Resulting Trusts Flashcards
When do resulting trusts arise?
They arise in response to specific circumstances and can be seen as a default mechanism - in situations where legal owner is not the true beneficial owner
Categories of resulting trusts
- Automatic resulting trusts
- presumed resulting trusts
When does the automatic resulting trust arise?
Typically arises when an intended trust has failed but the legal title has already been transferred to the trustee
In what circumstances can an automatic resulting trust arise?
a) the trust fails from the outset - e.g., there has been a problem with certainty of objects
b) a trust fails subsequently
What is the effect of an automatic resulting trust?
It effectively gives beneficial ownership back to the settlor
When does a presumed resulting trust arise?
When the legal owner transfers legal title to someone else for no consideration but there is no evidence that there was a gift or trust intended
(issue with certainty of intention)
What is the effect of a presumed resulting trust?
Equity presumes the transferor intended the transferee to hold the property on trust for them
What is a circumstance in which a presumed resulting trust can arise?
Where people contribute to the acquisition of an asset which is owned legally by someone else
When does a presumed resulting trust no longer apply?
It does not apply to the purchase of a family home
But it does apply to acquisition of land for investment purposes
What is a resulting trust?
It is a type of implied trust
A resulting trust arises where:
a) X transfers legal title over property to Y; and
b) Y then holds that property on trust for X
This means the property results back to X
What are 4 circumstances in which an automatic resulting trust arises?
It arises by operation of law, mostly when an express trust has failed to be validly created:
- There is no valid declaration of trust
- Valid declaration but the trust fails
- Undisposed of surplus
- Quistclose trust
Automatic resulting trust: no valid declaration of trust
The trust has failed for lack of certainty of subject or object, or the formalities have not been complied with (in writing and signed by settlor for land)
= automatic resulting trust
Automatic resulting trust - valid declaration but the trust fails
The beneficiary dies, does not satisfy a condition or charity ceases to exist = automatic resulting trust
Automatic resulting trust - undisposed of surpluses
If someone gives a gift which is limited and not absolute, then any surplus of that gift is held on resulting trust for the donee
Automatic resulting trust - Quistclose trust
A lender lends money to an individual for a certain purpose. Until that purpose has been fulfilled, there is a resulting trust (with the borrower as trustee) in favour of the lender. Once the purpose has been fulfilled, the trust comes to an end
What is a presumed resulting trust?
Where there is a rebuttable presumption of resulting trust as the property has been voluntarily put in the name of another
When does a presumed resulting trust arise?
- Voluntary conveyance of property: X transfers property to Y for no consideration and voluntarily, but gives no instruction or no intention as to whether Y holds it for anyone else or it is an outright gift
- Purchase money resulting trust
What is a voluntary conveyance of property?
When someone gratuitously transfers property to another for no consideration, without saying why
This results in a presumed resulting trust
What is a purchase money resulting trust?
Where property is bought in the name of another or X contributed to the purchase price for another to buy property (which is then put in that person’s name)
When does a purchase money resulting trust arise:
a) X gives money to seller but asks the seller to transfer the property to Y
b) X contributes money to purchase property but it is in Y’s name (the resulting trust reflects X’s contribution)
How can a presumed resulting trust be rebutted?
- There is slight evidence that a voluntary conveyance of property was intended as gift or loan
- There is slight evidence that purchase money was intended as a gift or loan (e.g., if there is a close relationship between the two parties)
How is equitable interest held under the doctrine of a presumed resulting trust?
When a transfer is made without consideration and there is no evidence of the transferor’s intention to make a gift, the equitable interest results back to the transferor
If there is no evidence that A intended to gift the property to B - equitable interest remains with A
What is the presumption for a presumed resulting trust
The transferor will succeed in a claim as in the absence of evidence to the contrary (without clear evidence of transferor’s intention to make a gift), the law presumes a resulting trust in favour of the transferor
How can the presumption be rebutted?
With evidence that a gift was intended
- possession of the property alone does not imply a gift was intended
MCQ scenario: shortly before her death, a woman transfers legal title to some company shares to her brother, asking him to hold the shares on trust for “all my friends”
What is the advice to the brother?
The brother holds the shares on a resulting trsut for the woman’s estate
- The trust fails for uncertainty of objects
- Legal title has passed to the intended trustee (the brother)
- He holds it on an automatic resulting trust
What happens if there is a joint contribution to the purchase price of an asset?
If A and B jointly contribute towards the purchase price of an asset, regardless of how legal title is held they will each gain an equitable interest which reflects their respective contributions, unless there is evidence of contrary intention
(equitable title likely to be held as tenants in common, with their shares reflecting their respective contributions)
A man purchases a property in the name of his daughter but makes no declaration of trust. The man’s daughter does not provide any consideration.
What is the position with regard to the beneficial ownership of the property?
There is a rebuttable presumption that the daughter holds the property on trust for the man
Although the legal title is in the name of the daughter, there is no declaration of trust or consideration –> she is presumed to hold the property on resulting trust
A man entered into a contract in reliance on a misrepresentation. He transferred an asset to the other party to the contract, which was then rescinded.
Who is entitled to the asset following the rescission of the contract?
The asset is held on resulting trust for the man
As the contract is rescinded, it would be held on resulting trust
