automatic resulting trusts Flashcards
definition of an automatic resulting trust
- Automatic resulting trusts arise where an express trust fails to take effect either ab initio (initially; at the outset) or subsequently, or where the trust has failed entirely to exhaust the beneficial interest in the trust property.
- The courts resolve this by presuming the settlor’s intention to have been for the beneficial interest to be held on trust for said settlor, rather than see the trust property become bona vacantia (per Lord Browne-Wilkinson; Profs Swadling and Mee). -
key equitable maxims for automatic resulting trusts
1) Equity abhors a vacuum – Beneficial ownership cannot remain uncertain; courts will find a resulting trust where ownership is ambiguous. - property hasnt been successfully transferred – how should the courts resolve it, has to be a solution cant just let property sit without any designated owner
2) Equity looks to intent rather than form – Courts consider the actual intention behind a
transfer of property rather than its formal appearance.
why do automatic resulting trusst arise
3 circumstances
1) Failure of an Express Trust ab initio (at the Outset)
2) Failure of an Express Trust Subsequently – initially set up correctly then fails at a later date, like if they passed away
3) Failure to Exhaust the Beneficial Interest
Lord Rein in Vandervell
- The beneficial interest must belong to or be held for somebody: so if it was not to belong to the donee or be held by him in trust for somebody it must remain with the donor.’
- Beneficial title if it gets stuck in limbo has to pass some where
- Legal title can be passed easily if you follow the formalities
failure of a trust ab nitio
-failure at outset
- due to uncertainty of intention, subject matter etc
case for failure ab nitio
Re Ames Settlements
Re Ames Settlements 1946
-Grooms father settled 10,000 pounds in a marriage settlement for there marriage
- husband failed to consumate the marriage, so she declared it void
- marriage failed at outset
- h continued to take money from the settled 10,000
- his father passed away
- who was the original transferer
- his executors tried to claim the money back
- court said the trust was void as the marriage was
- 10,000 was now a resulting trust for the fathers estate/executors
-
failure ab nitio
failure of an express trust subsequently
where it takes effect initally but fails at a later point
case for failure of an express trust subsequently
2
1) air jamaica
2) Re Gillingham bus disaster
air jamacia
failure subsequently
- company had a pension fund for its employees
- employees all contribute x amount of their income to the pension fund and the company contribute too
- trust later failed due to perpetruatory rules
- what happens to the money contributed to the pension fund
- contribution results back to the contributors as the payments can be traced
- most logical solution
Re Gillingham bus disaster
- bus was carrying cadets back to there bags
- they crash and some pass away
- local fund set up to for funeral costs and support families
- primary intention was that members of the local community get together to set it up, and pay funeral costs
- secondary prupose was to ‘such worthy causes’ in memory of the boys
- intended as discretionary - certainty of objects
- what was the specific taregt of beneficarys, too vague
- primary purpose successful
- failed at secondary purpose for certainty of objects
- results back to orignial settlor
failure subsequently
Failure to exhaust the beneficial interest
-if the trustee dont dispose of the entire beneficial interest, reamining results back to the settlor
Failure to exhaust the beneficial interest cases
1) Re West Sussex Constabularys widows
2) Davis v Richards
3) Vandervell 1
4) Vandervell 2
Re West Sussex Constabularys Widows
- Benevolent fund set up for widows of west sussex
- valid trust at outset
- excess money leftover in the fund when they decide to close it down west sussex was merging)
- what happens to left over money
- goes back to original contributors/estate of now deceased police officers
failure to exhaust
Davis v Richards
-pension fund being dissolved
q was do we return the contributions/excesss money back to employee contributors or find a separate outcome and return the money to employer contributors
- approx 3 mill leftover after employee owed contributions had been paid
- paid employees then excess money goes to empliyers that had not been contributing
failure to exhausrt
vandervell 1
-refer to sheet
failure to exhaust
vandervell 2
refer to sheet
-failure to exhaust
what is a quistclose trust
- arises when a lender transfers money to a borrower for a specific purpose mand that purpose fails
characteristics of a quistclose trust
- They arise where loaned money is provided for a defined and restricted purpose, which the borrower is obligated to fulfil.
- Unlike an ordinary loan, where absolute ownership passes to the borrower, in a Quistclose trust the lender retains a beneficial interest in the funds until the purpose is achieved.
- This beneficial interest confers an equitable property right in the lender, which affords them greater security against the borrower than would ordinarily be enjoyed by an unsecured creditor.
case for quistclose trust
Barclays Bank
Barclays Bank
-quistclose agreed to lend rolls razor 209,719 pounds
- to specifically enable the company (rolls razor) to pay a declared dividend to its shareholders so they still lend money and trust them
- money from q was deposited in a seperate bank account, (barclays) to ensure it was used exclsuively to pay dividends
- RR tried to pay dividends but had to voluntarily go into liquidation
- purpose had been partially fulfilled then failed due to bankruptcy
- what happened to the money from q - barclays
-
- wilberforce held: The loan was held on express trust for a specific purpose: the loan was made explicitly to pay dividends, and therefore the funds could not be used for any other purpose
- money held on resulting trust for quistclose - resulting trust arises on failure of said purpose, as purpose couldnt be fulfilled
- segretation of funds indicate intnetion to create a trust, (separate bank reinforced that the money was not to be treated as part of rr general assets)
case for quistclose trust
