Resulting trusts
The implied trust arising when beneficial ownership is not exhausted or a transfer fails.
Overview
The resulting trust is one of the three institutional species of trust recognised in English law—express, resulting, and constructive. Unlike express trusts, which arise from the settlor's manifest intention, resulting trusts are not dependent on the words or conduct by which the settlor attempts to create a trust. Rather, the resulting trust is an implied trust: it arises by operation of equity's default rules when equitable ownership has not been successfully disposed of or when an equitable interest is not exhausted.
The classic division, articulated by Megarry J in Re Vandervell's Trusts (No 2) [1974] Ch 269 and repeatedly endorsed since, separates resulting trusts into two categories: automatic resulting trusts and presumed resulting trusts. An automatic resulting trust arises where there is a gap in beneficial ownership—for example, where an express trust fails in whole or in part, or where property is transferred on trusts that do not exhaust the beneficial interest. The beneficial interest results, or springs back, to the transferor automatically, without reference to the transferor's actual intention. A presumed resulting trust, by contrast, arises where a person purchases property in the name of another or contributes to its purchase price, and there is no evidence of gift or loan; equity presumes that the beneficial interest is held for the contributor, in proportion to the contribution.
Resulting trusts have a wide doctrinal reach, touching questions of formality (because they are implied by law, they fall outside section 53(1)(b) of the Law of Property Act 1925), of proprietary remedies (the trust creates equitable proprietary rights in insolvency), and of family property (particularly in cohabitation disputes, though this territory now substantially overlaps with the common intention constructive trust). Since Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53, however, the resulting trust's role in domestic cases has contracted; the modern approach is to ask instead what the parties' common intention was, not merely who paid what.
The conceptual basis of the resulting trust remains controversial. Is it truly an implied intention to retain beneficial ownership, or is it a policy response imposed by law regardless of actual intention? The House of Lords in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 confirmed that a resulting trust arises whenever there is a transfer of property in circumstances where the transferor did not intend the transferee to receive the beneficial interest. Lord Browne-Wilkinson's analysis in that case remains the lodestar of the modern law, although his insistence on the necessity of 'conscience' and 'knowledge' has been subjected to persistent academic scrutiny.
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