The term ‘resulting’ comes from the Latin word
‘resalire’, meaning ‘to jump back’.
The trust operates to ‘jump back’ interest
in property to a donor who transferred it to another person who is now deemed a
resulting trustee of property in his hands.
Resulting trusts respond to the absence of any intention
on his part to pass the beneficial interest to the recipient. Additionally,
where a trust has been used properly for its purpose but a surplus fund
remains, it will be held on resulting trust.
Equitable maxim that ‘equity abhors a beneficial vacuum’
– where a person transferred property to another without identifying who was to
enjoy the beneficial interest in such property, the beneficial interest would
result back to the person transferring the property.
CASE LAW:
In Vandervell v IRC
(no1) Lord Reid said the ‘beneficial interest must belong to or be held for
somebody; so if it was not to belong to the donee or be held in trust by him
for somebody, it must remain with the donor.’
Westdeutsche case: two instances in which a resulting
trust arises:
1) A
makes a voluntary payment to B, or pays for the purchase of property which is
vested in either B alone or in their joint names. There is a presumption that A
did not intend to make a gift to B – but this is only a presumption, and is
easily rebutted where the A’s intention demonstrates that it was intended to be
a gift.
2) A
transfers property to B on express trust but fails to exhaust the entire
beneficial interest.
Air
Jamaica v Charlton [1999] – LJ Millett: a resulting trust ‘arises
whether or not the transferor intended to retain a beneficial interest – he
almost always does not – since it responds to any absence of intention on his
part to pass a beneficial interest to the recipient.’
Re
Sick [1973] – Megarry LJ: ‘a resulting trust is
essentially a property concept; any property that a man does not effectually
dispose of remains his own.
There are a plethora of circumstances in which a
resulting trust might arise, although in all cases, the presumption in equity
is that is that the transferor or the person providing the purchase money does
not intend to confer absolute ownership on the transferee; rather the
presumption is that he intends to retain the beneficial ownership.
Justifications for resulting trusts – 1) to reverse an
unjust enrichment; 2) to give effect to the true intention of the settlor.
Automatic
and presumed resulting trusts - Megarry J in Vandervell (no2) said that a resulting
trust was one of two main types: 1) Automatic – arise automatically in
circumstances where an express trust failed for some reason, e.g. failure to
comply with a formality or being contrary to perpetuity rules; or 2) Presumed –
arise on the basis of the presumed intentions of the person transferring
property to another; most typically where a person transfers or purchases
property in the name of another.
EXAMPLES
WHERE A RESULTING TRUST ARISES
1. A settlor attempts to create a trust by appointing a
trustee and transferring the £1000 to him. The settlor explains to the trustee
that he will inform him later as to who the beneficiary of the trust is. The
settlor fails to inform the trustee as to whom the £1000 was to benefit and a
few weeks later dies.
2. A settlor creates a trust by transferring £20,000 on
trust to his trustee for the medical costs of his old aunt so long as she is in
hospital. The aunt recovers and is discharged from hospital. The trustee,
however, has £12,000 of trust money which was not used for the aunt’s medical
costs.
3. At the beginning of their studies, 50 law students
form a club which organises seminars and talks on equity. The club also
organised a number of trips. Membership to the club could only be taken on
payment of a fee. The club also received some money from the parents of the
students by way of voluntary donations and one legacy of £1000. The students
are now coming to graduation and wish to end the club. There are 30 members
remaining and the club has £1,200 in a bank.
4. You secure employment with a firm. The employer
provides you with the opportunity to join a private pension payable on your
retirement. The scheme requires that you pay a sum of money from your wage
every month into the scheme. The employer also agrees to pay a certain sum each
year into the scheme so as to make sure that it provides sufficient cover when
the employees retire. Your employer has informed you that the business will be
closed and the employees will receive their benefits from the scheme as
explained in the scheme should the business cease trading. After payment of the
agreed benefits, the pension scheme has a surplus of £200,000.
5. Michael transfers his house voluntarily in the name of
his brother in fear that his new business may fail and his house may be at risk
from the claims of creditors. The business, however, is a success and he wishes
his brother to re-convey the house to him. The brother refuses to do so.
Michael commences proceedings in court to recover the house on the ground that
the only reason he transferred the house to his brother was to hide it from the
creditors.
6. V and D are an unmarried couple, and have decided to
purchase a house to live in. The legal title is taken in the name of V despite
the fact that D contributed £30,000 to the initial deposit price.
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