Resulting Trust Flashcards
What are the two types of trust?
Automatic and Presumed
Automatic Trust arises when
Failed Express Trust - Quistclose trust
Incomplete disposal of Beneficial Interest
Distribution of surplus funds upon dissolution of an unincorporated association
Presumed Trust arises when
Voluntary conveyance
Joint deposit accounts
Purchase of property in another’s name or in joint names
Cases of Failed Express Trust
Re Ames, Vandervell v IRC
Vandervell v IRC
Mr. Vandervell faced a £250,000 tax bill due to an arrangement challenged by the Inland Revenue.
The arrangement involved an option for his trust company to repurchase shares from the Royal College of Surgeons in Ireland.
The Inland Revenue argued that Mr. Vandervell hadn’t truly given away the shares because he could buy them back.
The House of Lords ruled that since the trust holding the shares had no clear beneficiaries, there was a trust back to Mr. Vandervell.
Mr. Vandervell later repurchased the shares for his children’s benefit.
The Court of Appeal in Vandervell Number 2 held that the trust ended when steps were taken to use the children’s money to repurchase the shares.
Lord Denning emphasized that trusts for the original owner start and stop without formal paperwork whenever there’s a gap in ownership.
Re Ames Settlements
In a case, property was given to a trustee for a trust that failed because the marriage it was meant for got annulled.
The court decided that since the trust failed, the property went back to the father’s estate.
Uncertainty can also lead to resulting trusts, like when the subject of the trust isn’t clear in cases such as Boyce v Boyce.
In secret trust cases like Re Keane and Re Boyce, where the settlor didn’t give clear instructions, resulting trusts happened because the express trust failed.
Resulting trusts often happen when a trust’s purpose fails or when there’s confusion about its terms or beneficiaries.
Vandervell v IRC
Mr. Vandervell faced a tax bill when the Inland Revenue questioned an arrangement where the Royal College of Surgeons in Ireland granted his trust company an option to repurchase shares.
The Inland Revenue argued he hadn’t truly given away the shares if he could buy them back, leading to a £250,000 tax bill.
The House of Lords ruled that since the trust holding the shares was undefined, there was a resulting trust back to Mr. Vandervell.
Mr. Vandervell later repurchased the shares for his children’s benefit, supported by a formal deed of release.
In Vandervell Number 2, the Court of Appeal held that the resulting trust ended when steps were taken to use the children’s money to repurchase the shares, backed by evidence like funds from the children’s trust and dividends to the children.
Lord Denning stressed that resulting trusts for the settlor start and end without written documentation, arising when there’s a gap in ownership and ceasing when someone else becomes entitled to the ownership.
Barclays Bank v Quistclose
Rolls Razer Limited was doing well and was going to do a dividend distribution. Time passed and there was insufficient liquidity to do the transfer. Obtained loan from Quistclose. In due course, the company became insolvent. Members liquidations. Argument that there is an equitable interest made by Quistclose. The money that was lent for that dividend distribution was always segregated for that purpose which was never carried out. If a lender loans money to a borrower subject to the condition that it is to be kept in a separate bank account and employed for a specified purpose, such an agreement may give rise to a trust
Twinsectra v Yardley
The plaintiff lent money to a solicitor for property purchase, with an undertaking to use it only for that purpose. The House of Lords found a trust arose as the money was designated for a specific use. However, they didn’t find the other solicitor guilty of dishonest assistance. Lord Millett, in a minority judgment, identified the payment as a Quistclose trust, where the lender retains beneficial interest. He stressed the importance of mutual intention and restriction of the money’s use for such a trust to apply.
Re Harlequin
7 requirements - (1)Intention – was money intended to be at free disposal of recipient? (2) Representations to use money in particular way not sufficient to create fiduciary obligations/trust per se. (3) Mutual intention that funds are not general assets of recipient; are used for exclusive purpose; and if not, are returned: EXPRESS term or objectively discerned (4) Mechanism = trust giving rise to fiduciary relationship (5) Trust = “resulting trust in favour of payer with a mandate granted to recipient to apply the money for the purpose paid. Recipient has no beneficial interest in the money.” (6) Subjective intentions of parties as to creation of trust are irrelevant. If parties enter into arrangement that has the effect of creating a trust, it is sufficient that they intend to enter into the relationship. (7) Particular purpose must be specified in terms that Court can say whether given application of the money does or does not fall within its terms. give just the requirements
(B) Incomplete Disposal of the Beneficial Interest
case
Re Andrew’s Trust [1905] 2 Ch 48,
Re Trustees of the Abbott Fund,
Re Osoba [1979] 1 WLR 247 Re Gillingham Bus Disaster Fund
(C)Distribution of Surplus Funds upon Dissolution of an Unincorporated Association cases
Holbourn Aero Components Air Raid Distress Fund,
Feeney v McManus
Tierney v Toug
Re Andrew’s Trust [1905] 2 Ch 48
funds were raised for the children of a deceased clergyman, earmarked for their education expenses. When the children completed their formal education, there was a surplus of funds. Mr. Justice Kekewich decided that the children, being alive and capable of benefiting, should receive equal shares of the surplus, without a resulting trust arising. He referenced Re Sanderson’s Trust, where it was established that if a specific purpose is assigned for a gift, the court views the gift as absolute, with the purpose being the motive. In this case, education was deemed the motive, interpreted broadly beyond formal schooling, allowing the funds to remain with the children.
Re Osoba [1979] 1 WLR 247
Bequest left for the education of the tstators daughter up to university grade. By the time she completed university still some money left in the fund. Was their a resulting truste for the settlors estateor was she entitled to claim that money now for herself. Court held this gift was an Absolute gift to the duaghter and the expression of purpose for whihc the gift was to be used only indicated the doners motive in maing the gift. Mr Justice McGarry gave the judgement saying this is unlike the Re Abbott case because they were dead. It is much more like Re Andrews where daughters can still benefit from the money. The fact that she was ali e was determinateive compared to re Trustees of the Abott Fund.
Re Trustees of the Abbott Fund
Funds were collected for the maintenance of two sisters who were deaf and dumb. When one sister passed away, leaving unspent money from the fund, Mr. Justice Sterling had to determine its disposition. The question was whether the surplus money should go to the sisters’ survivors, forming part of their estates, or if a resulting trust arose in favor of the subscribers who initially contributed to the fund. The court held that a resulting trust arose, as the sisters and their survivors had no enforceable interest in the money beyond its intended purpose of their maintenance, which was now fulfilled. Consequently, the surplus money reverted back to the donor
