Resulting trust

● a trust may not be expressed; it can be implied by law.

● They arise where equity stipulates that it should do so in response to particular
circumstances.
● No formal requirements for its creation and exempt from s.53(1) of LPA 1925.
● Latin term for jumping back- the settlor is also its beneficiary, the fundamental function
is to re direct the beneficial ownership of trust property back to the title owner.
● The resulting trust arise in two principle ways- apparent gifts this is a voluntary
transfer of a property or contribution to purchase price of property without an
express indication as to how the equitable title is to be held, the intention of the
contributor was not to give a gift but that should hold a proprietary right proportionate to
their contribution. (In guide it is voluntary and purchase resulting trust). And the second
type is failed trust where there has been an attempt to create a trust and some part of
the beneficial interest remains undisposed of. The function is restorative: the property
jumps back to the settlor and the equitable title remains in the settlor.
● In Landesbank v Islington LBC the House of Lords rejected the liberal reasoning and
confined resulting trust to its traditional role. And it should play a smaller role in modern
law, since the reach of the common intention constructive trust has become more
encompassing.
Classification of resulting trust:
● In re vandervell trusts no.2 megarry J divided resulting trusts into 2 categories
1. Resulting trust arising automatically-didn’t depend on the intention of the parties but
arose as an automatic consequence of the transferors failure to dispose of the entirety of
the beneficial interest.
2. Presumed intention of the transferor of property- this arises because there is a
rebuttable presumption of trust based on the inferred intention. The settlor makes no
express indication as to how the beneficial interest lies in equity presumes, if the
property belongs to a person who advances the purchase money in the absence of
evidence to rebut the presumption.
This distinction attracted further scrutiny.
● Lord Browne Wilkinson in islington clarified in the circumstances in which the
resulting trust arises, the distinction drawn by megarry j between ART AND PRT was
untenable the ART was not irrebuttable in the manner megarry J appeared to suggest.
● He stated the general feature of the resulting trust is that it gives effect to the common
intentions of the parties.
● His criticism: first, it’s not immediately apparent that resulting trust must give effect to
the common intention of the parties , a common intention may be discerned where the
purchase money resulting trust where 2 or more people show the intention to share the
beneficial interest in property. secondly the circumstances in which one can be said to
have simply abandoned property, the courts uphold the resulting trust even where the
transferor didn’t intend to retain any interest in air Jamaica privy council held that a RT
arose in favor of the company over the surplus of funds of a pension trust determined to
be void under the perpetuity rule.
 ● A limitation of megarry j distinction and the views as to intention by lord Browne
Wilkinson fails to explain the role of intention in RT.
● So both type of RT (automatic and presumed) might simply be viewed as a response to
the absence of intention that the recipient of property should’ve the benefit of it.
● Lord Browne wilkinson positioned the quitclose trust as falling within the category of trust
which fail.
The apparent gift cases:
● It contains those RT that arise where there is a contribution to the purchase price of
property but the property Is held in the name of another or in joint names
● Or where a voluntary transfer of property has been made into the name of another
● They both may be perceived as gifts though equity sees it as a bargain in the absence of
evidence.
● So imposition of the RT is based on the un rebutted presumption that the transferor
didn’t intend to benefit the transferee (Pettit v Pettit).
Purchase in the name of another:
● The presumption of RT is said to apply where the property is bought in someone’s
name(Ben) but they have not provided for the purchase price and has been provided by
someone else(bitch). so the RT arises by operation of law in favor of bitch, to reflect
bitch’s reflection of contribution and especially where there is no evidence of contrary
intention to fuel the constructive trust. So Ben will hold the legal title on the resulting trust
for bitch.
● In terms of shared legal ownership, where purchase money for property acquired by 2 or
more people in joint names and provided unequal amounts they will be beneficially
entitled as between themselves in the proportions in which they provided the purchase
money. So in family homes this approach doesn’t apply, in stack and dowden there is a
strong presumption that equity follows the law and legal/ equitable ownership is jointly
held. There is no presumption of a RT arising from their having contributed to the deposit
in unequal shares (lord walker and baroness hale), so the presumption is that the
parties intended a joint tenancy both in law and equity.
● The presumption was assumed and RT would continue to operate where the primary
context was deemed to be commercial, in laskar v laskar the RT principles applied
where a mother and daughter has purchased a property for investment purposes though
in marr v collie the privy council decided that stack approach wouldn’t be confined to
a domestic setting and it may extend to commercial investments made in a personal
emotional relationship.
● Though such approach is yet to be proved that if it is workable and fair in non domestic
cases
● the scope of RT has been reduced in joint name cases.
Voluntary conveyance of transfer
● In the case of gratuitous transfer of property into the name of the transferee or into the
joint names of the transferor and the transferee- broad effect of section 60(3) LPA 1925,
the distinction is drawn between voluntary transfer of land and personality.
Land:
 ● The provision in essence is a word saving mechanism to ensure that as had been
required in the past it is no longer necessary to employ a particular formulation of words
in order to render a voluntary conveyance to Ben.
● In lohia v lohia judge Strauss QC was of the view that on the plain reading of the
statute s.60 finishes the presumption of RT making it necessary for the person seeking
to establish RT prove it.
● In Prest v petrodel the sc proceeded on the basis that the presumption arose, but didn’t
feel necessary to refer to s.60(3), a wife’s claim to ancillary relief on divorce property
vested in companies controlled by her husband were held on resulting trust and was
described as him using the company as a vehicle to hold legal title on trust for himself-
approach was influenced by family law.
● The effect of s.60(3) was addressed in national crime agency v dong this added
uncertainty on the point in question.
● This concerned a beneficial ownership in a property purchased by D in 2008, renovated,
transferred 3 years later for no consideration in the name of a close business associate.
● The tax authorities sought to recover unpaid tax from D, invoked a presumption of RT to
argue that the sole beneficial ownership remained with D. Chief master marsh stated
that the presumption of RT remained in place despite the wording of section 60(3), he
stated it was unusually explicit. To support his argument he said that if the intention was
to remove presumption of law of long standing, the act would’ve said so in terms and it
would be surprising to remove the presumption only to land and not chattels.
● This view is supported in Ali v dinc where deputy judge Sarah was persuaded by the
view.
Personalty
● A gratuitous transfer of personal property into the hands of the transferee gives rise to
RT in the transferor’s favor.
● S.60(3) solely operates in relation to land transfer.
● This view is supported by the lack of case law on the application of section to transfers of
personal property.
● Re vingogradoff: a grandmother transferred a bond into the joint names of herself and
granddaughter, though her intention was unclear she received diividends till her death.
Farewell J held that it was found on RT for grandmother’s estate
● The presumption of RT arising on voluntary transfer of personalty wasn’t rebutted by the
evidence or displaced by counter presumption of advancement.
1. Displacing the presumption of RT
● The presumption of RT is displaced by evidence of intention or a counter presumption of
equity.
● So where there is evidence that money was provided by way of loan there can be no
room from presumption of RT, the debtor and creditor relationship is regulated by
contract and shouldn’t entitle the lender to a beneficial ownership under a RT (smith v
crawshay)
● Same goes with the presumption of RT will be displaced by evidence that the transferor
or contributor intended to confer a gift (walker v walker) Browne Wilkinson LJ accepted
that if the father said he is a king a gift to son any claim based on RT will fail.
 2. The presumption of advancement
● In the 19th century counter presumption of advancement arises with specific
relationships where equity recognizes there is an obligation of conscience owed by the
transferor to advance or to support the welfare of the transferee. For example in a case
of voluntary conveyance from the transferor to his wife, child or someone whom he
stands loco parentis.
● In such cases no presumption of RT will arise because the transferor is presumed to
transfer the property freely to the transferee based on the relationship of obligation.
● The transferor is deemed to intend (Spence J) teh effect of the presumption is to shift the
burden of proving equitable ownership in the absence of declared intention.
● Kelly v Kelly- the C father brought a claim against D son for buying a property with his
money, the burden of proof fell on the C to prove it is a loan rather than the D prove a
gift. The father failed on balance of probabilities to discharge this burden, the HC
accepted that it could take account the parties subsequent conduct in his assessment.
● Though this rationale is highly criticized. Since this can produce diverse outcomes and
reflects prevailing moral and socioeconomic values of the past (mc Hugh J)
● In Pettit v Pettit lord diplock attacked its contemporary relevance by stating it would be
abuse of legal technique for imputing intentions which applied to earlier generations…
belonging to propertied classes of a different social era.
● First- if s.199 of the equality act of 2010 come into force this will lead to the prospective
abolition of the presumption of advancement, this desire is derived from the fact that
presumption is outdated, weak and unfair.
● Second- it is still operating though it is incompatible with art 5 of the seventh protocol to
the European convention on human rights.
● SECTION 199 isn’t IN FORCE YET. Until then the courts will grapple with parameters of
advancement.
● Hardwood v hardwood- shade J confirmed that the presumption of advancement must
be applied with caution in modern social conditions
● So for the time being it is applicable.
Husband or wife
● The presumption as it operates is long established and it is only applicable when a man
transfers money or other property into his wife’s name then the presumption is intended
and not the other way round (Malins VC in the late 19th century)
Parent and child
● The presumption of advancement is also applicable her and also applies when the child
is an adult though that can be rebutted easily.
● Historically it only applied to father and child and no evidence is necessary to show the
obligation of providing (sir George Jessel MR)
● In the case of mother and child equity rarely construed that relationship and seeing mom
as a provider and advance her child financially, even where the father died or the mother
was a primary caretaker.
● This was subject to criticism as nowadays it is perfectly reasonable to expect the courts
to adopt a more proactive approach and eliminate indefensible gender bias.
 ● In Nelson v Nelson HC Australia, the progressive approach has recently been endorsed
of Mr Simon picken QC in close invoice finance ltd v abaowa “ there is no question that
the presumption of advancement applies…”
● In Farrell v burden, the HC accepted that the presumption Also applied to mothers like
fathers.
In loco parentis
● The relationship outside parent child the courts will look for evidence that teh donor
stands in loco parentis to the transferee, a someone assumes parental obligations of
support or provision.
● For example illegitimate child, adopted child or even grandfather (e brand v dancer)
3. Rebutting the presumption of advancement
● The effect of a presumption of equity is to shift the burden of evidential proof to the party
against whom the presumption operates. Rebutting the presumption simply comes down
to evidence James LJ in fowkes v pascoe
● In the context of discredited presumption of adavnacemnet the fiction arises in the
absence of evidence as to the transferor’s real intentions now the courts have endorsed
flexible approach to the admissibility of evidence lord Phillips MR.
● Older authorities imposed restrictions on the admissible of evidence which was a good
practice, however now difficulty lies in when a party seeks to achieve an illegal objective
to rebut the presumption.
● Wood v Watkin
● Laskar v laskar the HC held that the presumption of advancement isn’t limited to a minor
child.
4. Illegality
● He who comes to equity must come with clean hands
● When a gratuitous transfer of property from father to child as part of an illegal or
fraudulent scheme, the presumption of advancement couldn’t be rebutted by adducing
evidence of illegality and fraudulent activity.
● The transferor is prevented from arguing illegality to show that he intended to retain a
beneficial interest in the property (cheittar v cheittar)
● The father transferrred additional plantations to his son to avoid further regulations the
privy council was unimpressed with his evidence of a fraudulent purpose. Lord denning
stated that the father used the transfer to achieve his deceitful end and can’t go back on
it.
● The law commission in 2010 report stated that if the courts accept illegality as a
defense it may benefit the D who may be part of the illegal act though if they benefit the
C then the courts would help the one one who has behaved illegally
● This was considered in Patel v Mirza.
● Gascoigne v gascoigne- the husband couldn’t rebut the presumption of advancement
in favor of wife by relying upon his own illegality and fraud, it didn’t matter that she was
aware of the fraud or benefitted from it.
● Tinker v tinker- lord denning horns of a dilemma check google slides
5. Reform?
 ● In 1999 the law commission published a consultation paper concerning teh effect of
illegality on contracts and trusts, following the further consultation paper a final report
emerged where the law of trust was singled out as in need of a short targeted act of
parliament.
● The commission felt that the decision in tinsley v Milligan the operation of law on this
matter lacks fairness, certainty and transparency.
● Lord sumption stated that the loss lies where it falls which means that the past
convenience of the transaction is un disturbed and denying relief may be injustice and in
some cases rewards illegal conduct.
● The law commission emphasized that if people are deprived of valuable property then
the law must be clear, proportionate and justifiable.
● The commission recommended that where a trust was set up to conceal real ownership
of the trust property the process would require teh courts to declare that teh intended
beneficiary was entitled to the equitable interest asserted.
● A non exhaustive list of factors which influence the excerise of discretion was suggested
i) the conduct and intention of all relevant parties
ii) the value of equitable interest at stake
iii) the effect of allowing the claim on the criminal purpose
iv) Whether refusing the claim would act as deterrent
v) The possibility that the person from equitable interest was concealed
● In 2012 the government announced that it would not take these recommendations.
● The discredited reliance principle in tinsley v Milligan
Before Patel v mirza , tinsley v Milligan was the source of authority on this area, this entails
that where a PI can be established under RT OR CT without recourse to reliance on evidence of
illegality the clean Hands principle has no role
Fact: there was a joint purchase of a home for 2 woman as cohabiting lovers. Mutually the
property was registered in ms tinsley s name as a sole proprietor to enable ms Milligan to make
false social security claims, benefitting both parties.upon breakdown, Ms tinsley claim
possession and Ms Milligan counterclaimed that the property was held on trust, for both. Ms
Milligan discontinued her fraudulent activity and settled the matter.
Held: HOL held that RT could be held where it wasn’t necessary to rely on illegality as basis of
the claim. And reliance principle was born. Here Ms Milligan shown that she contributed towards
the price purchase the law presumed a RT.
If it was a parent child relationship the presumption of advancement would’ve operated to infer a
gift to the child. Because where presumption of advancement applies the transferor is faced with
the presumption that property was transferred freely. The transferor can’t claim under RT unless
they have rebutted the presumption of gift for those purposes.
The reliance principle didn’t survive because of policy perspective and it is not related to the
seriousness of the underlying illegality.
The defunct withdrawal exception
A further relaxation of clean hands requirement was reduced from the withdrawal exception
(locus poenitentiae) promoted by tribe v tribe.
The question was whether the transferor could rebut the presumption of advancement by
adducing evidence of an illegal purpose that wasn’t carried into effect.
Facts: Tribe owned shares in a company which operated from some shops, which were leased
by Tribe. Fearing that he was personally liable for repairs of the shops, Tribe gave all his shares
to his son: this was to place them beyond the reach of his creditors. In the event, Tribe was able
to surrender the lease of the unrepaired shops on advantageous terms and no longer needed to
keep his property out of the reach of his creditors. His son refused to return the shares, relying
on the presumption of advancement, and that a man cannot rely on his own illegal act (i.e. to
defraud the creditors).
Held: the COA found that the presumption of advancement has been rebutted and tribe has no
illegal act his son held shares on RT. For his father
So he may have tried to act illegally but he hadn’t actually done so.
In Patel v mirza lord Toulson didn’t examine the locus poenitentiae exception the doctrine is
inconsistent with the new approach adopted by the SC and is no longer to be reagarded as
good law.
Patel v mirza
Mr Patel paid 620000 pounds to Mr mirza to speculate on the price of shares in bank, Mr mirza
had inside information on predicting movements in market price of shares from his contacts at
the bank, insider trading is an offense under s.52 of criminal justice act 1993. This information
never came and the deal was abandoned due to external factors. Mr mirza refused to return the
money while pleading illegality as a bar to recovery.Mr Patel had to rely on illegality the SC
unanimously allowed his claim
Held: Patel was successful to recover his monies despite his criminal activities with mirza, a
claimant will not be prevented from enforcing his claim to property because it was paid to
perform an illegal act, unless allowing his claim would be contrary to relevant public policy, it
would be disportionate to allow him to recover.
This decision resulted in abandonment of the reliance principle and the withdrawal exception the
SC tailored a new test, which applied in torts contract and trusts it emphasised that this area of
law should be governed with strict rules which left no room for discretion lord Toulson that a
person will not prima facie be debarred from recovering money paid or transfer property by
consideration which failed and was unlawful consideration.
Kitover v galmarley a gold bullion was purchased in another persons name from an online
store using a forged passport, the claimants conduct may be illegal enforcing his claim wouldn’t
harm the integrity of the legal system and illegality as a defense DIDNT bar his claim.

The multi factorial approach

The courts had to assess whether the public interest with the integrity of the legal system would
be harmed by enforcement of illegal agreement. It wouldn’t as lord Toulson noted exclude the
possibility that the court would not assist a claimant such cases are likely to be rare.
In Henderson v Dorset NHS a mental patient killed her mom wasn’t entitled to recover
damages against the health authority for its negligent failure to return her to the hospital so
regardless of the degree of personal responsibility her claim was preclude by the illegality
doctrine.
In stoffel and co v grondona-Applying the of the rules on the illegality defence set out in Patel
v Mirza [2016], the court found that a negligent solicitor could not invoke the illegality defence,
even if the negligent advice arose when assisting with a fraudulent transaction by the client. the
SC considered whether or not public policy will justify the successful invocation of the illegality
defense the courts considered 3 matters:
1. The underlying purpose of prohibition which has been transgressed and whether
that purpose will be enhanced by denial of claim. The SC could see no justification for
allowing the negligent conveyancer to escape liability simply because the firm and its
client has made misrepresentations to the lender. Whereas in the Henderson case the
prohibition transgressed was to deter unlawful killing to protect the public
2. Any other public policy on which the denial of the claim might have an impact, The SC
recognized that a genuine public interest in ensuring that clients who employed solicitors
were able to sue in negligence
3. Whether the denial of the claim would be proportionate response to the illegality
considering that punishment isn’t a matter for the civil courts. It would be
disproportionate to deny the purchaser a remedy against her solicitors despite her claim
was fraud.
The majority of SC in Patel v Mirza felt that the public interest was best served by principled and
transparent assessment of the above considerations rather than the application of a formal
approach which produces flexible results that are arbitrary, unjust and disproportionate.
The test still remained flexible but the factors mentioned the seriousness of the conduct, it’s
centrality to the transaction whether it was intentional and whether there was a marked disparity
in the parties culpability (lord Toulson)
In kliers v schmerler the purpose of the house was to get social benefits and mortgage, the
person wouldn’t be entitled to get these if the real state affairs were t revealed, the court raised
an issue of illegality and concluded that according to Patel v mirza, the illegality shouldn’t bar
the trust claim. It would be offensive to public policy to allow registered proprietorship to set up
an illegality defense where they were clearly aware of what was going on and made no
contributions to purchase price, the illegal activities had to be undone.
In Patel v mirza lord sumption and lord Clarke felt that the test was too wide and vague and
leaves a lot of discretion to the judge depending on the fact, lord Mance in minority felt
uncomfortable with the range of factors as it required the courts to reach a value judgment on
highly unspecific non legal sense
Lord Sumption also disliked the notion of balancing a series of different factors.
The majority view in Patel v Mirza marked a radical departure from the pre existing law; the
universal multi-factorial approach is welcomed.

Failure of trust cases

Where an express trust fails to dispose of the entirety of the beneficial interest the remainder is
held by the implication on RT by the settlor. It’s to restore equitable title in property to its
previous ownership.
1. Failure to declare a trust
● Where the property is conveyed to persons with the intention that they act as trustees
the failure to declare the manner in which all of the beneficial interest is to be held on
trust will entail that any property unaccounted for is held on RT for the grantor or the
settlor
● Vandervall v IRC
● The basis of this view was that on failure to declare a trust of the option it’s benefit must
be held on RT for vandervall.
● Majority in HOL the inland revenue was successful. No trust of the option had been
declared the option was held on RT
● The retention of the option involved retention of part of the beneficial interest in the
shares.
● In re vandervall 2 the COA concluded that the RT terminated when the option was
excersised.
2. Failure of a trust
● A trust can fail for a variety of reasons whether by lapse, illegality, or failure to comply
with the rules against perpetuity and accumulations
● If it occurs it goes back to the settlor.
● And it can also fail on uncertainty. (Boyce v Boyce)(re Atkinson will trust)
● Failed trust are consequent to the failure of a condition precedent or condition
subsequent. When a transfer of property is made subject to a condition which isn’t met
then RT takes efffect. (Essery v cowlard)
● Failure also occurred in re Ames settlement which was in the words of vaisey J “a simple
case of money consideration which failed.” The question was that whether the capital
sum was held on trust for the husbands next of kin or payable under RT the court
decided on latter because money was vested on trusts which failed the money was held
on RT.
● Re Cochrane concerned with the post nuptial settlement into which both husband and
wife brought a property. The income generated was to be paid to the wife on the
condition that she continued to reside with her husband, if either die the other would get
the entirety beneficially, wife left husband and died shortly.
● Here the draftsman failed to provide for this situation harman J felt that the gap in trust
couldn’t be filled by constructive trust so his hesitancy fell back to RT, he arrived at no
other conclusion than that there must be RT, of the income of the fund in favor of the
settlors in porpotion to their several interests, property contributed by husband passed to
his estate.
● Excluding RT- RT can’t arise when the property is an absolute gift.
● In adams and Kensington vestry the wife was entitled to keep the property as an
abolsute gift to herself since the husband left his estate to his wife.
● The court will construe the language of the instrument as a whole to determine whether
there has been an initial absolute beneficial gift onto which inconsistent trusts have been
engrafted. (Hancock v Watson lord davey)- this rule won’t apply and the property will be
held on RT.
● Palmer v Simmonds, Boyce v Boyce.
● Failed charitable trust- where the purpose described is not exclusively charitable. Morice
v bishop of Durham
● Re st andrews cheam lawn tennis club was held to be invalid for failing to vest property
for exclusively charitable purposes or within the perpetuity period. It was held on RT by
Arnold J as he completely rejected the possibility that the gifts might be construed as
gifts to members of club as joint tenants in-line with the contract holding theory to the
 existing members subject to their respective contractual rights and liabilities towards one
another
● It was a conclusion that served to prevent the land passing to the crown as bona
vacantia.
3. Unexhausted beneficial interest
● Where the property in the event that a trust has been performed and surplus remains.
● It depends on the type of trust
Maintenance cases
● No RT can arise if it excludes the possibility or where where an inference can be drawn
that some other person intended to take teh property beneficially.
● Re trusts of the abott fund- where money is held on trust and the trsust declared not to
exhaust the fund, the surplus will revert back to the settlor under a RT.
● Re andrews trust- the surplus funds were distributed equally amongst the kids
● Re osaba- the rule of survivorship applied and the whole of fund of the the two joint
teanants with her share was given to her. Buckley J- the subject matter was the testators
residue any failure of the gift would result in intestacy which was something teh testator
didn’t intended to do
● The asbsence of the living beneficiaries was the key concern for megarry vc where the
beneficiaries are alive the courts are reluctant to conclude other than the expression of
purpose is merely an indicator of motive.
● Re Saunders trust- the courts make it as a gift or where possible an absolute gift to avoid
RT.
● So in re bowed it was a gift of 5000 pounds on trust for purpose of playing trees was
constured as an absolute gift.
● Lord Browne Wilkinson clarified in westdeutsche that if the donor has abandoned the
beneficial interest in the trust property there is no RT and undisposed of equitable
interest vests in the crown as bona vacantia.
Disaster appeals
In the context of public appeals for good causes a similar approach to re trusts of the Abbott
fund was adopted in re gillingham bus disaster fund where the court upheld a resulting trust-
related to specific tragic event
Facts: a fund was established for the benefit of the victims of a bus crash, it was to pay for
funeral and medical costs, the donations came from named and anonymous donors so the
trustees sought direction about what to do with extra.
Held: surplus created a RT that needed to be retained, trustees needed to find donors the trust
was not charitable so it failed for uncertainty and couldn’t be applied to others. Where money is
held on trust and the trust purpose has surplus there is a RT for the donor because they didn’t
mean to dispose of their interest absolutely therefore where identified teh donor should get it
back proportionately. Harman J ruled out the possibility of cy-près and it will be held on RT.
Harman J makes a convincing case for treating the contributors as same because there is no
compelling reason to distinguish the 2(more and less contributors) groups on intention, he only
argues the ease of retiring the contribution as RT are problematic in real life and bona vacatia is
much easier.
This was rejected by Goff J in re West Sussex constabulary fund. He held that people who
contribute to collection boxes make their contributions out and out, this excludes the possibility
of RT and the money goes to crown on a failure of trust. Though in this case there is a separate
issue of winding up of unincorporated associations.

Unincorporated associations
They lack legal personalities and can’t hold property in their own name. These are the ways in
which winding up of UA’s property will be dealt with.
I. RT
In re printers and transferrers amalgamated trades protection society Byrne J stated that the un
expended funds of the society will be divided to the members depending on the amount of funds
contributed by the existing members at the time of passing the resolution.
This followed in re lead company’s workmen’s fund society
And in re hobourn aero components in this case it was held that the contributor to the disaster
fund was entitled to interest in the surplus under RT in proportion to the amount contributed but
subject to the adjustment made on the basis of a benefit derived from the fund.
Re West Sussex constabulary trust-The surplus funds of an unincorporated association with a
purpose that seeks to benefit persons other than its members go bona vacantia after the
unincorporated association is dissolved – however, this was overruled in subsequent cases- In
Re Buckinghamshire Constabulary Fund it was held that the surplus funds of a unincorporated
association should be distributed back to its members on resulting trust since it is up to the
members to change the rules of the unincorporated association at any time to benefit
themselves.
Whether a resulting trust arises depends on whether the transferor of funds intended to part with
their money absolutely – note that the relevance of intention to automatic resulting trusts is a
moot point in law.
Facts: A fund had been established to grant allowances for the widows and children of
deceased members of the West Sussex police The fund is raised from subscription of members,
and money from entertainments, raffles, collecting boxes, donations and legacies The fund was
dissolved with a surplus.
Held: all the money was bona vacantia except for sizebale donations and legacies.
Lord Goff: Contribution of members are bona vacantia
● The fund could not, on analogy with members’ club cases, belong to the members
themselves since only third parties could benefit based on the rules
● The argument that the members had the power to amend the rules could reduce the
fund into possession and thus ought to be treated as beneficial owners was rejected by
Goff J
● Members could not recover their subscriptions as they have received all they contracted
for either because their widows and dependents have received the prescribed benefits
or put their money on contractual basis and not one of trust.

On money from outside source

● Proceeds from raffles, entertainment and sweepstakes go bona vacantia

 ● The relationship with the purchaser is one of contract and not of trust, there might or
might not be an intention to aid the cause
● There is no direct contribution to the fund but only the profit
● Small donations are also bona vacantia, contributors of small amounts intended to part
with their money absolutely
● Only donations and legacies, gifts made by name, are made with an unequivocal
intention that the they should only be retained so long as the fund operates and are thus
held on a resulting trust for the donors or their estates.

This was rightly decided as contributions in form of legacies and donations from identifiable
source/donors would be held on RT whereas anonymous contributors would go to bona
vacantia.
II. Bona vacantia
This approach was approved by COA in cunnack v edwards (Goff J in re West Sussex), the
members revived everything they were entitled to however the surplus was available to crown
as bona vacantia.
III. Contract holding theory
Re bucks fund n.2 look above this related to the approach to dissolution based on the contract
between members as that is the governing body in unincorporated associations and teh funds
are held subject to the contractual rights and liabilities between the members in accordance with
rules of their association, even where the AOA is silent he saw no residuary role for resulting
trust instead there should be a presumption of equal division amongst the existing members
(Walton J)
The approach of Walton j is consistent with the approach adopted in the general law towards
property holding by unincorporated associations and was followed in re GKN bolts and nuts
megarry VC held that the proceeds from the sale of a social club should be divided equally
amongst those persons who were members upon dissolution (elvidge v coulson)
Care should be taken as regards to dissolution of UA where members are alive or not:
In hanchett-Stamford v AG only one identifiable member was left so she was entitled to all of
the associations remaking asset.
And in Keene v wellcome even inactivity of 27 years can’t bring dissolution and teh assets
were distributed to the members in existence at that date pro data according to their
contributions.
IV. RT and pension funds
V. A resulting trust does not arise upon dissolution if there was no intention from the
employees that they should receive the surplus

Law professor.com:

Facts
 ■ The pension fund was terminated, there was a surplus of £3m
■ A definitive deed was later executed by the company on the distribution of the assets

Held (High Court)

■ On the facts the employer alone was entitled to the surplus since express provision
had been made for this on the trust deed
■ However, even if the trust deed was invalid, the surplus would have been held on
resulting trust for the employers but not the employees

Scott J- Basis of automatic resulting trusts- Automatic resulting trusts are based on presumed
intention of the transferor

○ The presumed intention is that if the trust fails the money returns to the transferor on resulting
trust
○ This presumed intention can be rebutted by express or implied terms of the trust deed that
exclude resulting trust, in such a case if the trust fails the property will pass as bona vacantia, The
fact that a party has received all that he bargained for is not necessarily a decisive argument
against a resulting trust

Current case

■ Money from the employees, employers, and new companies joining the group were
all transferred under contract
■ A resulting trust forms in favour of the employers since it was not excluded by any
express provision
■ However, no resulting trust in favour of the employees as they did not intend that
they should receive the surplus
○ It was impossible to arrive at a workable scheme for apportioning the
employee’s surplus among the different classes of employees, thus it was
wrong to “impute to them (employees) an intention that would lead to an
unworkable result.”
○ He also considered that he was precluded by statute from “imputing to
the employees an intention” that they should receive by means of a
resulting trust sums in excess of the maximum permitted by the relevant
tax legislation

Commentary
 ■ Partially affirms West Sussex on the point that automatic resulting trust is based on
presumed intention
■ This view is rejected in Air Jamaica by Lord Millet but affirmed by Lord
Browne-Wilkinson in Westdeutsche v Islington LBC

Key points

■ The automatic resulting trust is not based on presumed intention

■ A resulting trust of surplus assets previously held under a dissolved trust fund arises
in favour of contributors whether they intended to see their money again or not

Facts

■ A company created a pension scheme which provided defined benefits for the
company’s employees, their widows and designated beneficiaries, funded by
member’s contributions and company contribution
■ Clause 4 of the trust deed provided that no money which at any time had been
contributed by the company was in any circumstances to be repayable to the
company
■ The Attorney General of Jamaica contended that the surplus has reverted to the
Crown as bona vacantia, as Cl 4 precludes any claim by the company while
members cannot claim since they have received all that they are entitled to

Held (Privy Council)

■ The surplus goes back to employer and employees in proportion to their

contributions

Lord Millet

Distribution of surplus

■ Prima facie the surplus is held on resulting trust for those who provided it
■ Clauses like clause 4 should be construed as forbidding the repayment of
contributions under the terms of the scheme, and not as a pre-emptive attempt to
rebut a resulting trust arising after the scheme
■ An automatic resulting trust (ART) arises by operation of law and gives effect to
intention, but it arises whether or not the transferor intended to retain a beneficial
interest, he almost always does not
 ■ An ART may arise even when the transferor positively wished to part with the
beneficial interest: Vandervell v IRC

Davis v Richards is wrong

■ Just because members made contributions on a contractual basis for benefits, does
not mean that they are not entitled to the surplus
■ Relevant tax legislation limiting payout to employees in pension plans do not bar the
operation of the resulting trust since the resulting trust arises by operation of general
law after the pension scheme
■ Each member is to receive a share of surplus in proportion to the contributions made
without regard to benefits each has received and irrespective of the dates on which
the contributions were made, thus it is not necessary to value benefits received to
ascertain each member’s share in the surplus as suggested in Davis v Richards

Commentary

■ In an earlier House of Lords case Westdeutsche, Lord Browne-Wilkinson argued that

the ART is not imposed by an operation of the law and the presumed intention of
money returning upon resulting trust upon failure of express trust can be rebutted
expressly or implicitly

4. Quistclose trust

● This is the other category lord Browne Wilkinson regarded.

● In commercial context implied trusts have become increasingly pre slant and used as a
vehicle through which assets can be protected against insolvency of the designated
holder or trustee.
● For example a lender may give money in advance to the recipient on the condition that it
must be used for the specified purpose, so the beneficial property rights in those funds
don’t move from the lender unless the money is deployed for that specified purpose
● The consequence is that obligations in respect of the funds are such that those funds
are put beyond the reach of teh recipients creditor.
● Deputy judge Michael crystal in freeman v commissioners stated that it is similar to ROT
the basic idea is that the money advanced for a specified purpose is impressed with the
trust for that purpose although the legal title passes it doesn’t become the recipient’s
property beneficially.
● It is necessary that there is an intention not to part with the beneficial interest in the
property. (Patten LJ in Bieber v teathers) until that time the transferors beneficial interest
is maintained.
● Proper account is needed to be taken in the contractual mechanisms involved, the focus
is on the mutual and objectively evaluated intentions of the parties that the property will
not be disposed of, and the payer should retain some beneficial interest in the funds.
● The intentions don’t have to be in writing but must be communicated.
● The key issue is whether the money transferred was intended to become the absolute
property or belong beneficially to the transferor
● The main feature is that the recipient isn’t bound to apply the money for specific purpose
but he is precluded from misapplying it.
● This is illustrated in Barclays Bank v quitclose investment ltd.
● Facts: rolls razor borrowed from quitclose investment under an agreement where teh
loan was paid only for the purpose of providing a didvidend for SH that the company
already declared.rolls razor was in debt to Barclays Bank, before the payment of
dividend it went into voluntary liquidation quitclose claimed money in the special account
that the trust failed and it was to result back.
● Teh HOL held that teh shared objective intentions must have been that the money was
to be held on trust unless employed for the purpose specified, if the purpose had been
achieved then quitclose would’ve been treated as any unsecured creditor, but the
purpose failed and so the money was held for quitclose and not Barclays Bank.
● In re Lewis of Leicester the agreement that the money be kept separate from the store’s
own funds was sufficient to infer intention to create a trust.
● Carreras v freeman Mathew’s treasure Ltd, Carreras Rothmans v Freeman Mathews
Treasure [1985] Ch 207 is a legal case that discusses the nature of the Quistclose trust,
suggesting that it is a type of purpose trust akin to the Denley model. The case involves
a situation where money was transferred to a special bank account for a specific
purpose.
● Carreras hired an advertising firm and transferred money to a special bank account held
by the firm. This transfer aimed to assist the firm in settling its debts to creditors.
Carreras's concern was that if the firm became insolvent, he might be held accountable
for the firm's debts. When the firm went into liquidation, Carreras claimed the money
from the special bank account.
● The court held that a Quistclose trust was created. Peter Gibson J, in his judgment,
asserted that if the common intention is for property to be transferred for a specific
purpose and not to become the property of the transferee, the transferee cannot retain
the property if, for any reason, that purpose cannot be fulfilled.
● Peter Gibson J further stated that the primary trust in this case is a purpose trust. This
aligns with the Denley-type purpose trust model. The analysis was later adopted by Sir
Robert Megarry V-C in Re Northern Developments, where it was held that the primary
trust was a purpose trust enforceable by the subsidiaries’ creditors.
● According to Sir Robert Megarry's analysis, the beneficial interest in the trust remains in
suspense until the stated purpose is fulfilled or fails. Only when the primary purpose trust
concludes is the beneficial interest vested in the settlor.
 ● The purpose trust analysis, particularly the notion that the beneficial interest is in
suspense until the purpose is fulfilled or fails, was criticised by Lord Millet in Twinsectra.
Lord Millet argued that the trust might be for abstract purposes without specific
individuals benefiting and that the purpose was not to benefit third-party creditors but to
protect the lender advancing the money
Segregation:
Segregation of the money received is strong evidential indicator of the objective mutual
intentions of the parties it suggests that the transferor was intended to retain a beneficial interest
in the funds and acknowledges the existence of implied trust.
In Patel v mirza deputy judge David Donaldson accepted that without segregation the finding of
a trust will require powerful evidence.
Where the funds are mingled it is hard to establish an inferred interest.
The absence of segregation tends to weaken inference of an intention to restrict the payee’s
ability to deal with the money received.
In re clowes Watkins LJ admitted that the absence of such requirement… negatives it…
When the money has been mingled with other. Funds the general assumption is that transferor
has relinquished all beneficial interest in the money advanced, so it is necessary for the
transferor to prove a mutual intention that the money passing between them wasn’t be at free
disposal of the recipient.
Twinsectra look at law professor
Understanding the quistclose style trust
● It can arise in many factual settings, the law will develop an analogy, the legal nature of
the trust has been subject to major debate
● Briggs LJ suggested that it’s jurisprudential analysis remained uncertain for many years.
● In Barclays Bank v Quistclose lord wilberforce spoke that there are two terms, a primary
trust to pay the dividend and secondary trust which would arise from primary trust.
● Problems with his approach:
● He didn’t consider whether the primary trust is a PPT and potentially void, this advanced
it to being a non charitable purpose trust under which the beneficial interest is in
suspense until it is satisfied it is best viewed as a power to apply the money for specified
purpose.
● Didn’t explain where the beneficial interest was to lie in the money during the period
between its transfer and failure of the primary purpose
● He didn’t clear whether the primary trust and secondary trust is express or implied trust.
Some think it is express= finding of a declared intention that a trust relationship exists
and implied= RT or CT?
● Clarification was provided by lord millet in twinsectra v yardley, that teh was only one
trust, and the lender of the money was the beneficiary under that trust. He is reasoning
was that recipient of funds holds those funds on trust for the person who made the
advance subject to a power to use the money only for specified purpose
● Now it is established that they are single RT that comes into existence as soon as the
money is paid over to the recipient.
● Which entails that:
1. The donor or the lender doesn’t pass over the beneficial interest in the money until the
funds are applied for the purpose stipulated, this is when the trust is discharged the
claim of transferor lies in contract only
2. If the money is never applied for the specified purpose then that entity can’t use surplus
for other purposes including teh payment of its own costs and expenses. So the money
can’t be used for unspecified purpose
3. No need to analyse this style of trust to a PPT because as per lord millet the beneficial
interest remains throughout with the lender it doesn’t matter whether the trust is
regarded as abstract purpose trust or trust to an ascertainable class of beneficiaries, his
analysis destroys the myth that teh beneficial interest is maintained in suspense until the
purpose fails or performed and the lender merely retains a contractual right by an
injunction to restrain misapplication.