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law lecture 2 on trusts
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Lecture notes of 5 pages for the course Equity And Trust at City (Law)
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Lize Johnson & Ewan TreadgoldW1316442
Equity and Trusts Law: Resulting Trusts
Resulting Trusts
What is a resulting trust?
A resulting trust is a type of implied trust
An unincorporated association has no legal personality and therefore the holding in one is
complex
It seems to be accepted that the modern solution is that the officers of the association hold
the assets for the members on the basis of their contract inter se, which is formed by the
rules of the association.
The members’ rights therefore seem to be governed by the law of contract rather than the
law of trusts.
Where the property is held by means of a trust then the most appropriate way to dispose of
the surplus if by means of a resulting trust. Where the rights of the members is governed by
contract then the likely solution is that based on the law of contract.
Resulting Trust: arises where equity stipulates that a trust should be imposed on account of
the particular circumstances.
No formal requirements for the creation of implied trusts
- Resulting trusts are exempt from the requirement of writing laid down in s.53(1).
Look at intention, there are three options:
-To give for a specified motive which once exhausted means the money results back to the
donor
- a general intention to benefit, in which case the money is regarded as an absolute gift
- Neither, in which case it goes to the crown bona vacantia
Failure or exhaustion of purpose:
a) Appeal fund context:
Will either result back to donees or// absolute gift or// revert back to the Crown (bona
vacantia scheme)
Re Abbot – will result back to the donee’s
Re Andrews – absolute gift because money was intended to generally benefit children and
education was only one way of showing this. Kids were also still alive and therefore capable
of being beneficiaries, unlike in the case of Re Abbot
Re Osoba – absolute gift, education was only a motive, was intended to benefit her generally
Re Gillingham Bus Disaster - resulting trust in favour of donees
Re West Sussex – first three sources would go the Crown under the bona vacantia scheme
- Subscriptions (contractual payment consideration) – no RT
- Entertainment (money from profits not entertainment) – no RT
- Collecting tins (intended as an absolute gift) – no RT
- But legacies (big donations) and donations would be held on trust for the
donors
Cunnack v. Edwards - Society formed to provide annuities from funds raised by
subscriptions for the widows of members who die. By 1879 all the members of the society
, Lize Johnson & Ewan Treadgold
W1316442
Equity and Trusts Law: Resulting Trusts
had died and by 1892 the last benefiting widow had died. The question arose as to how a
surplus of £1250 should be dealt with. The money went bona vacantia mainly because the
members' right to funds subscribed were dealt with by a contract which left no rights in the
money except as should be obtained for a member's widow.
Air Jamaica v. Charlton - the Privy Council was of the opinion that Air Jamaica’s pension fund
was a trust fund and that the employees’ entitlement to a pension arose under the trusts of
the pension scheme. (However, the Privy Council recognised that a pension scheme could
arise by contract). Upon the dissolution of the pension fund the surplus in the fund was held
upon a resulting trust for those who provided it. Thus, the members if the fund and Air
Jamaica were each entitled to a half-share of the surplus.
b) Commercial purpose context:
Barclays Bank v. Quistclose – specific purpose not carried out so secondary trust arose in
favour of donor – Quistclose Trust
A Quistclose trust can therefore be defined as a trust created where a creditor has lent
money to a debtor for a particular purpose. In the event that the debtor uses the money for
any other purpose, it is held on trust for the creditor.
Twinsectra – Two important things arose from this case:
- Where a lender lends monies on condition that they are to be
applied for a specific purpose, those monies will be held on
resulting trust for the lender subject to the right of the borrower
to apply them for the specified purpose
- Dishonesty test - Defendant acted in a manner which
objectively fell short of the standard of honesty which
reasonable and honest people would maintain, and also that the
Defendant knew that his actions had fallen short of that
standard.
Re Kayford – put money in separate account for customers, held on trust, follows Quistclose
Carreras Rothman v. Freeman Matthews Treasure – Quistclose trust principle was said
by Peter Gibson J. to be that "equity fastens on the conscience of the person who receives
from another property transferred for a specific purpose only and not therefore for the
recipient's own purposes, so that such person will not be permitted to treat the property as
his own or to use it for other than the stated purpose"; this reference to "conscience" could
make Quistclose trusts constructive in nature. However, no constructive trust could be
created until the money is misused, which may be too late for an effective remedy
Summary:
Westdeutsche Landesbank Girozentrale v. Islington BC
- Lord Browne-Wilkinson set out the two categories of resulting trust:
- Voluntary: 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
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