Resulting trusts in English law are trusts created where property is not properly disposed of. It comes from the Latin resultare, meaning to spring back, and was defined by Megarry VC as "essentially a property concept; any property that a man does not effectually dispose of remains his own". These trusts come in two forms: automatic resulting trusts, and presumed resulting trusts. Automatic resulting trusts arise from a "gap" in the equitable title of property. The equitable maxim "equity abhors a vacuum" is followed: it is against principle for a piece of property to have no owner. As such, the courts assign the property to somebody in a resulting trust to avoid this becoming an issue. They occur in one of four situations: where there is no declaration of trust, where an express trust fails, where there is surplus property, or upon the dissolution of an unincorporated association. Rules differ depending on the situation and the type of original trust under dispute; failed charitable trusts, for example, have the property reapplied in a different way from other forms of trust.
Where property passes between individuals, English law presumes that the relationship between them makes it an outright gift, and thus not subject to a resulting trust in the event of failure; this is the "presumption of advancement". A presumed resulting trust occurs where the transfer fails, and there is no reason to assume it was intended as an outright gift. With some relationships, such as property transfers between father and son and husband and wife, this presumption of advancement is applied by default, and requires strong evidence for it to be rebutted. Presumed resulting trusts do arise, however, in one of three situations: where it is a voluntary gift, where there is a contribution to purchase price, and where the presumption that it was an outright gift can be rebutted. Rules differ for transfers and gifts of personal property and land; while personal property is assumed by default to create a resulting trust, Section 60(3) of the Law of Property Act 1925 prevents the creation of automatic resulting trusts. It does not comment on presumed resulting trusts, and while later law has seemingly permitted such trusts, there is some disagreement.
Definition The name resulting trust comes from the Latin resultare, meaning to spring back. It was defined in Re Sick and Funeral Society of St John's Sunday School, Golcar, 2 All ER 439 where Megarry VC stated that "A resulting trust is essentially a property concept; any property that a man does not effectually dispose of remains his own".Edwards (2007) p.254 A resulting trust could also be defined as an equitable reversion implied by the courts that may assist in the returning of trust property back to the settlor where there is doubt concerning his intention. In Re Vandervell's Trusts (No 2), 3 All ER 205 he divided them into two categories; presumed resulting trusts, which are created by the presumed intention of the transferor of property, and automatic resulting trusts, which arise regardless of the transferor's intention whenever he has failed to dispose of the beneficial interest.Edwards (2007) p.255 Lord Browne-Wilkinson, in Westdeutsche Landesbank v Islington London Borough Council, 2 All ER 961 disagreed with Megarry's classification. While he agreed there were two categories, he felt the dividing line was not based on intention, and the classes were "where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B" and "Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest", with both involving a presumption of intention. It is possible to argue that Quistclose trusts are also a category of resulting trusts, but their classification is the subject of much debate and remains ambiguous.Edwards (2007) p.256
The theoretical justification for resulting trusts was discussed by the Privy Council, in Air Jamaica v Charlton, 1 WLR 1399 where Lord Millet said that "Like a constructive trust, a resulting trust arises by operation of law, though unlike a constructive trust it gives effect to intention. But it arises whether or not the transferor intended to retain a beneficial interest - he almost always does not - since it responds to the absence of any intention on his part to pass a beneficial interest to the recipient". Resulting trusts were intended to fill in the gap left by a veiled transfer, obeying the equitable maxim that "equity will not suffer a wrong to be without a remedy".Edwards (2007) p.257 In Westdeutsche Landesbank, Browne-Wilkinson stated that resulting trusts "are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as in a constructive trust) but gives effect to his presumed intention". Alastair Hudson, Professor of Equity and Law at Queen Mary, University of London, argues that Browne-Wilkinson's theory is flawed, primarily because if the trust can not be enforced against the trustee's wishes, it is a form of constructive trust.Hudson (2009) p.457 Much of the case law is instead based on Megarry's classification.Hudson (2009) p.459
Resulting trusts work on a principle of "common intention". This is the idea that a resulting trust is a mix of the settlor's intention, and the trustee's knowledge that he is not intended to be the beneficiary. In Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd, Ch 207 Gibson J expressed the principle as:
Types Automatic resulting trusts Automatic resulting trusts arise from a "gap" in the equitable title of property. The equitable maxim "equity abhors a vacuum" is followed; it is against principle for a piece of property to have no owner. As such, the courts assign the property to somebody in a resulting trust to avoid this becoming an issue.Hudson (2009) p.456 Automatic resulting trusts occur where an express trust fails. This includes where there is no valid declaration of trust, where there is surplus property, or upon the dissolution of an unincorporated association. Whatever the reason, when a trust fails the property must be passed to someone.Hudson (2009) p.463 This is an application of the equitable maxim that "equity abhors a vacuum".Edwards (2007) p.260
No declaration of trust is the most straightforward form of resulting trust, and is created when a trust is created, but the settlor does not give the form in which the property is to be held. For example, the settlor might give property to the beneficiary to hold for life, but fail to explain what is to happen to the property when the holder dies.Edwards (2007) p.259 When this occurs, the property is held on resulting trust for the settlor, as in Vandervell v IRC. Ch 267 This also occurs where a trust is formed over property which requires formality, but is improperly created (for example, a land transfer that does not adhere to the Law of Property Act 1925).Hudson (2009) p.462
Upon the failure of a charitable trust, the gift may be held on resulting trust for the donor, as in Chichester Diocesan Fund v Simpson, AC 341 or submitted to variation under the cy-près doctrine. As in Simpson v Simpson, 1 FLR 601 if property is given to somebody who is incapable of acting, it will also be held on resulting trust for the donor.Hudson (2009) p.464
A resulting trust will also be found where the purposes of a trust have been completed, but there is excess property left over; for example, a trust by a settlor to provide for his children's university education.Edwards (2007) p.260 Judges and academics disagree over what should happen to the property; possibilities are that it should be held for the donors, that it should be held for the beneficiaries (as the donors intended to make an irrevocable gift) or that it should be given to the Crown as bona vacantia. A fourth suggestion is that the trustees take the surplus, as in Re Foord. 2 Ch 519 The general rule was set out in Re Trusts of the Abbot Fund, Ch 326 where it was decided that excess funds will be held on resulting trust for the settlor. There are exceptions to this rule; the general rule is put aside if the court can find intention to benefit specific individuals, as in Re Osoba. 2 All ER 393Hudson (2009) p.465
Linked to this category is the problem of unincorporated associations. Unincorporated associations cannot hold rights (chattels or land) on their own account.Green (1980). p. 627. When they dissolve, the question is then what to do with property that has been transferred to the association.Edwards (2007) p.263 The traditional view, as laid out in Re West Sussex Constabulary's Widows, Children and Benevolent (1930) Fund Trusts, Ch 1 is that the members of the association hold these rights on purpose trust. Where the money was raised from identified individuals, the property should be held on resulting trust for donors upon the failure of the purpose trust. Where it is impossible or impractical, the property should be passed to the Crown as bona vacantia.Gardner (1992). p. 42. The more modern view developed from Walton J's judgment in Re Bucks Constabulary Benevolent Fund. 1 WLR 641 This is that dissolving a society and distributing property to its members is a matter of contract, not trusts law. As such, the contract between the association's members should be the deciding factor in how the property is to be distributed, and there is no need to involve resulting trusts.Hudson (2009) p.466 If the contractual provisions identify how to distribute property, they will be followed; if not, the property will be distributed according to an implied term, usually in equal shares.Hudson (2009) p.467Gardner (1992). pp. 47–48.
Presumed resulting trusts Where property passes between individuals, English law presumes that the relationship between them makes it an outright gift, and thus not subject to a resulting trust in the event of failure; this is the "presumption of advancement". A presumed resulting trust is where the transfer fails, and there is no reason to assume it was intended as an outright gift.Hudson (2009) p.471 There are several types of relationship where it is automatically presumed to be a gift. Where a father transfers property to a child, it is presumed that the property was an outright gift, as in Bennet v Bennet.(1879) 10 Ch D 474 There is no similar recognition for a transfer from a mother, something recognised as a gift in Australia. A similar presumption exists where a transfer is made from a husband to a wife, as in Tinker v Tinker. P 136Hudson (2009) p.473