Resulting Trust

Definition and Nature of Resulting Trusts

Resulting trusts arise by the operation of the law rather than by the express intention of the settlor. They typically occur when property is transferred under circumstances where it would be unconscionable for the transferee to retain the benefit. In essence, the property ‘results’ back to the transferor or their estate. This contrasts with express trusts, where the settlor’s intentions are explicitly stated, and constructive trusts, which are imposed by the court to rectify unjust enrichment or wrongdoing.

Types of Resulting Trusts

Resulting trusts are generally categorised into two types: automatic resulting trusts and presumed resulting trusts.

Automatic Resulting Trusts

An automatic resulting trust happens when an express trust fails completely or partially. For example, if a trust is created for a specific purpose that cannot be fulfilled, or if there are remaining funds after the purpose is achieved, the leftover property automatically goes back to the settlor or their estate. This type of resulting trust makes sure that the property doesn’t stay in a state of uncertainty but rather returns to the original owner unless there is evidence of a different intention.

Presumed Resulting Trusts

Presumed resulting trusts come up when there is no explicit declaration of trust, but the situation suggests that the transferor did not intend to give the property as a gift to the recipient. This often happens when someone makes a voluntary transfer or contributes to the purchase of property without clearly stating that it’s a gift or trust. In these cases, the legal principle of equity assumes that the person who transferred the property still has a stake in it unless there is evidence showing otherwise.

Key Principles Governing Resulting Trusts

The operation of resulting trusts is governed by several key principles, rooted in equity and common law:

Equitable Maxims

The maxim “equity looks to the intent rather than the form” underpins the concept of resulting trusts. This principle ensures that the parties’ true intentions are honoured, even in the absence of formal trust documentation. Similarly, the maxim “equity will not assist a volunteer” is relevant, as resulting trusts often involve situations where the transferee has not provided consideration for the property.

Presumption of Advancement

The presumption of advancement is an important counterpoint to the presumption of resulting trust. This doctrine posits that certain relationships, such as those between parent and child or husband and wife, carry a presumption that property transfers are intended as gifts. However, this presumption is rebuttable, with evidence demonstrating a lack of donative intent.

Rebuttable Presumptions

Both presumptions of resulting trust and advancement are rebuttable. The courts will consider the totality of evidence, including the parties’ conduct and statements, to determine the true nature of the transfer. This flexibility allows the court to achieve a just outcome based on the specifics of each case.

Practical Applications of Resulting Trusts

Resulting trusts are invoked in a variety of contexts, each illustrating their practical importance in resolving disputes over property ownership:

Failed Trusts

When an express trust fails due to uncertainty of objects, purposes, or other reasons, the property reverts to the settlor under an automatic resulting trust. This ensures that the trustee does not unjustly retain the property.

Surplus Funds

In charitable trusts, if surplus funds remain after fulfilling the designated purpose, an automatic resulting trust ensures these funds are returned to the settlor or their estate unless an alternative use within the charitable scope is identified.

Voluntary Transfers

In cases where property is transferred without consideration, such as from one individual to another, a presumed resulting trust may arise if there is no evidence of a gift. This often occurs in family or personal relationships, where the presumption of advancement may also come into play.

Contributions to Purchase Price

When multiple parties contribute to the purchase of property but one party holds the legal title, a presumed resulting trust may be inferred in favour of the contributors. This situation commonly arises in joint property purchases or family investments.

Notable Cases and Judicial Interpretations

Several landmark cases have shaped the understanding and application of resulting trusts in the UK. These cases provide valuable insights into the judicial approach to resolving disputes involving resulting trusts:

1. Vandervell v IRC [1967] 2 AC 291: In this seminal case, the House of Lords addressed the issue of resulting trusts in the context of failed dispositions. Vandervell attempted to transfer shares to the Royal College of Surgeons with an option for repurchase. However, due to the lack of proper documentation, the option failed, and the shares were held on resulting trust for Vandervell, illustrating the importance of formalities in trust creation.
2. Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669: This case reaffirmed the principles governing resulting trusts and emphasised the necessity of an intention to create a trust. It clarified that resulting trusts arise not from the subjective intention of the parties but from the objective circumstances of the transfer, ensuring that property is not unjustly enriched at the expense of the transferor.
3. Stack v Dowden [2007] UKHL 17: While primarily a case on constructive trusts, Stack v Dowden also touched upon resulting trusts in the context of cohabiting couples. The House of Lords highlighted the importance of evidence in rebutting presumptions and demonstrated the nuanced interplay between resulting and constructive trusts in determining beneficial ownership of family homes.

Challenges and Criticisms

Despite their utility, resulting trusts are not without challenges and criticisms. Legal scholars and practitioners have identified several areas of contention:

1. Complexity and Uncertainty: The principles governing resulting trusts can be complex and often require intricate factual analysis. This complexity can lead to uncertainty in predicting outcomes, particularly in cases involving mixed intentions or incomplete evidence.
2. Presumptions and Modern Relationships: The traditional presumptions of resulting trust and advancement have been criticised for failing to reflect modern family dynamics and societal changes. For instance, the presumption of advancement between husbands and wives may not align with contemporary views on marital property and equality.
3. Overlap with Constructive Trusts: The distinction between resulting and constructive trusts can be blurred, especially in cases involving family property or contributions to the purchase price. This overlap can complicate legal arguments and judicial determinations, necessitating a clear understanding of both concepts.

Conclusion

Resulting trusts are an important part of trust law, ensuring that property is fairly allocated when there are no clear intentions or formal declarations. These trusts address situations where it would be unfair for the recipient to keep the benefit. At DLS Solicitors, we understand the significance of these trusts in protecting the rights and interests of our clients.

Understanding resulting trusts involves navigating complex legal principles, historical presumptions, and modern judicial interpretations. As the landscape of property ownership and familial relationships changes, our approach to resulting trusts must also evolve. By staying informed and adaptable, we can continue to offer effective legal solutions that uphold the fair distribution of property in various and challenging circumstances.