Land Law: Constructive Trust vs Resulting Trust
A resulting trust is an implied trust that comes into existence when property is transferred to someone who pays nothing for it, and then is implied to have held the property for benefit of another person.The implied settlor says that the trust property can result or return to the transferor.The word "result" means "in the result, remains with", or something similar to "revert" except that the beneficial interest is held on trust for the settlor.Not all trusts have a beneficiary who is also the settlor.In common law systems, the resulting trust refers to a subset of trusts in which the settlor is the beneficiary.[2]
If the settlor has died, the property forms part of his estate.The Re Vandervell case shows that only the beneficial interest disappears but not the beneficiary interest.
There is a presumption of gift for property transfers between relatives.The presumption can be used as an affirmative defense to establish a trust implied by law as it is.
The law presumes that transferring property to a family member is legitimate.An unrelated transferee who receives substantial value without considering it is presumed to hold the property in trust for the transferor.Transferring between siblings, uncles, aunts, children, and grandchildren is affected by the rebuttable presumption of gift.
The transfer of property between husband and wife is an exception to the presumption of gift.The fiduciary duty that spouses owe to one another is the reason for the exception to presumption of gift.There is an obligation of good faith and fair dealing in the trusted relationship between spouses.Under certain circumstances, spouses are deemed incapable of transmutation if they make a clear statement in a deed or other writing of substantial dignity.[3]
The law of equity is the creation of the trust law in common law jurisdictions.The laws of some countries might recognize equitable defenses such as laches and the responsibility to do equity.If a transferor transfers property for an illegal purpose and gains a benefit, then a court might hold that he doesn't have the right to claim a resulting trust.The court balances the transferee's unjust enrichment with the cheating of the other party.The legitimacy of the court would be eroded if a cheat was allowed to gain from his transaction.
It can be difficult to distinguish between an oral express trust and a resulting trust theory in situations of illegality.A transferor failing on one theory could still prevail on the other.
One attempt was made to classify resulting trusts.There are two types of trusts in English law.
The law creates a rebuttable presumption of a resulting trust if the intention is not made clear by A.Written evidence was produced.
The law presumes that a resulting trust has been created for A if A transfers property to B without any other evidence.This category was excluded.If H&W/F&C can adduce evidence that it is their property, trust will not arise.
The main categories of fact situations giving rise to a presumption of a resulting trust are:105.
If there is a voluntary transfer of property, the law presumes that the recipient holds that property on resulting trust until the property is returned to the original owner.
The presumptions are easily rebutted.Evidence was shown that a woman had purchased stock in the names of herself and her grandson, and that this had been done as a gift.The presumption is only concerned with evidence of an intent to create a trust and not with ulterior motives.The presumption of a resulting trust was not defeated when a woman transferred property to her business partner in order to fraudulently claim social security payments.
The intention to create a trust for the settlor is proved by the presumption of a resulting trust.The view of presumed resulting trusts has been endorsed by Lord Browne-Wilkinson.
The presumption of trust is rebutted by evidence of an inconsistent trust and an intention to make a gift.
A lack of intention to transfer any beneficial interest has been argued to be the reason for the presumption.This view has not been endorsed by the courts.Adicta.
In the case of voluntary transfers of land, the presumption does not apply because it is very much on the recipient to show there is intention of a gift.This is due to the Law of Property Act.
The resulting trust for the grantor will not be implied by reason that the property is not conveyed for use or benefit of the grantee.[5]
In the case of Ali v Khan, it was shown that despite the general presumption that property voluntarily transferred is held on a resulting trust, there is no such presumption when involving land.
The resulting trust takes effect by law, and so appears to be automatic, because there is no mention of any intent in any instrument or presumption of a trust.Re Vandervell's Trusts (No 2) was written by Megarry J.
Automatic resulting trusts can arise when the settlor tries to set up a trust for a third party, but there is an initial failure for want of objects, as in Morice v Bishop of Durham.