for the purpose to pay the dividends and
the relationship was contractual, but if a failure existed then it would be a
resulting trust for the lender. As a matter of trusts, trusts need three
certainties or they will fail. In this case, the subject matter of the trust
would be the money lent for the purpose. The intention to create a trust was
not apparent by the facts but one way that many cases have contemplated the
intention to be obvious is the segregation of money into a discrete account as
in Re Kayford.25
Another leading authority in the area of Quistclose trusts is Twinsectra Ltd v Yardly.26
In this case, money had been loaned to purchase land. The solicitors decided
that the money would only be used towards buying land. The money was passed
between solicitors and was then released to a borrower without imposing the
purpose to obtain land. Lord Mustill in the Court of Appeal stated that what is
necessary is a mutual intention that the money does not contribute to the
general funds of the donee’s assets but should be used for a specific purpose.
However, in terms of common intention this leaves doubt as to the identity of
the settlor but whoever is considered the settlor, there should be certainty of
intention to create a trust. The certainty of intention must not only be a
declaration expressing that the loan money is to be utilized for a specific
purpose but there must be an extra indication stating that the money is to be
held on trust.

 

In the final analysis, there is not one rule within
resulting trusts which denies the settlors intention.

Resulting trusts are classified into two categories,
automatic and presumed. Under this classification, the presumed resulting trust
arises in situations involving transfers to volunteers and is contingent on the
presumed intent of the transferor. Only in circumstances where there is a
special connection or evidence to indicate otherwise, equity will give rise to
the presumed intention of the settlor that he did not intend a gift. Whereas
automatic resulting trusts, happens on the failure to dispose of the beneficial
interest and are enforced by operation of law as well as not depending on any
intention. The traditional approach is that all resulting trusts are founded
upon the absence of any intention by the transferor to move a beneficial
interest to the transferee. In the position of transfers on trust this indicates
the absence of intention to benefit the recipient. Under automatic resulting
trusts, it is not unpredictable with principle to assume that when a trust is
unsuccessful, the settlor intended someone to maintain the rights and not let
the assets proceed as bona vacantia to the Crown. With consideration to Quistclose trusts, Lord Wilberforce approved that a resulting
trust is present because if there is an intention to make a secondary trust for
the advantage of the lender to pay the dividend, could not be done is obvious, then
that is proof that they are essentially based on intention.  Therefore, whereas the role of intention in resulting trusts is a negative one and the essential
question being whether or not the provider intended to benefit the recipient,
it can simply be established that a trust will give effect to a settlors
presumed intention in situations that were not foreseen by his expressed
intentions.