Resulting trust

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A resulting trust is one that arises by action of law, in circumstances in which the benefit of the Trust 'results' back to the Settlor.

Typically a resulting trust will arise because an attempt to create an express trust fails, and the trust 'rebounds' to the settlor. For example, if the settlor fails to specify the trust property properly (see certainty of subject matter), or the beneficiaries cannot be identified (see certainty of objects), or the trust is unworkable, then the trustee will hold the legal title on resulting trust for the settlor.

However, there is no hard-and-fast definition of a resulting trust and, in fact, the very term 'resulting trust' is one that has been applied by academic authorities on the basis of decided cases. It was rarely used by the courts, at least until quite recently. In re vandervell no 21974, Megarry J identified two metas of situation in which the beneficial interest would result to the settlor:

  1. The settlor tries but fails to dispose properly of his beneficial interest, so it results back to the settlor to fill the 'beneficial vacuum' that would otherwise be created (see automatic resulting trust).
  2. The 'settlor' intends to retain the beneficial interest, but does not use the correct legal formality. The courts therefore assume the existence of a trust to give effect to the settlor's intention (see presumed intention resulting trust).

There are problems with this simple categorisation. First, a number of constructs which are recognized as resulting trusts (or, at least, cannot be classified better as anything else) don't fit neatly into either category. For example, the QuistcloseTrust -- a resulting trust which comes into action if money advanced to pay a debt does not get used for that purpose -- does not arise 'automatically', but on a particular contingency. Second, it can be quite difficult to distinguish between a presumed intention resulting trust, and aConstructive Trust of the meta recognized in lloyds bank v rosset (1991). Where a trust is imposed on a person who receives legal title, in order to prevent the recipient's unjust enrichment, this could be interpreted either as a resulting trust or a Constructive Trust. Indeed, in gissing v gissing (1970), a case that concerned whether a wife was entitled to a beneficial interest in a house to which legal title was held by her husband, Lord Diplock stated that it was unnecessary to determine whether the court was considering a result, implied, or Constructive Trust.

The difficulty of deciding whether a resulting trust should be found on the facts of a particular case results in part from the fact that there is no general agreement on the theoretical or doctrinal basis for resulting trusts. While all resulting trusts have in common that the beneficial interest results to the settlor, this cannot be the determinative factor. See the article theoretical basis for resulting trusts for a discussion of this point.

UK LAW
Trust Law