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Topic 10- Resulting Trusts Automatic Resulting Trusts (The Purpose of a…
Topic 10- Resulting Trusts
Automatic Resulting Trusts
Automatic Resulting Trusts
A transfers property to B
A resulting trust may automatically arise upon the occurrence of non occurrence of certain eventualities
An Express Trust fails (Including Secret Trust and a Purpose Trust)
If an express trust fails, the property automatically results to the settlor or, if he is dead, his estates
Delany: Where an express trusts fails complete for any reason a resulting trust of the trust property will arise in favour of the settlor or his estate
THIS MAY OCCUR FOR A NUMBER OF REASONS
there may have been a total failure of the beneficiaries
the settlement deed defining scope of the trust may have been lost
the trust may be void for uncertainty
the trust may fail to qualify for charitiable status in circumstances where it cannot operate as a valid non-charitable purpose trust
The Purpose of a Loan Fails ('Quistclose Trusts)'
Barclays Bank Ltd v Quistclose Investments Ltd:
Facts: D loaned money to a co for purpose of enabling co to pay dividends
Money was paid into a bank account specifically opened for that purpose
Issue: Co became insolvent
dividends could not be paid
P wanted to use money in account to discharge debts owed to it by the co
D argued they had an equitable interest in the money and could therefore not be used to pay off debt owed to P
Held: In favour of D
If money is loaned for a particular purpose
lender has an equitable right to see that the money is applied to that purpose
if the purpose fails and the parties have agreed expressly or impliedly in such circumstances the money should be repaid to the lend, the money will be held on trust for the lender
Once i is made clear the funds being provided are to be applied to a particular purpose it is not necessary that the word 'trust' be used
Re McKeown:
Applicant loaded money to McKeown in order to enable him pay fees to obtain an arbitration award that had been made in his fvor
Loan given on basis the money would be applied to this purpose and the applicant would then be paid once the money from arbitration award was received
Issue: McKeown declared bankrupt
Applicant argued he value of the loan was held on trust for him
Held: In favour of applicant- despite none of the language usualluy associated with creation of trust used
Sufficient money loaned for a specified purpose
Clear from outset
A lend money to B
Agree the money is to be applied to a particular purpose
Loan is not secured
For whatever reason, it becomes imposs to apply money to agreed purpose
B becomes insolvent
Who is entitled to money?
A/A's estate OR B's secured cretiros
AUTHORITIES DEMONSTRATE: upon failure of agreed purpose, the money automatically results to A/A's estate
Twinsecra v Yardley
: money advanced by way of a loan normally becomes the property of the borrower
he is gree to apply money as he chooses
HOWEVER: a loan to a borrower for a specific purpose where the borrower is not free to apply the money for any other purpose gives rise to fiduciary obligations on part of borrower which a court of equity will enforce
Such arrangements described as a 'Quistclase trust'
: LENDER ACQUIRES RIGHT ENFORCEABLE IN EQUITY TO SEE THAT IT IS APPLIED FOR STATE PURPOSE OR MORE ACCURATELY TO PREVENT ITS APPLICATION FOR ANY OTHER PURPOSE
THIS PREVENTS BORROWER FROM OBTAINING ANY BENEFICIAL INTEREST IN THE MONEY, AT LEAST WHILE THE DESIGNATED PURPOSE IS STILL CAPABLE OF BEING CARRIED OUT
Loan has to be for specified purpose and no other purpsoe
Harlequinn Propertys v Ohalloran
: Although P paid over funds for completion of a project
could not be said there was an intention that the funds in qu were for specific purpose and for no other
Held: Ps had not estab on the facts the case fitted within ambit of Quitclose trust
The beneficial interest in property transferred hasn't been exhausted
The property which is the subject matter of the trust, is not fully disposed of
Part of property remains
T whim does the remainder belong?
In particular, does it automatically result to the settlor or his estate?
e.g. A transfers Property to B, on trust, for the education of C. C completes his education
Upon occurrence of this eventuality there is a surplus of funds in the trust
Historically C or C's estate entitled to it
Re Sanderson's Approach
: If a gift of property is given, and a special purpose is assigned for that gift, the Court always regards the gift as absolute, and the purpose merely as the motive of the gift, and therefore holds that he gift takes effect as to the whole property
More recent authorities draw a distinction between cases in which the beneficiary is dead and those in which he is still alive
Re Trusts of the Abbott Fund
: Trust created for the maintenance of two deaf and dumb women
No provision made for disposal of any surplus funds in the trust upon the death of the survivor
Held: The women had no enforceable interest in the capital sum
upon their death, a resulting trust of the surplus automatically arose in favour of the contributors to the fund
Re Osoba:
A testator bequeathed property to his widow on trust to be used 'for the maintenance and for the training of my daughter up to University grade' and for the maintenance of my aged mother
When he died his mother already dead and his W died shortly after him
Issue: Whether the funds resulted to the testator's estate
Testator had children from a previous marriage who sought to claim their portion of the surplus
Held: Court noted the distinction between beneficiaries who are dead and still living
If they are dead, the court is ready to hold there is a resulting trust for the donors: for the major purpose of the trust comes to an end when the beneficiaries are all dead
But if the beneficiaries are still living, the major purpose of providing held and benefit for the beneficiaries canstill be carried out even after the stated means have all been accomplished, and so the court will be ready to treat the state means as merely indicative and not restrictive i.e. no resulting trust arises
Held: Testator's overriding intention was to provide for his mother, wife and daughter, and accordingly, no resulting trust arose
There is a Surplus of Funds upon the Dissolution of an Unincorporated Association
Conservative and Unionist Central Office v Burrell
An unincorporated association defined as being'two or more persons bound together for one or more common purposes, not being business purposes , by mutual undertakings, each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and on what terms and which can be joined or left at will
Does the surplus result in those who contributed to association's funds?
Charitable purpose association
Upon its dissolution the court may exercise cy-pres jurisdiction and apply the surplus as near as possible to that purpose
Non-Charitable purpose association
Neville Estates v Madden
: A gift to such an association may be seen as a gift to the existing members subject to their respective contractual rights and liabilities towards one another as members of the association
can't sevr share
will accrue to other members on his death or resignation
Therefore: Any surplus remaining upon association's dissolution should be distributed amongst members who are alive at date of dissolution
In accordance with the members contractual rights and liabilities towards one another as members of the association
Otherwise- equal distribution (Equality is equity)
Some authorities suggest that distribution may be effected, no only amongst the members of the association who are alive one the date of dissolution, but also amongst third parties who have contributed to the association's funds
Re Gillingham Bus Disaster fund
: Number of marine cadets injured or killed in bus crash
The mayors of three diff towns appealed for contributions to fund that would benefit those injured and provide a memorial for this killed
Mainly anonymous donors
More money collected than was needed
HELD: Resulting trust arose in favour of contributors
He recognised the inconvenience in such a finding
Each contributor had intended to contribute to a specific purpose and once that purpose was attained or no longer attainable each contributor had an interest by way of resulting trust
Rejected Crown's claim of surplus as unclaimed
Re West Sussex Constabulary's Widows Children and Benevolent Fund Trust
Fund comprised
the proceeds of collections
Proceeds of entertainments and raffles
Donations and legacies
HELD: Gifts in he first two categories when Bona vacantia to the crown- represented absolute and outright gifts
Third category held on resulting trust for donors and their estates
OPTION 3: WHEN CONTRIBUTOR PARTED WITH HIS MONEY, HE DID SO PURSUANT TO A FORM OF A CONTRCT BETWEEN HIM AND ASSOCIATION'S MEMBER'S
UPON DISSOLUTION, THE MANNER IN WHICH HIS SHARE IS DEALT WITH IS GOVERNED BY THAT CONTRACT
Contractual right
Re Buckinghamshire Constabulary Widows' Orphans Fund Friendly Society
Fund establushed to provide benefits fto the widows and orphans of deceased police officers and payments on the death of a member or during sickness
Only the association's members contributed to it
Upon its dissolution, the association had a surplus of funds
Held: The surplus should be divided amongst the surviving members
Only if the association had become moribund (almost obsolete) e.g. no members left would teh crown be entitled to the funds
Rights of surviving member of fund to receive a share was a contractual right
No possible claim to be made on basis of resulting trust
OPTION 1: WHEN CONTRIBUTOR PARTED WITH MONEY HE DISCLAIMED HIS ENTITLEMENT TO IT
I.E. WEST SUSSEX CASE 1 AND 2
UPON DISSOLUTION A SHARE PROPORTIONATE TO HIS CONTRIBUTION GOES TO STATE AS BONA VACANTIA
HOWEVER
Section 48 Charities Act 1961
Generally speaking the court exercises its cy-pres jurisdiction re failed charitable trusts
However s48 governs an additional situation in which the court may exercise the jurisdiction
Cash collections made by means of collecting boxes or by other means not adpated for disinghishing one gift from another
Any lottery, competition, entertainment, sale or similar money-raising activity
may be applied cy-pres
Those who contributed such proceeds are conclusively presumed to be unidentifiable- so there does not have to be any advertisement or inquiry
Money not given back to those in charge, but in deciding how to apply the money cy-pres the court must have regard to the wishes of the persons in charge of it.
EFFECT: upon the dissolution of an unincorporated association that part of its surplus which represents the proceeds of
OPTION 2 : WHEN CONTRIBUTOR PARTED WITH HIS MONEY HE DID SO ON TRUST FOR THE ASSOCIATION'S PURPOSE E.G. CATEGORY THREE OF WEST SUSSEX
UPON DISSOLUTION A RESULTING TRUST ARISES IN FAVOUR OF THE CONTRIBUTOR OR HIS ESTATE
Yet to be definitively decided: Upon dissolution, should the association's assets be divided equally amongst surviving members or in proportion to the contributions that they made?
Tierney v Tough
: Held: Surplus funds should be distributed amongst teh existing members in proportion to the contributions that they had made
Feeney v MacManus
: held a surplus shuld be distributed in equal shares amongst survivng members of GPO Fining club
necessary, as determining contribution made by every member would be impossible task
Appears equal distribution favoured in UK from Buckinghamshire case