#3127 - Resulting Trusts - GDL Equity and Trusts

Introduction

- Express vs. implied trusts.

• express trust: settlor expressly transfers property to hold on declared trust, or declares self trustee.

• implied trust: arise by operation of law.

  • [Underhill and Hayton]: imposed by implication of a court of equity where the legal title to property is in one person, and the equitable right to the beneficial enjoyment thereof is in another.

    • encompasses: resulting trusts + constructive trusts.

- Resulting trusts: property deemed to return (‘result’) to settlor.

• no express declaration, so different rules: e.g. s53(2) LPA 1925: s53(1) LPA 1925 (writing requirements) does not apply.

• arise in many + miscellaneous set of circumstances:

  • a. transferor has not parted with whole of beneficial interest.

  • b. voluntary conveyance into another’s name.

  • c. purchaser conveys property into name of another.

Types of Resulting Trusts

- Automatic vs. presumed resulting trusts: division by [Megarry J] in Re Vandervell’s Trusts (No. 2) [1974].

• automatic resulting trusts: RT automatic consequence of failure to dispose of all the beneficial interest – e.g. Vandervell v IRC.

  • [Megarry J]: do not depend on intention – but: [Ld Browne-Wilkinson] in Westdeutsche Landesbank Girozentrale v Islington LBC [1996]: they are.

  • where no alternative: e.g. A tells B to hold on trust, but does not nominate beneficiaries.

• presumed resulting trusts: rebuttable presumption of RT because property put in name of another.

  • where settlor’s intention unclear: could have intended transferee to hold absolutely, on trusts validly declared, or for settlor.

  • rebuttable presumption: need evidence to suggest a contrary intention.

Automatic Resulting Trusts

- Introduction.

• e.g. Vandervell v IRC [1967]: documentation did not state beneficiaries of option held on trust RT.

  • need careful drafting: failure to declare all beneficial interests tax charge because of RT.

• 3 reasons automatic RT arise:

  • 1. no (valid) declaration of trust

  • 2. valid declaration but trust fails

  • 3. beneficial interests not completely disposed of (inc. surpluses).

- No (valid) declaration of trust: possible reasons…

• 1. no trusts declared – e.g Vandervell v IRC. (N.B. trust interests tenacious: RT despite desire of settlor).

• 2. lack of proper formalities – s53(1) LPA 1925.

• 3. lack of certainty: esp. certainty of objects + their shares.

• 4. perpetuities rule breach.

• 5. failure to create intended charitable trust void as private purpose trust.

  • e.g. Morice v Bishop of Durham [1804]; Chichester Diocesan Fund and Board of Finance (Inc) v Simpson [1944].

- Valid declaration but trust fails: possible reasons…

• 1. trust becomes impossible: e.g. intended beneficiary dies; body intended to benefit ceases to exist (e.g. Re Recher’s WT [1972]: anti-vivisection society); trust/purpose becomes impossible.

• 2. pre-condition not met: often re marriage settlements.

  • e.g. Essery v Cowlard [1884]: marriage never took place RT.

- Incomplete disposal of beneficial interests: possible reasons…

• 1. failure to provide for a situation: e.g. gift for life, with no gift over.

• 2. failure to foresee possible situation:

  • Re Cochrane’s ST [1955]: life interest to wife for as long as she lives with her husband, then life interest to husband, then gift over to children appointed by survivor (or equally at age of 21) – but: wife ceased living with husband + husband died first both life interests ended during life of survivor – ‘gap’: RT of income to settlor until wife’s death.

• 3. creation of a Quistclose trust: v. important commercially.

  • asset protection: loan moneys held on trust by borrower for specified purpose ring-fenced: lender protected against borrower’s insolvency (purpose fails RT).

  • Barclays Bank Ltd v Quistclose Investments Ltd [1970]: John Bloom, owner of struggling Rolls Razer, uses Quistclose (sister co.) to lend 210k for purpose of paying dividend to RR investors; Barclays aware of purpose + agree; 210k kept in special RR account RR in liquidation (general a/c 484k overdrawn), Barclays try to claim 210k in special account not allowed: 210k only to be used for specific purpose, now impossible RT to Quistclose.

    • rationale: [Ld Wilberforce]: 2 trusts – 1^st for purpose; when impossible: 2^nd RT.

    • but: dubious analysis – purpose trusts should fail.

  • Twinsectra v Yardley [2002]: Y. (property developer) wants to borrow 1m to develop property; T. transfer 1m to Y’s solicitor’s (Simms) a/c only to be transferred to Y. if he finds property to buy; S. uncomfortable, transfers money to new solicitor (Leach); L. ignores S’s undertaking + transfers money to Y. in breach of purpose; Y. able to claim money back.

    • better rationale: [Ld Millett]: moneys on RT for lender as soon as lender transfers money; borrower has power to use money for specified purpose.

    • but: analysis does not explain how power attached to automatic RT.

  • requirements for Quistclose trust:

    • [Ld Wilberforce]: loan; only specified purpose; segregation of loan moneys.

      • but: have been partly deviated from in later cases.

    • [Ld Millett]: dep. on facts of case (para 99: wide-ranging scenarios possible).

• 4. Unused ‘surpluses’.

  • surplus: gift for stated purpose, achieved without using all money.

    • e.g. police benevolent funds on amalgamation of forces.

  • various outcomes:

    • gift construed as limited: surplus on RT – e.g. Re Abbott.

    • gift construed as absolute:

      • to provide for beneficiaries: goes to beneficiaries – e.g. Re Andrew’s Trusts; Re Osoba.

      • to unincorporated association: goes to members – e.g. Re Recher; Re Bucks Constabulary.

  • resulting trust to contributors:

    • Re The Trusts of the Abbott Fund [1900]: money to support 2 deaf + dumb women, no provision for after their death

      • [Stirling J] construed as limited purpose: RT to contributors.

  • absolute gift with motive:

    • Re Andrew’s Trust [1905]: fund raised ‘for education’ of children of a clergyman [Kekewich J]: absolute gift with motive surplus to beneficiaries.

    • Re Osoba [1979]: testator left money for maintenance of mother + wife, + for education of daughter; mother + wife dead absolute gift presumed.

      • HC rationale: [Megarry J]: beneficiary alive (vs. Re Abbott: dead).

      • CoA rationale: [Goff LJ]: intention of settlor – wide terms (e.g. education) more likely to be absolute gift.

  • anonymous donations (to non-charitable fund): conflicting case law.

    • resulting trust: Re Gillingham Bus Disaster Fund [1959].

      • facts: donations from known donors + street collections towards funeral expenses of cadets killed in bus accident, caring for disabled victims, worthy causes determined by 3 mayors ‘worthy causes’ too wide to be charitable + too uncertain for private trust.

      • [Harman J]: RT of all surplus to donors (following Re Abbott) – no distinction between small anonymous donations + large known ones.

      • but practical problems: much unclaimed + paid into court

    • bona vacantia: Re West Sussex Constabulary’s Widows, Children and Benevolent (1930) Fund Trusts [1971].

      • facts: surplus when association amalgamated – (1) donations + legacies; (2) collecting boxes; (3) profits of entertainments, raffles etc.; (4) contributions from members.

      • distinction: [Goff J]:

        • donations + legacies RT

        • collecting boxes absolute gift – bona vacantia.

          • rationale: more efficient – impractical to work out identity of small donors.

        • profits bona vacantia

          • rationale: (1) contract rel, not trust, between donor + recipient; (2) profit, not direct contribution to fund.

        • contributions bona vacantia

          • vs. Re Bucks Constabulary Widows and Orphans Fund Friendly Society (No 2) [1979]: money to members.

    • anonymous donations: Re West Sussex decision more attractive?

      • [Ld Browne-Wilkinson] in Westdeutsche: settlor has abandoned beneficial interest no RT undisposed equitable interest bona vacantia.

Presumed Resulting Trust

- Rebuttable presumption of resulting trust.

• can arise in 2 ways:

  • 1. voluntary conveyance to another

  • 2. provision of purchase moneys

• rationale: equity “assumes bargains, not gifts” – Goodfriend v Goodfriend [1972].

  • [Robert Chambers]: equity is suspicious of transfers not proven to be gifts.

• can be rebutted by:

  • 1. presumption of advancement

  • 2. evidence that gift intended: e.g. Fowkes v Pascoe.

  • 3. evidence that loan intended: e.g. Re Sharpe.

- Voluntary conveyance: property transferred to ‘stranger’ (not wife or child) for no consideration.

• voluntary transfer of personalty presumed RT.

  • Re Vinogradoff [1935]: grandmother transferred stock to joint names of self + 4-y.o. granddaughter, but continued to receive dividends RT to grandmother.

    • N.B. presumption v. tenacious: applies even when likely gift intended.

• voluntary transfer of land: less clear.

  • s60(3) LPA 1925: RT NOT implied merely because property not expressed to be conveyed for use/benefit of grantee.

  • differing interpretations of s60(3): unclear whether presumption of RT exists.

    • 1. no presumption of RT in voluntary conveyance of land.

      • Lohia v Lohia [2001]: [Nicholas Strauss QC]: no presumption from plain reading of s60(3) (following [Gray]’s Elements of Land Law. RT must be proved to be established

      • voluntary conveyance will take effect as expressed unless evidence of contrary intention (e.g. Hodgson v Marks).

      • but: CoA – [Sir C Slade + Mummery LJ] refused to rule on whether presumption exists – irrelevant to case:...