essay on resulting trust

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Resulting Trusts

7 Resulting trusts

AIMS AND OBJECTIVES By the end of this chapter you should be able to: ■ classify resulting trusts ■ understand the Quistclose controversy ■ recognise an unincorporated association ■ comprehend the basis of distributing funds on the liquidation of unincorporated associations ■ understand the rationale behind presumed resulting trusts 7.1 Introduction So far, we have been considering various aspects of express trusts. These trusts, it may be recalled, are created in accordance with the express intention of the settlor. This intention is required to be clearly expressed to the satisfaction of the court. All the circumstances are considered by the courts including verbal and written statements as well as the conduct of the settlor. The effect is that the material terms of an express trust are complete. There are no shortcomings by the draftsperson. A resulting trust, on the other hand, is implied by the court in favour of the settlor/transferor or his estate, if he is dead. Such trusts arise by virtue of the unexpressed or implied intention of the settlor or testator. The settlor or his estate becomes the beneficial owner under the resulting trust when no other suitable claimants can be found. It is as though the settlor has retained a residual interest in the property, albeit one that is implied or created by the courts. The trust is created as a result of defective drafting. The draftsperson omitted to deal with an event that has taken place, and the court is asked to deal with the beneficial ownership of the property. The expression ‘resulting trust’ derives from the Latin verb resultare , meaning to spring back (in effect, to the original owner). Examples are the transfer of property subject to a condition precedent which cannot be achieved, the intended creation of an express trust which becomes void, or the incomplete disposal of the equitable interest in property. In Vandervell v IRC [1967] 2 AC 291 (see Chapter 5 ) the House of Lords decided that the equitable interest in the option to purchase shares was vested in Mr Vandervell by way of a resulting trust. JUDGMENT ‘If A intends to give away all his beneficial interest in a piece of property and thinks he has done so but, by some mistake or accident or failure to comply with the requirements of the law, he has failed to do so, either wholly or partially, there will, by operation of law, be a resulting trust for him of the beneficial interest of which he had failed effectually to dispose. If the beneficial interest was in A and he fails to give it away effectively to another or others or on charitable trusts it must remain in him. Early references to equity, like nature, abhorring a vacuum, are delightful but unnecessary.’ Lord Upjohn 7.2 Automatic and presumed resulting trusts In Re Vandervell’s Trusts (No 2) [1974] 1 All ER 47, Megarry J classified resulting trusts into two categories, namely ‘automatic’ and ‘presumed’ (see below). ‘Automatic’ resulting trusts arise where the beneficial interest in respect of the transfer of property remains undisposed of. Such trusts are created in order to fill a gap in ownership. The equitable maxim that is applicable here is ‘equity abhors a beneficial vacuum’. The equitable or beneficial interest cannot exist in the air and ought to remain with the settlor/transferor. The resulting trust here does not depend on any intentions or presumptions, but is the automatic consequence of the transferor’s failure to dispose of property that was vested in him. In other words, if the transfer is made subject to an intended express trust that fails, the resulting trust that arises does not establish the trust but merely carries back the beneficial interest to the transferor. In Vandervell v Inland Revenue Commissioners (1967) (see Chapter 5 ), a settlor transferred the legal title to property (an option to purchase shares in a company) to Vandervell Trustees Ltd, but failed to identify the beneficial owner. The House of Lords decided that the beneficial interest resulted back to the settlor by way of an automatic resulting trust. JUDGMENT The beneficial interest must belong to or be held for somebody; so if it was not to belong to the donee or be held in trust by him for somebody, it must remain with the donor.’ Lord Reid in Vandervell v Inland Revenue Commissioners The conclusion, on the facts found, is simply that the option was vested in the trustee company as a trustee on trusts, not defined at the time, possibly to be defined later. But the equitable, or beneficial interest, cannot remain in the air: the consequence in law must be that it remains in the settlor … he (Mr Vandervell) had, as a direct result of the option and of the failure to place the beneficial interest in it securely away from him, not divested himself absolutely of the shares which it controlled.’ Lord Wilberforce in Vandervell v Inland Revenue Commissioners The ‘presumed’ resulting trust arises, in the absence of evidence to the contrary, when property is purchased in the name of another, or property is voluntarily transferred to another. For instance, A purchases property and the legal title is conveyed in the name of B, or A transfers the legal title to property in the name of B. In these circumstances B prima facie holds the property on resulting trust for A. This is a rebuttable presumption of law that arises in favour of A. The question is not one of the automatic consequences of a dispositive failure by A in respect of the equitable interest, but one of presumption: the legal title to the property has been transferred to B, and because of the absence of consideration and any presumption of advancement, B is presumed not only to hold the entire interest on trust, but also to hold the beneficial interest for A absolutely. The presumption thus establishes both that B is to take on trust and also the nature of that trust. Megarry J in Re Vandervell Trusts (No 2) (1974) classified resulting trusts in the following manner: JUDGMENT ‘Where A effectually transfers to B (or creates in his favour) any interest in any property, whether legal or equitable, a resulting trust for A may arise in two distinct classes of case For simplicity, I shall confine my statement to cases in which the transfer or creation is made without B providing any valuable consideration, and where no presumption of advancement can arise; and I shall state the position for transfers without specific mention of new interests: (a) the first class of case is where the transfer to B is not made on any trust. If, of course, it appears from the transfer that B is intended to hold on certain trusts, that will be decisive, and the case is not within this category; and similarly if it appears that B is intended to take beneficially. But in other cases there is a rebuttable presumption that B holds on resulting trust for A. The question is not one of the automatic consequences of a dispositive failure by A, but one of presumption: the property has been carried to B, and from the absence of consideration and any presumption of advancement, B is presumed not only to hold the entire interest on trust, but also to hold the beneficial interest for A absolutely. The presumption thus establishes both that B is to take on trust and also what that trust is. Such resulting trusts may be called presumed resulting trusts; (b) the second class of case is where the transfer to B is made on trusts which leave some or all of the beneficial interest undisposed of. Here B automatically holds on resulting trust for A to the extent that the beneficial interest has not been carried to him or others. The resulting trust here does not depend on any intentions or presumptions, but is the automatic consequence of A’s failure to dispose of what is vested in him. Since ex hypothesi the transfer is on trust, the resulting trust does not establish the trust but merely carries back to A the beneficial interest that has not been disposed of. Such resulting trusts may be called “automatic resulting trusts”.’ Professor Birks advocated a theory that the resulting trust (automatic or presumed) is triggered in order to reverse unjust enrichment. His view is that where the defendant has innocently received property as a result of a mistake, or on a failure of consideration or under a void contract, a resulting trust will arise to prevent the unjust enrichment of the transferee. This view was extended by Professor Chambers who argued that in cases of mistake or failure of consideration, the resulting trust was created in accordance with the intention of the transferor not to pass the beneficial interest to the transferee. In short, the transfer of property to a transferee, subject to a mistake or failure of consideration, will effectively only dispose of the legal title to the transferee. These theories map out a major role for the resulting trust. Sir Peter Millett, writing extra-judicially (‘Restitution and constructive trusts’ (1998) LQR 399), argued that a transfer of property based on a mistake or failure of consideration does not give rise to an immediate resulting trust. The initial transfer of property disposes of both legal and beneficial interests to the transferee in accordance with the intention of the transferor. There is no room for a resulting trust at this stage. Once the mistake or failure of the consideration has been revealed to the transferor, he obtains a ‘mere equity’ to rescind the contract and pursue restitutionary remedies, including a reconveyance of the property. In other words, the transferee obtains a defeasible equitable interest which will be defeated if the contract is rescinded. William Swadling (‘A new role for resulting trusts’ (1996) 16 LS 110) argues that the resulting trust is displaced by evidence of intention which is contrary to the intention to create a trust. If the transferor intended the transferee to have the equitable interest, the existence of a mistake on the part of the transferor does not change things and does not give rise to a resulting trust. The transferor will be able to recover the mistaken payment at common law on a total failure of consideration. In Westdeutsche Landesbank Girozentrale v Islington BC [1996] AC 669, Lord Browne-Wilkinson rejected the notion that the resulting trust is designed to reverse unjust enrichment, and declared that this type of trust gives effect to the common intention of the parties. The trust is imposed on the basis of the conscience of the recipient of the property. In his Lordship’s opinion this trust arises in two sets of circumstances, namely the purchase of property in the name of another and the existence of surplus trust funds after the trust purpose has been fulfilled. His Lordship disagreed with Megarry J’s underlying rationale for the automatic resulting trust laid down in Re Vandervell Trusts (No 2) because of his lack of emphasis on implied intention: JUDGMENT ‘A resulting trust arises in two sets of circumstances: (A) 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, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer: (B) Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest: ibid . and Quistclose Investmerits Ltd v Rolls Razor Ltd (In Liquidation) [1970] AC 567. Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust), but gives effect to his presumed intention. Megarry J in In Re Vanderveil’s Trusts (No 2) [1974] Ch 269 suggests that a resulting trust of type (B) does not depend on intention but operates automatically. I am not convinced that this is right. If the settlor has expressly, or by necessary implication, abandoned any beneficial interest in the trust property, there is in my view no resulting trust: the undisposed-of equitable interest vests in the Crown as bona vacantia: see In Re West Sussex Constabulary’s Widows, Children and Benevolent (1930) Fund Trusts [1971] Ch 1.’ The principle laid down in Carreras Rothmans Ltd v Freeman Matthews Ltd [1984] 3 WLR 1016 is to the effect that where property is transferred to the trustee for a specific purpose, to the extent that the equitable interest in the property remains with the transferor until the specified purpose is carried out, it would be unconscionable for the trustee to deny the existence of a resulting trust. This resulting trust will arise in accordance with the intention of the settlor and the knowledge of the trustee. JUDGMENT ‘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. If the common intention is that property is transferred for a specific purpose and not so as to become the property of the transferee, the transferee cannot keep the property if for any reason that purpose cannot be fulfilled.’ Peter Gibson J The difficulty with this rationale for the creation of a resulting trust is that the boundaries between resulting and constructive trusts become blurred. In Air Jamaica v Charlton [1999] 1 WLR 1399, Lord Millett emphasised the relevance of intention in the context of a resulting trust. But he also added that the resulting trust will arise whether or not the settlor/transferor intended to retain a beneficial interest, as in Vandervell v IRC: JUDGMENT ‘Like a constructive trust, a resulting trust arises by operation of law, though unlike a constructive trust it gives effect to intention. But it arises whether or not the transferor intended to retain a beneficial interest – he almost always does not – since it responds to the absence of any intention on his part to pass a beneficial interest to the recipient. It may arise even where the transferor positively wished to part with the beneficial interest, as in Vandervell v Inland Revenue Commissioners [1967] 2 AC 291. In that case the retention of a beneficial interest by the transferor destroyed the effectiveness of a tax avoidance scheme which the transferor was seeking to implement. The House of Lords affirmed the principle that a resulting trust is not defeated by evidence that the transferor intended to part with the beneficial interest if he has not in fact succeeded in doing so. As Plowman J had said in the same case at first instance [1966] Ch 261, 275: As I see it, a man does not cease to own property simply by saying “I don’t want it.” If he tries to give it away the question must always be, has he succeeded in doing so or not? Lord Upjohn [in the same case] expressly approved this.’ Essentially, a resulting trust arises as a default mechanism that returns the property to the transferor, in accordance with his presumed (or implied) intention, as determined by the courts. Very often the transferor may not have contemplated the possibility of a return of the property, but this may be regarded as immaterial if, in the discretion of the court, the circumstances trigger a return of the property to the transferor. The classification by Megarry J in Re Vandervell Trusts (No 2) (1974) into automatic and presumed resulting trusts, despite criticism, serves the useful purpose of simplifying the categories of resulting trusts and for the purpose of exposition we will rely on it. 7.3 Automatic resulting trusts The rationale behind this type of resulting trust, as indicated above, is that the transfer of property was subject to a condition precedent that has not been achieved or that the destination of the beneficial interest has not been dealt with. This type of resulting trust arises in a variety of situations. CASE EXAMPLE Re Ames [1946] Ch 217 A transfer to trustees was made subject to a marriage settlement that turned out to be void. The court decided that the fund was held on resulting trust for the settlor’s estate on the ground that the money was paid on a consideration that had failed. A similar result was reached in Essery v Cowlard (1884) 26 Ch D 191, where the court decided that the contract to marry had definitely and absolutely been put to an end. In Vandervell v IRC [1967] 2 AC 291, the transfer of the legal title to property was made but the transferor omitted to deal with the destination of the equitable interest in a share option scheme. In Barclays Bank v Quistclose [1970] AC 567, a resulting trust was created with regard to a loan made for a specific purpose which was not carried out. It must be emphasised that in order to implement the law of trust the specific loan to the borrower must be such that the sum does not become the general property of the borrower. The specific purpose of the loan identified by the lender must be sufficient to impress an obligation on the borrower to use the amount solely for the purposes as stated by the lender. CASE EXAMPLE Barclays Bank v Quistclose [1970] AC 567 Quistclose Ltd loaned £209,719 to Rolls Razor Ltd, subject to an express condition that the latter would use the money to pay a dividend to its shareholders. Q Ltd’s cheque for the relevant sum was paid into a separate account opened specifically for this purpose with Barclays Bank Ltd, which knew of the purpose of the loan. Before the dividend was paid, Rolls Ltd went into voluntary liquidation and Barclays Ltd claimed to use the amount to set off against the overdrafts of Rolls Ltd’s other account at the bank.  The House of Lords held that the terms of the loan were such as to impress on the money a trust in favour of Quistclose Ltd in the event of the dividend not being paid, and since Barclays had notice of the nature of the loan, it was not entitled to set off the amount against Rolls Ltd’s overdraft. Lord Wilberforce broadened the basis on which the resulting trust arose by deciding that there were two trusts posed by these facts – a primary trust to pay a dividend and a secondary trust that arises if the purpose of the primary trust has not been carried out. JUDGMENT ‘[W]hen the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose … when the purpose has been carried out (i.e. the debt paid) the lender has his remedy against the borrower in debt: if the primary purpose cannot be carried out, the question arises if a secondary purpose (i.e. repayment to the lender) has been agreed, expressly or by implication: if it has, the remedies of equity may be invoked to give effect to it, if it has not (and the money is intended to fall within the general fund of the debtor’s assets) then there is the appropriate remedy for recovery of the loan. I can appreciate no reason why the flexible interplay of law and equity cannot let these practical arrangements, and other variations if desired: it would be to the discredit of both systems if they could not. In the present case the intention to create a secondary trust for the benefit of the lender, to arise if the primary trust, to pay the dividend, could not be carried out, is clear and I can find no reason why the law should not give effect to it.’ Lord Wilberforce In Twinsectra v Yardley [2002] 2 AC 164, Lord Millett in an obiter pronouncement reiterated that the duty imposed on the borrower or recipient of the funds to use the funds for the stipulated purpose was not merely contractual, but equitable, and therefore affected the interests of third parties: JUDGMENT The duty is not contractual but fiduciary. It may exist despite the absence of any contract at all between the parties… and it binds third parties as in the Quistclose case itself. The duty is fiduciary in character because a person who makes money available on terms that it is to be used for a particular purpose only and not for any other purpose thereby places his trust and confidence in the recipient to ensure that it is properly applied. This is a classic situation in which a fiduciary relationship arises, and since it arises in respect of a specific fund it gives rise to a trust.’ In R v Common Professional Examination Board ex p Mealing-McCleod , the Court of Appeal decided that a Quistclose trust was created where a specific loan from Lloyds Bank was made to the borrower for the purpose of security for costs in respect of litigation and subject thereto, to be held on trust for the lender. The court followed the reasoning of Lord Wilberforce in Quistclose . CASE EXAMPLE R v Common Professional Examination Board ex p Mealing-McCleod, The Times , 2 May 2000 The career of Sally Mealing-McCleod (the applicant), as a student at the Bar, had been dogged by disputes and litigation involving educational institutions and the Common Professional Board (the Board). The first proceedings were against Wolseley Hall and Oxford and Middlesex Universities, in which the Board was joined as a third party. The cause of action was breach of contract. In those proceedings, a number of orders for costs were made against her. The applicant sought judicial review of two decisions of the Board made between 8 April 1997 and 15 July 1997. The effect of these decisions was that the applicant had not qualified for, or was not eligible for, the Bar Vocational Course. The Board declared that it would decline to give the applicant a certificate if she obtained the diploma for which she was studying. Sedley J refused the application. The Court of Appeal granted leave to appeal provided that the applicant gave security for costs in the sum of £6,000. The applicant complied with the order by borrowing £6,000 from Lloyds Bank. The loan agreement with the bank provided in clause 2(c) that: ‘You must use the cash loan for the purpose specified … You will hold that loan, or any part of it, on trust for us until you have used it for this purpose.’ The money was paid into court on 21 December 1998. On 18 February 1999, the appeal was withdrawn because the Board conceded that the applicant was entitled to apply for a place on the Bar Vocational Course. The applicant sought to recover the sum paid into court, on the ground that the money was subject to a trust in favour of the bank. Hidden J refused the application and ordered that the £6,000 and interest should be paid to the Board. The applicant appealed. The court allowed the appeal and ordered that the relevant sum be paid to the bank. The nature of the loan and the surrounding circumstances created a Quistclose trust in respect of the purpose of the loan. The effect was that since the primary purpose of the loan was not carried out, a resulting trust for the lender was created. In the recent case, Wise v Jimenez (2013) the High Court endorsed the Quistclose principle and created a resulting trust for a disappointed investor who transferred funds to the defendant. The court regarded the principle of law as well established but the main issue in this case was one of fact namely, deciding which party’s version of events was to be believed. CASE EXAMPLE Wise v Jimenez and another [2013] Lexis Citation 84 The claimant, Dennis Wise (W), an ex-professional footballer, made a payment of 500,000 to the first defendant, Tony Jimenez (J), a close friend and co-owner of Charlton Football Club. The payment was made in December 2007 through the second defendant, CD Investments Ltd (CDI), a company set up for such a purpose and owned by W and his wife. Following the payment the company was put into liquidation. The payment was made to J as an investment for the purpose of developing a golf course in France, a project which failed to materialise.  It was agreed between the parties that W paid the relevant sum to J but it was disputed whether the sum was invested for the stated purpose. J contended that the sum had been invested in the project and consequently he had a complete defence. He argued that land in France was procured for development as a golf course by a company known as Les Bordes Golf International SAS (SAS). J was a director of SAS which owned over 51 per cent of the shares in the company. J claimed that W’s money had been invested in SAS which issued 26 shares in his favour representing his investment. The court preferred W’s explanation of events and held in his favour. In the circumstances the recipient of the sum of money was subject to fiduciary obligations to apply the fund for the stated purpose only. Since the golf course failed to materialise the moneys were held on resulting trust for the claimant. 7.3.1 Quistclose analysis Lord Wilberforce’s reasoning in Quistclose (1970) has attracted a great deal of judicial and academic comment. Millett P, writing extra-judicially (‘The Quistclose trust: who can enforce it?’ (1985) 101 LQR 269), questioned whether a valid ‘primary trust’ had existed in Quistclose (1970). An express trust, subject to limited exceptions, assumes the existence of a person with a locus standi to enforce the trust. Without such a person the intended express trust is void (see later). The intended ‘primary trust’ was to pay a dividend. This lacks a beneficiary to enforce the trust. Thus, it is doubtful whether there could be a valid express trust in order to pay a dividend as Lord Wilberforce decided. In addition such a primary trust may lack precision or certainty which the law requires. In Twinsectra v Yardley [2002] All ER 377 Lord Millett restated his views: JUDGMENT ‘In several of the cases the primary trust was for an abstract purpose with no one but the lender to enforce performance or restrain misapplication of the money … It is simply not possible to hold money on trust to acquire unspecified property from an unspecified vendor at an unspecified time.’ In addition there have been a variety of approaches to the ‘secondary trust’ in favour of the lender, as laid down by Lord Wilberforce in Quistclose (1970). In Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd [1984] 3 WLR 1016, Peter Gibson J decided that this trust will affect the conscience of the borrower where the terms of the agreement had not been carried out. This is consistent with a constructive trust as distinct from a resulting trust. CASE EXAMPLE Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd [1984] 3 WLR 1016 The claimant company (a cigarette manufacturer) engaged the services of the defendant, an advertising agency. The defendant fell into financial difficulty and needed funds to pay its production agencies and advertising media. The claimant made a special agreement with the defendant to pay such of its debts which were directly attributable to the claimant’s involvement with the defendant. A large fund was paid into a special bank account established in the name of the defendant. A few months later the defendant went into liquidation. The creditors called on the claimant to meet the defendant’s debts. The claimant complied with their demands and took assignments from the creditors of their rights against the defendant. The liquidator of the defendant company refused to pay the claimant any sums from the special account. The claimant sought a declaration that the moneys in the special account ought to be repaid to the claimant. The court held that the funds in the account were held on resulting trust for the claimant because the sum had been paid for a specific purpose that had not been achieved. Accordingly, the sum was not part of the defendant’s assets to be distributed among its creditors. The court applied the Quistclose principle, despite differences in the facts of this case and Quistclose . The differences were that in Quistclose the transaction was one of loan with no contractual obligation on the part of the lender to make payment prior to the agreement for the loan. In the present case there was no loan but there was an antecedent debt owed by the claimant. These were considered insignificant. JUDGMENT ‘In my judgment the principle … is 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. If the common intention is that property is transferred for a specific purpose and not so as to become the property of the transferee, the transferee cannot keep the property if for any reason that purpose cannot be fulfilled. In my judgment therefore the [claimant] can be equated with the lender in Quistclose as having an enforceable right to compel the carrying out of the primary trust.’ Peter Gibson J A similar conclusion was reached by the Court of Appeal in Re EVTR [1987] BCLC 646. CASE EXAMPLE Re EVTR [1987] BCLC 646 The claimant acquired a windfall sum of money and decided to assist the company that employed him by purchasing new equipment. He paid a sum of money to the company’s solicitors to be released to the company ‘for the sole purpose of buying new equipment’. The new equipment was ordered, but before it was delivered the company went into receivership. The claimant alleged that the sum of money was repayable to him in accordance with trusts law. The court held in the claimant’s favour. The court applied the Quistclose principle and decided the sum was held on resulting trust for the claimant. However, in confusing the terminology as to the type of trust involved, the court also reasoned that a constructive trust was created when the sum was originally received by the defendant. JUDGMENT ‘On Quistclose principles, a resulting trust in favour of the provider of the money arises when money is provided for a particular purpose only, and that purpose fails… It is a long-established principle of equity that, if a person who is a trustee receives money or property because of, or in respect of, trust property, he will hold what he receives as a constructive trustee on the trusts of the original trust property. It follows, in my judgment, that the repayments made to the receivers are subject to the same trusts as the original [sum] in the hands of the company. There is now, of course, no question of the [amount] being applied in the purchase of new equipment for the company, and accordingly, in my judgment, it is now held on a resulting trust for the [claimant].’ Dillon LJ Similarly in Cooper v PRG Powerhouse Ltd [2008] EWHC 498 (Ch), the High Court decided that a payment that is subject to a Quistclose trust makes the payee a fiduciary for the benefit of the payer. The effect is that if the payee becomes bankrupt, the payer is entitled to trace his funds in the hands of the payee and may recover his funds in priority over the creditors of the payee. CASE EXAMPLE Cooper v PRG Powerhouse Ltd [2008] EWHC 498 (Ch) The claimant had been the managing director of the defendant company. He purchased a Mercedes motor car from Godfrey Davis Ltd for £37,239 pursuant to a credit agreement and the defendant company agreed to discharge the instalment payments on his (the claimant’s) behalf as part of the salary which he received. Later the claimant resigned and it was agreed that the claimant might keep the car in return for a lump sum payment of £34,329 to the defendant company. It was expected that the defendant company would pay this amount to Godfrey Davis Ltd in discharge of the credit agreement. The claimant made the payment to the defendant, but before the latter could pay Godfrey Davis Ltd, the defendant company went into administration and the payment failed. The claimant brought proceedings for a declaration that the sums paid were held on trust for him and that he was entitled to a repayment of the funds. The principal issues in the proceedings were: (i) whether a purpose trust had been created in favour of the claimant; and (ii) if so, whether the claimant was entitled to trace his funds in the hands of the defendant company. The court held in favour of the claimant and decided that on the evidence it was clear that the payment by the claimant was impressed with a purpose trust to pay that sum to Godfrey Davis Ltd in reduction of his loan. The effect was that the defendant company became a fiduciary in respect of the sum received. The failure to carry out the purpose meant that the claimant was entitled, in equity, to trace his funds in the hands of the defendant company. The objection to the imposition of a constructive trust in the context of a Quistclose trust is that such a trust is not dependent on the intention of the lender or transferor. The trust is created by the courts in order to promote good conscience or to prevent unjust enrichment. The date on which the trust is created is also significant, for if the constructive trust is imposed at the time when the defendant receives the funds, then the equitable interest of the lender would appear to be created before the defendant performs an unconscionable act. The same argument may be raised with regard to the resulting trust. The point here is that the claimant’s (lender’s) equitable interest does not leave him until the sum is applied for the purpose stipulated by the lender. Accordingly, on receipt of the relevant amount the borrower merely acquires the legal title to the funds to be used for the stipulated purpose. If the sum is not used for such purpose the proprietary interest of the claimant may be asserted by him. In Twinsectra v Yardley [2002] 2 All ER 377, Lord Millett expressed his opinion that a Quistclose trust is a resulting trust for the lender and the underlying basis of the trust is the fiduciary relationship that is created between the lender and borrower: JUDGMENT ‘[T]he Quistclose trust is a simple commercial arrangement akin (as Professor Bridge observes) to a retention of title clause (though with a different object) which enables the borrower to have recourse to the lender’s money for a particular purpose without entrenching on the lender’s property rights more than necessary to enable the purpose to be achieved. The money remains the property of the lender unless and until it is applied in accordance with his directions, and insofar as it is not so applied it must be returned to him. I am disposed, perhaps pre-disposed, to think that this is the only analysis which is consistent both with orthodox trust law and with commercial reality.  It is unconscionable for a man to obtain money on terms as to its application and then disregard the terms on which he received it. Such conduct goes beyond a mere breach of contract. The duty is not contractual but fiduciary. It may exist despite the absence of any contract at all between the parties… and it binds third parties as in the Quistclose case itself. The duty is fiduciary in character because a person who makes money available on terms that it is to be used for a particular purpose only and not for any other purpose thereby places his trust and confidence in the recipient to ensure that it is properly applied. This is a classic situation in which a fiduciary relationship arises, and since it arises in respect of a specific fund it gives rise to a trust.’ An alternative analysis is to consider that the resulting trust is created only when the fund is not used for the stipulated purpose. Here it could be argued that the defendant receives both the legal and equitable interests in the fund subject to perhaps a contractual obligation to use the fund for the stipulated purpose. If the fund is used in accordance with the common intention of the parties the defendant acquires both the legal and equitable interests. But if the defendant fails to carry out the stipulated purpose a resulting trust automatically springs up in favour of the claimant. In Templeton Insurance Ltd v Penningtons Solicitors LLP [2006] EWHC 685 (Ch), the High Court endorsed the resulting trust analysis to the effect that a payment subject to a Quistclose trust creates a resulting trust in favour of the payer, but subject to a power vested in the recipient of the fund to use it for the stated purpose. CASE EXAMPLE Templeton Insurance Ltd v Penningtons Solicitors LLP [2006] EWHC 685 The claimant, an insurance company, intended to invest in properties by purchasing and reselling the same at a profit over a short period of time. The intention was that the claimant would lend Mr Johnston the fund to purchase the property. The moneys were paid to Johnston’s solicitors, the defendants, subject to an express solicitor’s undertaking that the defendant would keep the moneys in its client’s account only to be used to acquire the identified property. The claimant was led to believe that the property price was £500,000 whereas in reality the purchase price was £236,000. The greater part of the balance of the fund was paid on disbursements and for other purposes unconnected to the purchase of the property. The claimant brought an action seeking compensation and a proprietary interest in the balance of the funds. The court held that the money was subject to a Quistclose trust and the claimant was entitled to its return. JUDGMENT ‘It is now conceded (which it was not, I believe, last November) that when Templeton paid the money to Penningtons, it was held by Penningtons on trust for Templeton and that the money was beneficially owned by Templeton. That, as it seems to me, is plain from the terms of the undertaking … which expressly says that if completion is delayed, then the money will be placed in a designated client deposit account to earn interest for you, that is to say, for Templeton. Plainly, therefore, at any rate, until completion took place, the money was Templeton’s money beneficially. The debate therefore turns on whether there was power under the terms of the undertaking read as a whole to apply the money deposited in Penningtons’ client account for a purpose other than the purchase of the property referred to in the letter.  The terms of the trust were the classic Quistclose type of trust, namely, a resulting trust in favour of Templeton subject to a power on the part of Penningtons to apply the money deposited for the purpose of completing the purchase of 4 Aymer Close, Thorpe. It seems to me to follow that monies which were not paid out of the client account for that purpose were monies paid in breach of trust.’ Lewison J KEY FACTS The Quistclose principle Quistclose trust Lord Wilberforce Primary express trust to pay a dividend and secondary resulting trust if primary trust fails Exp Mealing-McCleod Applying Quistclose Carreras Rothmans Gibson J Common intention – trust imposed on conscience of the recipient of funds (constructive trust?) Re EVTR Dillon LJ Constructive trust for the purpose of the loan and on failure a resulting trust for the lender arises Twinsectra Lord Millett Debtor has fiduciary duties regarding the purpose of the loan and on failure a resulting trust arises Templeton Ins v Penningtons Lewison J Resulting trust for the payer but with a power vested in the payee to use the fund for the stated purpose ACTIVITY Self-test questions To what extent is it possible to formulate a comprehensive theory regarding resulting trusts? Discuss. 7.3.2 Surplus of trust funds Where the trust exhausts only some of the trust property, leaving a surplus of funds after the trust purpose has been satisfied, a resulting trust for the transferor or settlor may arise in respect of the surplus. This principle is based on two assumptions: (a) the trust purpose has been satisfied; and (b) a surplus of funds has been left over. CASE EXAMPLE Re Abbott [1900] 2 Ch 326 An appeal was launched to raise funds for two sisters who were destitute. The purpose of the appeal was to enable the beneficiaries to live in lodgings in Cambridge and to provide for their ‘very moderate wants’. Considerable sums were raised and a surplus was left over after the ladies died. The question in issue involved the destination of this surplus. The court decided that the surplus was held on resulting trust for the subscribers. The court dismissed the assertion that the fund was intended to become the absolute property of the ladies entitling them to demand a transfer to themselves, or if they became bankrupt transferring the funds to their trustee in bankruptcy. On construction of the terms of the appeal and the surrounding circumstances, the intention of the subscribers was to give a wide discretion to the trustees as to whether any, and if so what, part of the fund ought to be applied for the benefit of the ladies. This approach was only consistent with a resulting trust. It is to be noted that a material factor in these types of cases is the intention of the transferor. If the intention is expressed an express trust will be created for the transferor. In the absence of an express intention the court is required to consider whether there is any evidence of an implied intention that the transferor retained an interest in the property. Such evidence will vary with the facts of each case. In Re Abbott (1900) some of the factors that appealed to the court were that virtually all the contributors were identifiable and acquainted with the ladies, the terms of the appeal indicated that the basic needs of the ladies were to be taken care of and the trustees were given a wide discretion as to the means of caring for the ladies. These factors were sufficient to impress on the court that an implied resulting trust ought to be created in favour of the contributors. In Re Gillingham Bus Disaster Fund [1958] Ch 300, the court concluded that a resulting trust is created even though the contributors were anonymous. CASE EXAMPLE Re Gillingham Bus Disaster Fund [1958] Ch 300 A disaster took place on the streets of Gillingham. A bus had careered into a group of marching cadets, killing several persons and maiming several more. An appeal was launched to raise funds by means of collecting boxes to be used for funeral expenses, caring for the disabled and ‘for worthy causes’ in memory of the dead boys (non-charitable purposes). A surplus of funds remained after the bus company admitted liability and paid substantial sums for similar purposes. The court was asked to determine the destination of the surplus. Harman J decided, on construction of the circumstances, that a resulting trust for contributors was created. The donors did not part ‘out and out’ with their contributions, but only for the specific purposes as stated in the appeal. In this respect, it was immaterial that the donors contributed anonymously. Accordingly, the surplus amount was held on resulting trust for the donors. The sum was paid into court to await claimants. Failing claimants, the fund was taken by the Crown on the basis of bona vacantia. The court took the view that the ordinary resulting trust rule ought to be followed despite the fact that the vast majority of the contributors were anonymous. The ruling of the court was to the effect that all the contributors (small and large, anonymous and identifiable) were to be treated as having the same intention. The position was analogous to trustees who could not find their beneficiaries. But the court could easily have come to the opposite conclusion, namely the donors being anonymous, manifested an intention not to have the property returned to them. They would then have parted with their funds ‘out and out’, leaving no room for a resulting trust. The Crown would then have been entitled to the property on the basis of bona vacantia. This case was heavily criticised in Re West Sussex Constabulary Trusts [1971] Ch 1 (see later). No resulting trust – beneficial interest taken by the transferee An alternative construction that may be adopted by the court is to the effect that the transferee may take the property beneficially in accordance with the implied intention of the transferor/settlor. In this event there is no room for a resulting trust. This approach may be adopted where the beneficiary is still capable of enjoying the benefit from the settlement. The issues concerning the implied intention of the transferor and whether the purpose of the transfer is still capable of being achieved remain questions of construction of the circumstances of each case. CASE EXAMPLE Re Andrew’s Trust [1905] 2 Ch 48 The first Bishop of Jerusalem died, leaving several infant children. An appeal was launched to raise funds ‘for or towards’ their education. The children had subsequently completed their formal education with use of some of the funds. The question in issue concerned the destination of the remainder of the funds. The court held that the surplus was taken by the children in equal shares, in accordance with the implied intention of the contributors. There was no resulting trust for the contributors. The court was influenced by the fact that the children were still capable of deriving benefits from the fund, unlike Re Abbott (1900) (where the ladies had died: see above). In addition, the court was willing to construe ‘education’ in a broad sense and did not restrict it to formal education. In any event, the court decided that education in the narrow sense as referring to formal education was merely the motive for the gift, as distinct from the intention underlying the gift. A similar result was reached in Re Osoba [1979] 1 WLR 24. CASE EXAMPLE Re Osoba [1979] 1 WLR 24 A testator bequeathed the residue of his estate, which comprised rents from certain leasehold properties, to his widow ‘for her maintenance and for the training of my daughter up to University grade’. The widow died and the daughter completed her formal education. The testator’s son claimed the remainder of the residue which had not been used for the daughter’s education. The court held that the widow and daughter took as joint tenants. This joint tenancy was not severed. Thus, on the death of the widow the daughter succeeded to the entire fund. The references to maintenance and education in the will were merely declarations of the testator’s motive for the gift. JUDGMENT ‘[T]he testator has given the whole fund; he has not given so much of the fund as the trustee or anyone else should determine, but the whole fund. This must be reconciled with the testator having specified the purpose for which the gift is made. This reconciliation is achieved by treating the reference to the purpose as merely a statement of the testator’s motive in making the gift. Any other interpretation of the gift would frustrate the testator’s expressed intention that the whole subject matter should be applied for the benefit of the beneficiary.’ Buckley LJ An additional factor that had influenced the court was that the transfer was made in a residuary clause in the testator’s will. The significance of this was the fact that any failure of the gift would have resulted in an intestacy which would have frustrated the testator’s intention. KEY FACTS Automatic resulting trusts Transfer of the legal title to trustees subject to an intended trust which is void Re Ames (1946) Transfer of the bare legal title to trustees without disposing of the equitable interest Vandervell v IRC (1967); Hodgson v Marks (1971) Disposal of property to another subject to a specific limitation which has not been achieved Barclays Bank v Quistclose (1971); Carreras Rothmans v Freeman Matthews (1984); Re EVTR (1987) Surplus of trust funds left over after the trust purpose had been achieved Re Abbott (1900); Re Gillingham Bus Disaster Fund (1958); contrast Re Andrew’s Trust (1905); Re Osoba (1979) ACTIVITY Self-test questions Consider the ownership of the equitable interests in the relevant properties, in respect of each of the dispositions made by Alfred of properties which he originally owned absolutely: (a) A transfer of 10,000 shares in British Telecom plc to his wife, Beryl, subject to an option, exercisable by their son, Charles, at any time within the next five years, to repurchase 5,000 of the shares. The shares have been duly registered in Beryl’s name and she pays 50 per cent of the dividends received to Alfred. (b) A transfer of £50,000 to trustees ‘upon trust to distribute all or such part of the income (as they in their absolute discretion shall think fit) for the maintenance and training of my housekeeper’s daughter, Mary, until she graduates from university or reaches the age of 25, whichever happens earlier’, subject to gifts over. Mary, aged 24, has recently graduated from the Utopia University. 7.3.3 Dissolution of unincorporated associations An unincorporated association comprises a group of individuals joined together to promote a common purpose or purposes, not being commercial activities and creating mutual rights and duties among its members. Many sports clubs are run as unincorporated associations. Such associations vary in size and objectives; some may be long standing or exist with a view to making profits and have open or restricted membership. They differ from incorporated associations in that they lack a legal personality – separate and distinct from those of its members. The title of the association is treated as a label to identify its members. The association may sue or be sued through its officers who act on behalf of the members collectively. The association is regulated by its rules, which have the effect of imposing an implied contract between all the members inter se . Thus, all the members are collectively joined together by the rules of the association. Its affairs are normally handled by a committee and its assets may be held on trust for the members of the association in order to ensure that the association’s property is kept separate from that of its members. In the leading case of Conservative and Unionist Central Office v Burrell [1982] 1 WLR 522, Lawton LJ defined an ‘unincorporated association’: JUDGMENT ‘[T]wo 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 upon what terms and which can be joined or left at will. The bond of union between the members of an unincorporated association has to be contractual.’ The issue in this case involved the legal status of the Conservative Party and whether it was liable to corporation tax on its profits. The court decided that the party was not an unincorporated association but an amorphous combination of various elements. The party lacked a central organisation which controlled local organisations. In Re Bucks Constabulary Fund (No 2) [1979] 1 WLR 936, Walton J graphically described the structure of an unincorporated association: JUDGMENT ‘If a number of persons associate together, for whatever purpose, if that purpose is one which involves the acquisition of cash or property of any magnitude, then, for practical purposes, some one or more persons have to act in the capacity of treasurers or holders of the property. In any sophisticated association there will accordingly be one or more trustees in whom the property which is acquired by the association will be vested. These trustees will of course not hold such property on their own behalf. Usually there will be a committee of some description which will run the affairs of the association; though, of course, in a small association the committee may well comprise all the members; and the normal course of events will be that the trustee, if there is a formal trustee, will declare that he holds the property of the association in his hands on trust to deal with it as directed by the committee. If the trust deed is a shade more sophisticated it may add that the trustee holds the assets on trust for the members in accordance with the rules of the association. Now in all such cases it appears to me quite clear that, unless under the rules governing the association the property thereof has been wholly devoted to charity, or unless and to the extent to which the other trusts have validly been declared of such property, the persons, and the only persons, interested therein are the members. Save by way of a valid declaration of trust in their favour, there is no scope for any other person acquiring any rights in the property of the association, although of course it may well be that third parties may obtain contractual or proprietary rights, such as a mortgage, over those assets as the result of a valid contract with the trustees or members of the committee as representing the association.’ In Hanchett-Stamford v Attorney General [2008] All ER (D) 391 (Feb), the High Court decided the novel principle of ownership of surplus funds of a non-charitable unincorporated association, subject to only one surviving member. The court decided that the sole surviving member of the association was entitled to the assets absolutely and without restriction. CASE EXAMPLE Hanchett-Stamford v Attorney General [2008] All ER (D) 391 The claimant and her husband hadjoined the Performing and Captive Animals Defence League (the League) in the mid-1960s as life members. The League was a non-charitable, unincorporated association whose object was to introduce legislation outlawing circus tricks and animal films depicting cruelty. The claimant’s husband exercised effective control of the assets which continued to accumulate. In the early 1990s a property was purchased and title was registered in the names of the claimant’s husband and Mr Hervey (a member of the League) as trustees for the League. This property was valued at £675,000. The League also owned a portfolio of shares valued at £1.77 million. Both of the registered proprietors have since died. The claimant, who was the sole surviving member of the League, lived in the premises until she moved into a nursing home. The claimant wished to transfer the assets of the League to an active charity supporting animal welfare and identified the Born Free Foundation as an appropriate charity to receive the assets. The Attorney General was named as the defendant.  The issues that required consideration by the court were: (a) whether the objects of the League satisfied the tests for charitable status; and (b) if not, to whom did the assets belong? The court (Lewison J) decided that the objects of the League were inconsistent with charitable status because one of its main objects was to change the law. The League was a private unincorporated association and its assets were owned by the members of the association. Subject to any agreements between members of the League to the contrary, deceased members were deprived of all interests in the assets of such associations. The claimant, as sole surviving member of the association, was entitled to its assets without restriction.  The court distinguished an obiter pronouncement by Walton J in Re Bucks Constabulary Fund (No 2) [1979] 1 WLR 936, to the effect that the sole surviving member of an unincorporated association cannot say that he is or was the association, and therefore is not entitled solely to its funds. In Walton J’s view the surplus assets of the association, being ownerless, are taken by the Crown on a bona vacantia . In the present case, Lewison J took issue with Walton J’s analysis and questioned whether the Crown ought to be entitled to the assets of a defunct society, as opposed to the last surviving member. The learned judge considered the potential contradiction in Walton J’s reasoning to the effect that ownership of the society’s assets will be vested in its subsisting members, provided that there is a minimum of two members. But if there is one surviving member that member loses all interest in the assets. Lewison J decided that was equivalent to suggesting that the death of the last but one member deprives the last member of his interest: JUDGMENT ‘[W]hat I find difficult to accept is that a member who has a beneficial interest in an asset, albeit subject to contractual restrictions, can have that beneficial interest divested from him on the death of another member. It leads to the conclusion that if there are two members of an association which has assets of, say, 2 million, they can by agreement divide those assets between them and pocket 1 million each, but if one of them dies before they have divided the assets, the whole pot goes to the Crown as bona vacantia.’ Likewise, the principle in Cunnack v Edwards [1896] 2 Ch 679 was distinguished on the ground that, in that case, there were no surviving members of the society, and on the death of the last surviving third party annuitant beneficiary, the surplus assets of the organisation were ownerless and thus taken by the Crown on a bona vacantia . In that case the society was established to raise funds through subscriptions etc. from its members to provide annuities for the widows of its deceased members. There were no surviving members of the association and on the death of the last widow (beneficiary) an unsuccessful claim to the surplus assets of the society was made by her personal representatives. bona vacantia Property without an apparent owner but which is acquired by the Crown.

Is it true to say that resulting trusts have nothing whatsoever to do with intention?

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Introduction

The orthodoxy, propounded by Megarry J in Re Vandervell (No.2) is that the institution of resulting trust can be understood through a dichotomy of the “presumed” and the “automatic” resulting trust. Notwithstanding controversy then, this essay will untangle the relationship between resulting trusts and intention through this dichotomy.

Moving from method to substance, this essay suggests that where the presumed resulting trust is concerned, resulting trusts have everything to do with the settlor’s intention (or lack thereof). More specifically however, the Cook v Fountain conception of presumed resulting trust is preferred on grounds of authority and argument.

Presumed Resulting Trusts

As Swadling correctly observes, an understanding of the theoretical foundations of presumed resulting trusts must be grounded in an accurate understanding of a presumption. Properly understood, presumptions are part of the law of proof. As Lord Diplock described them in Pettitt v Pettitt , they disclose the “consensus of judicial opinion” as to the most likely inference of fact to be drawn in the absence of evidence to the contrary. The role of presumptions is thus to bridge proof by evidence of a “primary” fact, to proof of a “secondary” fact, without the need to adduce a separate piece of evidence. Herein lies the presumed resulting trust’s relationship with intention – on the various theoretical accounts of resulting trusts that are described shortly, what is being presumed is the intention of the transferor.

Different Species of Intention

Crucially however, this presumed intention must be distinguished from two other species of intention. The first is an inferred intention, which Lord Neuberger has explained in Stack v Dowden as an intention that is objectively deduced to be the subjective actual intention of the parties, in light of their actions and statements – this conclusion of what a party has intended gives rise to an express trust.

Secondly, we must distinguish presumed intention from imputed intention – a device countenanced by Lady Hale and Lord Walker in Jones v Kernott , in situations where a court is unable to deduce what shares were intended, as a last resort, and representing what the intentions of “reasonable and just people” would have been. The distinction here is crucial, as an imputed intention arises by operation of law and cannot be rebutted.

Content of Presumptions

Having accepted that the link between presumed resulting trust and intention lies in the idea that a the former is grounded in a true (evidential) presumption of the transferors intention, the next question is the precise content of this presumption – in other words, what is the precise intention that is presumed? On this issue, there are two principal approaches, supplemented by a third auxiliary suggestion.

(1)   The settlor has positively intended to create a trust in their favour – Swadling’s view

(2)   The settlor has no intention to benefit anyone else – the Birksian/Chambers view

(3)   The settlor had an unexpressed intention for B to hold on trust for A.

The Cook v Fountain View

Stone points out that the resulting trust was historically an express trust, which differed only in that it was proved by presumption. This is most clearly seen in Lord Nottingham’s judgement in Cook v Fountain , where he considered that a presumptive trust was where the court “presumes there was a declaration”, though the plain and direct proof thereof is not extant. Moreover, this view is supplemented by rebuttal cases such as Fowkes v Pascoe – where the judgement of the court speaks of there being no transfer on trust.

Mee however, criticises this view by reference to Re Vandervell (No.2) – as he considers that Megarry J’s reference to a presumption of a resulting trust applying if the intention is not made manifest to mean that the presumption of resulting trust refers to an unexpressed intent. This however, ignores Megarry J’s conclusion later in the judgement, which considers that an unexpressed intention “does nothing” to effect a result. Secondly, Mee further argues that in a purchase money resulting trust, where A provides money to B to transfer property to C, A’s lack of legal ownership precludes the declaration of an express trust. Nevertheless, Wilde has pointed out by reference to secret trusts and covenants to settle that it is indeed possible to validly declare a trust over property not owned by the settlor at the time of declaration.

Alternatively, Chambers argues that the Cook v Fountain view is inconsistent with s.53(1)(b) LPA 1925 (and its s.7 progenitor) as it put an end to the possibility of presuming a declaration of trust in the absence of writing. Two responses are possible. The first is that, by reference to the words “manifested and proved”, s.53(1)(b) is a procedural rather than a substantive rule, which does not speak to the question of substance – that is, what form a declaration of trust must take to be valid. Furthermore, there is no reason why the presumption could not be that a written declaration in conformity with the evidence admissible to discharge that burden, was in fact made.

The Unexpressed Intention View

Reflected in Mee’s thesis, this is the view that the presumption of resulting trust is that the presumption is a “tool for proving the existence of (naked) intention”, as opposed to expressed intention to create a trust. The quotation points out that Mee’s concept of a presumption is confused, as a presumption is itself a form of proof. More importantly, the established case law on certainty of intention (ie Milroy v Lord ) indicates that we are not concerned with unexpressed intention. To accept his thesis, as Swadling points out, would be to fundamentally reshape the established rules, and create an anomaly whereby the application of a rule of procedure (the presumption) would override the substantive law.

The Birksian/Chambers View

The first approach has been alluded to earlier, and are in fact supported by more traditional cases. Motivating the second Birksian approach however, has been the growth of the law of unjust enrichment, and its influence in the evolution of the view that what was being presumed was an absence of an intention to benefit the transferee. As Birks argued, this employment of negative intention could accommodate the integration of “unjust” factors upon which restitutionary plaintiffs habitually relied on – such as mistake, compulsion and inequality.

To support the Birksian view, commentators such as Chambers rely on Chase Manhattan , where the claimant bank mistakenly made the same payment twice to the defendant. Goulding J held that the payment of money under a factual mistake would lead to the transfer retaining an equitable proprietary interest in the property. While the specific trust was unidentified in that case, Chambers has taken Goulding J’s reliance on Viscount Haldane LC’s speech in Sinclair v Brougham to argue that this was in fact a resulting trust, which arose as the claimant was to be presumed not to intend the recipient to hold the property beneficially.

Returning however, to the concept of “presumption” illuminated by Swadling above, it is submitted, in line with Graham and Virgo that this argument is unconvincing – this is because, as was stated by Deane J in Muschinski v Dodds – the use of presumption (in the device of the resulting trust) could not apply where there was an actual intention that was established by the overall evidence. Thus in Chase Manhattan , the fact that the gift was given under a misapprehension must contradict the idea that the transferee was intended to hold on trust for the transferor. There is thus no space for the presumption to operate – were it to operate, any presumption would be rebutted by the fact.

As a matter of authority, Lord Browne-Wilkinson in Westdeutsche clearly favoured the positive intent analysis of the presumed resulting trust, in contradistinction to the Birksian negative intention approach.

Automatic Resulting Trusts

  the positive intention view.

In Westdeutsche , Lord Browne-Wilkinson considered that an “automatic” resulting trust was explicable on the same basis as that of the presumed resulting trust – where there is a presumption that the transferor has intended to declare a trust in their own favour. One construction of his Lordships’ suggestion is that this follows the Cook v Fountain view. Similarly, Rickett and Grantham have argued that where there is a necessity for the law to fill the evidential gap by pointing out that the transferor would have intended to retain the beneficial interest – particularly when one considers the modern political economy, where the alternative presumption that the property is to pass to the Crown would be untenable.

Swadling argues that the problem with this understanding is that fundamentally, the incidence of an automatic resulting trust is in circumstances where there is a transfer on trust which fails – the corollary of which means that the court in such a case has accepted, as an evidential matter, that the transferor has not in fact declared a trust in his own favour. This is illustrated by  Vandervell v IRC , where the courts insisted on the automatic application of a resulting trust, despite Mr Vandervell explicitly disavowing any beneficial interest, with Lord Wilberforce pointing out that there was no room to invoke a presumption. We will return to his argument shortly in closing, but for now its validity is entertained.

The Unexpressed Intention Approach

An alternative construction of Lord Browne-Wilkinson’s statement is that his reference to “presumed intention” considers that a proof by presumption of unexpressed intention of the transferor to create a trust for himself is constitutive of the automatic resulting trust. This however, is susceptible to the same criticisms outlined in the case of presumed resulting trusts, and the same point above that it appears inconsistent with the facts and indeed the ratio of Vandervell .

The Negative Intention Approach

In the Air Jamaica case, Lord Millett, giving the speech of the Privy Council pointed out that a resulting trust responds to the absence of intention on the part of the transferor to pass a beneficial interest to the recipient. While this “negative intention” analysis may potentially explain the automatic resulting trust, it is susceptible to a normative critique. Specifically, as Swadling argues, if the only desire is to strip out the the transferee’s enrichment, a response by way of personal claim for the value received may be a better solution, given that it does not prioritise the transferor over the creditors of the transferee, in the event of an insolvency.

Retention Theory

In Vandervell , the judgements of Lord Upjohn and Lord Wilberforce suggest a theory of automatic resulting trust unrelated to that of intention – where a failure to effectually dispose of the beneficial interest, even in circumstances where the transferor has intended to give it away will create a resulting trust by operation of law. Nevertheless, Westdeutsche   has pointed out that “retention” is a myth, given that the equitable title of the beneficiary is “engrafted onto” the rights held by the trustees, rather than carved out of the settlor’s rights – thus there is nothing to retain at the time of transfer, a proposition confirmed by Lord Mance in Akers v Samba .

Rebutting Swadling’s Conclusion

Following the rejection of all four ways to explain the automatic resulting trust above, Swadling reaches the unpalatable conclusion that “the automatic resulting trust still defies legal analysis” – and insofar is it cannot be understood, it has nothing to do whatsoever with intention. With respect however, it is submitted that Swadling’s conclusion is flawed. There is in fact a way to explain the automatic resulting trust in terms of positive intention, aligning it conceptually with the presumed resulting trust. This derives from Graham and Virgo’s insight that one way to reconcile this analysis with the case is to consider that the presumed positive intention to create a resulting trust was not rebutted on the facts by Mr Vandervell’s desire to set up a tax-efficient structure. Lending strength to this analysis is the idea that it was unlikely that Mr Vandervell envisaged the failure of the trust, and hence little could be said about who should take the property in that eventuality.

On this view, we might distinguish this presumption of “positive intention” in the case of an automatic resulting trust as conditional on the failure of the original trust that sought to be declared, which is once removed from the unconditional positive intention in the case of a presumed resulting trust.

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Land Law: Resulting Trusts

Resulting trusts, what are resulting trusts.

A resulting trust is a type of implied trust . It arises in the absence of a valid express trust. When property is held on resulting trust, it is held by the trustee on trust for the person who transferred title to them in the first place.

Types of Resulting Trust

Resulting trusts arise in a variety of situations. These are the most common:

• Automatic Resulting Trusts : these arise where the settlor voluntarily transfers property to another attempting to make an express trust, but the trust failed – Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669.
• Presumed Resulting Trusts : these arise when a person contributes to the purchase price of property – Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669.
• Trusts of Surplus Benefits : these arise where property is transferred on trust but proves excessive to settle the beneficiary’s claims – Re Guinness’s Settlement [1966] 1 WLR 1355.
• ‘Quistclose’ Trusts : these arise in some circumstances when money is transferred for a specific and exclusive purpose, often as a loan – Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.

Automatic Resulting Trusts

Establishing the trust.

An automatic resulting trust happens whenever a person transfers property on trust, but the trust fails: Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669.

Exception: The Doctrine of Acceleration

Some express trusts set up successive interests. For example, a trust might give assets ‘on trust for X during his life time, and Y in remainder’. Y’s interest is essentially postponed by X’s interest. The intention is that X gets the benefit of the property in their lifetime, and once they die it will be held on trust for Y.

These trusts can be vulnerable to failure by offending the certainty or perpetuity rules . If they do fail for this reason, the assets will not necessarily be held on resulting trust for the original settlor. The doctrine of acceleration usually means that the benefit of the property passes to Y instead. However, the doctrine will not apply if:

• Y’s interest is contingent (e.g., ‘on trust for X during his lifetime, remainder to Y provided Y is married);
• There is any reason not to presume that the settlor intended the benefit of the property to be accelerated to Y: Re Flower’s Settlement Trusts [1957] 1 All ER 462.

Presumed Resulting Trusts

Establishing the presumption.

Where a person makes a contribution to the purchase price of property, there is a presumption that the transferee then holds that property on resulting trust for the contributor: Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669. The equitable title is held in proportion to each beneficiary’s contribution.

For example, T buys a house, and the legal title is transferred solely into T’s name. S1 contributed 40% of the purchase price, while S2 contributed 60%. T contributed nothing. There is a presumption that T holds the legal title on resulting trust for S1 (who owns 40% of the equitable title) and S2 (who owns 60% of the equitable title).

Contributions other than to the purchase price will not raise the presumption:

• Indirect contributions, such as to household expenses, will not count: Burns v Burns [1984] Ch 317
• Applying a discount to the purchase price will count: Springette v Defoe [1992] 2 FLR 388; Laskar v Laskar [2008] EWCA Civ 347.
• Contributing a gift given to the contributor by a third party will count: Midland Bank v Cooke [1995] 4 All ER 562.
• There is no consensus on whether contributing to the mortgage after purchase will count – contrast Cowcher v Cowcher [1972] WLR 425, Curley v Parkes [2004] EWCA Civ 1515 and Stack v Dowden [2007] 2 AC 432.

For family homes, the courts prefer to apply constructive trusts . The presumption of resulting trust is unlikely to arise in this context. Where legal title of a family home is transferred into joint names, the presumption of resulting trust does not apply: Stack v Dowden [2007] 2 AC 432.

Rebutting the Presumption

The presumption of resulting trust is rebutted by showing that the contribution was intended as a gift or a loan : Fowkes v Pascoe (1875) LR 10 Ch App 343.

Where the ‘counter-presumption of advancement’ applies, the courts assume that the contribution was intended as a gift unless proven otherwise. The counter-presumption of advancement tends to involve contributions by male family members. It applies to gifts from:

Fathers to children: Re Roberts [1946] Ch 1.

Husbands to wives: Gascoigne v Gascoign e [1918] 1 KB 223. Also, male fiancés to female fiancés: Moate v Moate  [1948] 2 All ER 486. But not wives to husbands: Heseltine v Heseltine  [1971] 1 WLR 342.

Historical cases declined to apply it between mothers and dependent children: Bennet v Bennet (1879) 10 Ch D 474. However, see now Musson v Bonner [2010] WTLR 1369.

The presumption does not appear to apply between siblings: Noack v Noack  [1959] VR 137.

s.199 of the Equality Act 2010 would abolish the counter-presumption of advancement. However, it has yet to be brought into force. The counter-presumption has received considerable criticism in the courts: see Pettit v Pettitt [1970] AC 777.

S.60 of the Law of Property Act 1925

s.60 of the Law of Property Act 1925 states that:

(1) A conveyance of freehold land to any person without words of limitation, or any equivalent expression, shall pass to the grantee the fee simple or other the whole interest which the grantor had power to convey in such land, unless a contrary intention appears in the conveyance.

A literal interpretation of this provision seems to abolish the presumption of resulting trust for land transfers. This has never been settled by the courts, though there is some dicta stating that this is not the provision’s effect: e.g. National Crime Agency v Dong [2017] EWHC 3116; Ali v Dinc [2020] EWHC 3055. There have been some cases involving presumed resulting trusts of land which do not even mention it, such as Prest v Petrodel Resources Ltd [2013] 2 AC 415.

Trusts of Surplus Benefits

Where a person transfers property to satisfy a claim, but the property proves greater than necessary, a resulting trust will arise. The resulting trust attaches to the ‘surplus’ aspect of what was transferred: Re Guinness’s Settlement [1966] 1 WLR 1355.

A common example is where S transfers assets to T on trust for B’s use as long as B lives. If there is still property left when B dies, the remainder of the property will be held by T on a resulting trust for S.

This does not apply to absolute gifts, since there will be no surplus. For example, take a trust ‘for the benefit of T’s children in their university education’: Re Andrew’s Trust [1905] 2 Ch 48.

• If the courts construe this as a gift solely for use in educating the children, anything left once the children have been educated will be held on resulting trust for the original settlor.
• If, by contrast, the courts construe this as an absolute gift for the children which was merely motivated by the desire to educate them, the children are entitled to the full fund. No resulting trust arises.

If there is no one who can be the beneficiary of the resulting trust, absent contrary intention, the assets will be bona vacantia : Re West Sussex Constabulary’s Widows, Children and Benevolent (1930) Fund Trusts [1971] Ch 1. This means they pass to the Crown.

Quistclose Trusts

A Quistclose trust can arise where money is transferred and segregated for a specific, exclusive purpose which subsequently fails. The name arises from Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.

Quistclose Investments made a loan to Rolls Razor. Quistclose knew the company was doing poorly financially, so it specified that the money could only be used to pay a dividend which had been declared in Rolls’ shareholders’ favour. The money was ringfenced in its own account.

Rolls’ became insolvent before the money was used. The courts were asked who was entitled to the money: Rolls’ secured creditors or Quistclose (an unsecured creditor). Normally, secured creditors have priority over unsecured creditors.

The House of Lords held that Quistclose was entitled to the money as Rolls held it on trust for them. By loaning the money, Quistclose made a primary express declaration of trust for the benefit of the shareholders. When it became impossible to fulfil that trust, a secondary trust arose in Quistclose’s favour.

The nature of the Quistclose trust is uncertain. There are three possibilities:

• The primary trust is express, and the secondary trust is a resulting trust – see Lord Wilberforce in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.
• The primary and secondary trusts form part of one, overarching express trust (‘on trust for the shareholders’ dividends, or if that fails on trust for Quistclose’) – supported by the Australian courts in Re Australian Elizabethan Theatre Trust (1991) 102 ALR 681.
• The whole arrangement is a fiction or ‘illusory trust’. The lender always possesses the beneficial interest in the money loaned, subject to a power allowing the borrower-trustee to use the money for the specified purpose – see Lords Millet and Hoffman in Twinsectra v Yardley [2002] UKHL 12.

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A discussion of resulting and constructive trusts in the UK

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The doctrine of presumed resulting trust arises in cases where property is transferred without consideration, such as gifts or gratuitous transfers. It presumes that the transferor intended to retain a beneficial interest in the property and that the transferee holds the property on resulting trust for the transferor. This essay considers the origins and evolution of the doctrine, its application in the English and Nigerian jurisdictions, and the policy considerations underlying it. It also examines the scope and limitations of the doctrine and its interaction with other legal principles, such as the rules of evidence and the principles of equity. Finally, the essay evaluates the continuing relevance and coherence of the doctrine in light of contemporary legal and social developments. Keywords: resulting trusts, presumptions, beneficial interests.

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Chapter 5 Guide answers to the essay questions and problem scenarios

Essay question ‘[a]ll resulting trusts effect restitution of what would otherwise be the unjust enrichment of the recipient’, Robert Chambers, Resulting Trusts , (Oxford: OUP, 1997)

Critically discuss this statement.

Guide answer The statement asserts that in every case in which a resulting trust is properly enforced against a defendant, the absence of the resulting trust would result in the unjust enrichment of the defendant. The statement is uncontroversial as a description of the outcome of any case in which a resulting trust solution is improperly overlooked, but the statement is controversial if it means to suggest that resulting trusts are enforced because they reverse what would otherwise be an unjust enrichment of the defendant. The reality is that resulting trusts are enforced to ensure that the defendant returns an asset belonging to another. It is the fact that the defendant is holding an asset properly belonging to another which renders “unjust” the continued holding of it by the defendant. In order to defeat the claim made against him, it is no defence for the defendant to say that he has not been unjustly enriched; his only defence is to show that he has better title to the property than the claimant. He will succeed in showing this if he can demonstrate that the claimant has made an effective disposition of the disputed asset in the defendant’s favour by way of gift, or because the asset is held by the defendant as part of a contract, loan or other arrangement to which the claimant has directly or indirectly consented. Against this, Chambers asserts that ‘[t]he resulting trust is not merely the passive preservation of the provider’s pre-existing property interest, but is one of equity’s active responses to non-voluntary transfer’. Taken on its face, this statement is perfectly orthodox. To return assets to a donor whose disposition of those assets has been technically ineffective or otherwise unsuccessful as a matter of property law is not wholly passive response, for it fulfils the implied intentions of the donor. The donor might have intended to dispose of the assets, but if he was unsuccessful in his attempt, we can be sure that his secondary intention would be to recover the assets rather than to see them pass to the Crown as ownerless assets ( bona vacantia ). However, if this statement is read in conjunction with the assertion that ‘[a]ll resulting trusts effect restitution of what would otherwise be the unjust enrichment of the recipient’, the thesis appears to be that when equity’s active response takes the form of a resulting trust, it is an active response to the unjust enrichment of the defendant and not an active response to the implied intentions of the donor. This thesis adds an unnecessary and over-elegant gloss on the traditional property-basis for the resulting trust. It isolates the resulting trust within a novel restitutionary remedial framework and thereby severs the resulting trust from orthodox property law. So long as rights in assets vary between the legal and the equitable, it is inconceivable that all rights in assets should be regarded as simple homogenous “enrichment”, and without a simple homogenous idea of enrichment and an authoritative idea of “unjust”, a resulting trust that is merely the remedial reversal of unjust enrichment can never adequately fit the within the wider picture of orthodox property law. Very often the language of unjust enrichment is simply out of place. Suppose, for example, that B had transferred property to A on trust for C ‘for so long as C shall live’, but had failed to direct for whom the property should be held on C’s death. The resulting trust that arises in favour of B when C dies is in no sense a response to the possibility that A will be personally unjustly enriched. A is fully aware that he has taken the property on trust and if he is unaware that B retains an interest in the property entitling him to retake possession when C dies, A should seek the directions of the court. At no point will A appear, or claim, to own the property beneficially—so he will never be unjustly enriched—and if he does claim the property beneficially he will have breached his trust and will have to account to B. It is artificial, and takes insufficient account of the nature of the office of trustee, to suggest that when a trustee accounts to trust beneficiaries he is merely acting in a negative way to prevent his own unjust enrichment, rather than acting in a positive way to discharge his trust in accordance with the best interests of the beneficiaries. Supporters of the restitution school acknowledge that: The sanctity of property and its immunity to discretionary ‘adjustment’ is deeply rooted in legal thought. It is dictated by respect for the individual and individual preferences and by the fear of prejudicing third parties. Bur the fear remains that certainty of proprietary title will be undermined if the current focus of the law of trusts, which aims to give effect to beneficiaries’ proprietary rights, is refocused on the reversal of the unjust enrichment.

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Introduction

⇒ A resulting trust is always for the benefit of the original owner of the property.

⇒ Resulting trusts arise where the beneficial title in property reverts to, or never leaves, the original legal owner of the property . It may never leave the legal owner where the nature of the transaction is not to pass the beneficial title with the legal title; or may revert where the reasons for the transaction no longer exist or never existed.

⇒ In some cases, the beneficial title will revert because there is nowhere else for it to go, other than to the Crown in bona vacantia

Type A and B resulting trusts

⇒ In In re Vandervell’s Trusts (No 2) , Megarry J explained resulting trusts, drawing a distinction between presumed resulting trusts and automatic resulting trusts:

• Where we have a transfer where there is an intention to retain beneficial title then on the basis of that presumption beneficial title remains with the original owner (presumed Resulting Trust); on the other hand, automatic Resulting Trusts arise by operation of law

⇒ More recently, Lord Browne Wilkinson in Westdeutsche Landebank v Islington LBC [1996] set out the same categories as McGarry J but uses the nomenclatures A and B

• He said where one makes a voluntary payment to someone, the law presumes you did not intent to make a gift (law requires positive evidence to make a gift); the recipient will thus hold it on resulting trust (a presumed resulting trust)
• On the other hand, if you have an express trust and there is no beneficial owner then by operation of law the settlor is the beneficial owner under a resulting trust (automatic resulting trust)

⇒ There are three main sets of circumstances where resulting trusts may arise:

• Incomplete or Imperfect express Trusts (Type B/automatic) e.g. unallocated beneficial interest will give rise to an automatic resulting trust
• Transfer without Value (Type A/presumed)
• Purchase Money Resulting Trust of Property (Type A/presumed)

Type B - Incomplete, imperfect or invalid trusts

⇒ Where property is transferred on trust, but the trust cannot be performed, the beneficial title will result back to the settlor

⇒ Equitable title cannot remain in the air (as Lord Wilberforce said in Vandervell v IRC [1967]) → Equity abhors a beneficial vacuum i.e. if there is no beneficial owner of property equity will find an owner (usually under a resulting trust, to the original owner)

⇒ Following failure of a trust, the beneficial title is left hanging. There are then 3 possibilities:

• The property belongs beneficially to the trustee; → this would destroy the foundation of equity so this will not happen
• The property goes to the Crown bona vacantia ; → crown will not take beneficial title if there is someone with a better claim
• The property reverts to the original settlor.

⇒ See the following cases:

• Chichester Diocesan Fund v Simpson [1944]
• Re Ames Settlement [1946]
• Air Jamaica v Charlton [1999]
• Re St Andrew's Lawn Tennis Club Trust [2012]

Failure to declare the trust

⇒ Where property is transferred to another on express trust, but there remains some beneficial interest in the property that is not dealt with by the declaration of trust, that interest results to the settlor.

⇒ Vandervell v Inland Revenue Commissioners [1967] → If A intends to give away all his beneficial interest in a piece of property and thinks he has done so but, by some mistake or accident or failure to comply with the requirements of the law, he has failed to do so, either wholly or partially, there will, by operation of law, be a resulting trust for him of the beneficial interest of which he had failed effectually to dispose.

Exhaustion of Objects

⇒ Where money has been left for the benefit of persons who have died, and there is, due to the imperfect drafting of the trust instrument, no provision for the vesting of the trust property, the trust property will result to the settlor or settlors.

⇒ See the cases of In re the Trusts of the Abbott Fund [1900] and Re Gillingham Bus Disaster Fund [1958]

Trusts for the benefit of a person for a particular purpose

⇒ In cases where a trust is for the benefit of a particular person, and there is an attached purpose, the purpose will be construed as the motive for the gift, and will not prevent the beneficiary from taking the benefit after the purpose is exhausted: Re Sanderson's Trust (1857) e.g. where someone give you money at Christmas to buy books, the purpose is a motive and not a binding obligation

⇒ See the case of Re Osoba [1979]

Dissolution of Unincorporated Associations

⇒ When an unincorporated association is wound up, a question may arise as to how any surplus assets are to be disposed of. In some circumstances, the money will be held on resulting trust for those who have contributed; or to the members at the time of distribution.

Type A – ‘Presumed’ resulting trusts

Transfer of property without consideration.

⇒ Remember, equity will not aid a volunteer

• A volunteer is someone who receives something for nothing

⇒ “Equity tends to be suspicious of gifts and often asks the recipient of an apparent gift to prove that it was intended as a gift. The failure to do so means that it will be held in trust for the apparent donor. In other words, the apparent gift creates a presumption of resulting trust.” Chambers R. “Resulting Trusts” (1997) OUP p.11

• So, with a voluntary transfer of property, the onus is on the recipient to prove the gift was intended
• If this cannot be shown, the recipient holds it on resulting trust for the donor

⇒ Where a person transfers property to a third party, without value, the transferee may hold the property on resulting trust for the transferor. In general, where a person transfers money, land or other property to another person without payment, one might think that, without any evidence otherwise, it would be reasonable to presume that the transfer was a gift. However, equity presumes that there is no gift unless there is evidence.

⇒ See the cases of Fowkes v Pascoe (1875) and Re Vinogradoff [1935]

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Voluntary transfers of land

⇒ Law of Property Act 1925 s.60(3): "In a voluntary conveyance a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee."

• So, if you transfer land without value there is no presumption of a resuling trust → the court will look at evidence to decide if gift is intended or not

⇒ In Ali v Khan [2002] , Sir Andrew Morritt VC said the following: "I should also refer to Lohia v Lohia [2001]. This case establishes that the presumption of a resulting trust on a voluntary conveyance of land has been abolished by s 60(3) Law of Property Act 1925. It was not suggested that this proposition precludes a party to the conveyance from relying on evidence from which a resulting trust may be inferred."

• Court can hear evidence from both parties, but no presumption when there is voluntary transfers of land

⇒ In Prest v Petrodel Resources Ltd [2013] houses had been conveyed to a company for a nominal sum. The Supreme Court held that the company held the houses on resulting trust for the transferor: "The only question is who did hold the beneficial interest. Flat 4, 27, Abbey Road was transferred by the husband, who had originally bought it in his own name in 1991, before PRL was incorporated. There is therefore an ordinary resulting trust back to the husband, which is held by him subject to the charges in favour of Ahli United Bank and BNP Paribas."

• The Law of Property Act s.60(3) was overlooked by the Supreme Court in this case → So the court relied on the presumption, rather than on the Law of Property Act s60(3)

The Presumption of Advancement

⇒ Where a man transfers property (realty or personalty) to his wife or his son or daughter without value, there is a presumption that the transfer is a gift (the presumption is of a GIFT, not a resulting trust → the burden of proof is reversed i.e. on the donor that he did not intend a gift).

⇒ Note that the presumption does not apply to transfers from wife to husband or mother to child, or to more distant relations

⇒ See the cases of Tribe v Tribe [1996] and Gascoigne v Gascoigne [1918]

⇒ The presumption of advancement will be abolished by the Equality Act 2010 s.199 at a date to be appointed. In the meantime, it is still valid: see Ullah v Ullah [2013] EWHC 2296 (Ch)

• So presumption of advancement still good law → but at some point the govt will get around to commencing s199

⇒ Where the presumption applies, the transferee will take the property absolutely. It is a rebuttable presumption, so if the transferor is able to show that the transfer was not intended as a gift, by showing other intentions, the presumption will not apply.

• Courts don't require much evidence that a gift was intended

Type A – Purchase money resulting trust

⇒ Where two people contribute money towards the purchase of property and the property is held in one person's sole name, the legal owner will hold the property on resulting trust for both contributors in shares proportional to their contribution to the purchase price.

⇒ "The clear result of all the cases, without a single exception, is that the trust of a legal estate, whether freehold, copyhold or leasehold; whether taken in the names of the purchasers and others jointly, or in the names of other without that of the purchaser; whether jointly or successive - results to the man who advances the purchase money." Per Eyre CB in Dyer v Dyer (1788)

⇒ See the case of Tinsley v Milligan [1994]

• They held that, as both had contributed to the purchase price, the house was held by Tinsley on resulting trust for Tinsley and Milligan, in shares proportional to their contribution to the purchase price and mortgage payments.

⇒ However, this approach is no longer applied to cases involving family homes (Tinsley v Milligan involved a business situation):

• You get a Common Intention Constructive Trust trust instead, not a resulting trust
• The court is not bound to deal with the matter on the strict basis of the trust resulting from the cash contribution to the purchase price, and is free to attribute to the parties an intention to share the beneficial interest in some different proportions: Midland Bank v Cooke [1995] (Waite LJ)
• The resulting trust will still apply to property bought as an investment, rather than as a family home.

The Resulting Trust in the Law of Restitution

⇒ The exact nature of the resulting trust has been the subject of extensive academic debate over the past 25 years. In particular, Professor Birks, formerly of Oxford University, attempted to incorporate the resulting trust into a model of restitution based on unjust enrichment.

• Birks thinks when you want money back, all remedies should be incorporated into a model of restitution based on unjust enrichment that combines common law and equity

⇒ “[A]ll resulting trusts affect restitution to the provider of what would otherwise be the unjust enrichment of the recipient.” R. Chambers, Resulting Trusts p.93.

• He says existing case law can fit into restitution based on unjust enrichment

⇒ The reason that restitution lawyers were keen to adopt trusts as part of the law of restitution was because a trust creates a proprietary interest which allows the claim to survive the insolvency or bankruptcy of the legal owner; and which allows the claimant to take any increase in value of the property, thus reversing the unjust enrichment at the claimant’s expense.

⇒ A key part of this was the model of resulting trusts proposed by Robert Chambers, under the guidance of Professor Birks. This model unified resulting trusts under the principle that a resulting trust would arise whenever A transferred property to B without an intention that A should benefit B.

⇒ While this model worked well and received judicial support, particularly from Lord Millett, in that it covered both presumed and automatic resulting trusts, in Westdeutsche Landesbank v Islington LBC, the House of Lords rejected the resulting trust approach in a restitution claim brought under a contract which was void for illegality.

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Article Contents

Introduction, resulting trusts and retention, the birks/chambers theory, the demise of the purchase money resulting trust, the normative justification for gap-filling resulting trusts.

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The Past, Present, and Future of Resulting Trusts

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John Mee, The Past, Present, and Future of Resulting Trusts, Current Legal Problems , Volume 70, Issue 1, 2017, Pages 189–225, https://doi.org/10.1093/clp/cux003

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This article considers the nature and future of resulting trusts, and offers a critique of the Birks/Chambers theory of resulting trusts. It argues that the current law cannot be explained, as the Birks/Chambers theory suggests, on the basis of the reversal of unjust enrichment. Instead, the law of resulting trusts is based on an old fiction whereby the owner of property is regarded as holding a beneficial interest which may be retained when the legal ownership has been transferred to another person. Unfortunately, this ‘retention’ idea does not provide a doctrinally satisfying justification for the current law. A logical response would be to discard those aspects of the law of resulting trusts that depend on the retention idea and, therefore, to dispense with presumed resulting trusts. The article argues that, in fact, in English law the purchase-money resulting trust has already been made irrelevant by the common intention constructive trust. However, the article argues for the continued recognition of gap-filling (i.e. ‘automatic’) resulting trusts on the basis that an alternative justification can be identified for such trusts.

On first inspection, it is not easy to see why the category of resulting trusts exists in the law. If express trusts are those trusts that are created by someone on purpose and constructive trusts are those trusts that have not been deliberately created but are imposed by the courts in the interest of justice, then where do resulting trusts fit in? Trusts created by the settlor and trusts created by the courts seem to exhaust the possibilities. This article addresses this conundrum, attempting to explain where resulting trusts fit into the law and assessing what their future should look like.

The current law recognizes two types of resulting trust. The first are ‘presumed’ resulting trusts, which can arise when a person makes a voluntary transfer of property 1 or puts up the purchase price of property which is conveyed into the name of another person. The second type arises where the claimant transfers property to a trustee on an express trust that fails to exhaust the beneficial interest in the property. The resulting trust arises to fill the ‘gap’ in the beneficial interest (and, for convenience, such trusts will be referred to in this article as ‘gap-filling’ resulting trusts). 2 It has also been suggested that, beyond these well-recognized categories, other instances of resulting trusts have been, or should be, recognized by the law. An influential argument has been made in recent years by Professor Peter Birks and Professor Robert Chambers, advocating an expansion of the scope of resulting trusts, so that such a trust would be recognized as the standard response to unjust enrichment and would, eg, arise upon the making of a mistaken payment. 3

It will be argued in this article that resulting trusts pre-date the modern distinction between express and constructive trusts. As will be explained in detail, in the different historical conditions that prevailed when the doctrine was developed, the normal motive of a transferor was not to vest the beneficial interest in the transferee, but rather to make the latter a trustee. Reflecting these historical conditions, the courts proceeded on the basis that a transferor would ‘retain’ the beneficial interest in the property unless it could be shown that he intended it to pass. Thus, no express declaration of trust was required in order to make the recipient hold the property on a resulting trust; the transferor’s intention was sufficient.

Establishing as a descriptive matter the nature of the current law, and identifying the outdated theoretical justification that underlies it, is of particular assistance when it comes to assessing the Birks/Chambers argument in favour of a radical increase in the scope of resulting trusts. This is because the latter is a somewhat unusual type of argument. It does not appear to be normative in nature. The appeal is, rather, essentially to a perceived pattern within the law. The Birks/Chambers argument identifies the basis of resulting trusts as ‘absence of intention to benefit the defendant’, understanding this to extend beyond cases where the claimant intended to make the defendant a trustee. 4 It then argues that resulting trusts should arise in other situations, which do not currently trigger a resulting trust, on the basis that those other situations fall within the scope of the ‘absence of intention to benefit’ principle. 5 If, in fact, as is argued in this article, the perceived pattern does not exist, then the Birks/Chambers argument in favour of the expansion in the scope of resulting trusts loses its force. This is not, of course, to suggest that it is impossible to mount a normative argument that the law should develop so as to provide a proprietary response to unjust enrichment (favouring unjust enrichment claimants over the general creditors of the defendant), only that an appeal to the nature of resulting trusts does not advance this argument.

None of the above means that the current author thinks that the past must determine the future of the law. There is much wrong with the current law of resulting trusts and, on the basis of an understanding of its historically determined nature, the article will suggest—making a normative argument—that much of it should be jettisoned. The category of presumed resulting trusts appears to be indefensible in modern times. In fact, it will be suggested, the purchase money resulting trust has already been displaced in English law by the common intention constructive trust, and the law should also dispense with the less commonly discussed ‘voluntary transfer’ category of presumed resulting trusts. On the other hand, the gap-filling resulting trust makes good sense as one aspect of the package of rules surrounding the express trust and, as will be argued in the final section of the article, can be defended in principle by reference to the fact that the settlor has expressly stipulated, in making the transfer, that the defendant is not to take beneficially. Thus, this article favours reducing the scope of resulting trusts but not their complete elimination from the law.

This section of the article explains the role of the concept of retention, which originated in the context of resulting uses, in the law of resulting trusts. It will be argued that the retention rationale, although key to understanding the current state of the law, is not defensible in modern times because, in doctrinal terms, the interest under a resulting trust is not truly a ‘retained’ interest.

The Historical Background to the Development of the Law of Uses

A key aspect of the background to the development of the resulting trust was that it had become ‘the practice in late medieval England to make feoffments of freehold land to the uses of a last will, allowing, in effect, a will of such land, otherwise impossible at common law’. 6 The settlor would remain in possession of the land and would continue to enjoy it, exactly as before. Subsequently, often when he was on his deathbed, he would declare who the beneficiaries under the use would be. Such declarations of the settlor’s intentions, or ‘will’, as to who would succeed to his land constituted the earliest wills. 7 Primarily because of their use as a mechanism to facilitate the making of wills, ‘uses’, as trusts were then known, became extremely common; it was said in 1518 that ‘few men be sole seised of their own lands’. 8

The prevalence of such arrangements at this specific point in history had crucial consequences for the developing law of uses and, ultimately, for the law of trusts. At a time when ‘uses waxed general’, 9 it was natural for the law to assume that a transfer of land for which the transferee did not pay was intended to create a use. In considering the intention behind a particular voluntary conveyance of a family’s ancestral lands to someone outside the family, it was far more likely that the explanation was a desire to facilitate the making of a will rather than to make a gift to the recipient. This led to the creation of a ‘presumption of resulting use’ whereby, unless a voluntary conveyance was expressly stated to be for the benefit of the recipient, it would be presumed that the recipient was intended to be a trustee who would ultimately pass on the property to beneficiaries to be nominated by the settlor and who would hold for the settlor in the meantime.

The near universality of such arrangements also meant that the need was not felt to spell them out expressly. Thus, John Baker notes that ‘most uses created prior to 1536 [were] tacit resulting uses arising from feoffments made without a consideration moving from the feoffees’. 10 This helps to explain why the nature of the presumption of resulting use that developed was not that an express declaration of trust had been made by the settlor but rather that the intention behind the transfer, which may or may not have been expressed in a declaration but which would have been understood on all sides in any case, was that the trustee would hold it to the uses of the settlor’s will and, in the meantime, passively allow the settlor to continue to enjoy the land on the basis of a resulting use. Similarly, the modern presumption of resulting trust, which developed by analogy with the presumption of resulting use, is a presumption as to the intention of the settlor, not a presumption that the settlor made an express declaration of trust in his own favour. 11

A final consequence of the prevalence of uses is that the owner of land who created a passive use would not have thought of himself as having given away his ownership of the land to the trustee. The transfer of legal title to the trustee was simply a technicality that was necessary in order to facilitate the acquisition of a power (to dispose of the land by will) that would become useful in the future. The fact that the trustee’s role was essentially passive, with the settlor remaining in occupation of the land as before, made it plausible for the law to think, as the parties surely did, in terms of the settlor having ‘retained’ his pre-existing ownership of the land. 12 As will now be discussed, this idea of ‘retention’ was at the heart of the doctrine of resulting uses and, although it cannot be defended in doctrinal terms, it remains the foundation of the modern doctrine of resulting trusts.

Retention and Resulting Uses

[E]very man that has lands has thereby two things in him, that is to say, the possession of the land, which … is called the … freehold, and the other is authority to take thereby the profits of the land. 13

[W]hosoever is seized of land, hath not only the estate of the land in him, but the right to take profits, which is in the nature of the use, and therefore when he makes a feoffment in fee without valuable consideration to divers particular uses, so much of the use as he disposeth not, is in him as his ancient use ….

[H]e that has land, and intends to give only the possession and freehold thereof to another and keep the profits to himself ought in reason and conscience to have the profits. 19

Retention and Resulting Trusts

Uses at common law, and trusts now, must ensue [ie follow] the nature of the land …. In the case of a resulting use, the true reason is, that ‘tis never out of the grantor. In the case of trust, ‘tis the same – ‘tis the old trust … 22

The courts have continued to formulate the rules on resulting trusts in terms of the retention by the settlor of a pre-existing beneficial interest. In Vandervell v IRC , 25 Lord Upjohn stated that ‘if the beneficial interest was in A and he fails to give it away effectively to another or others or on charitable trusts it must remain in him’. 26 In the same case, Lord Wilberforce argued that ‘the equitable, or beneficial interest, cannot remain in the air: the consequence in law must be that it remains in the settlor’. 27 There are many other examples. 28

A Problem: Retention is not a Doctrinally Satisfying Explanation

The discussion so far has pointed out that the courts’ explanation of the basis for resulting trusts has centred on the concept of retention. To some commentators, this judicial rationalization has seemed self-evidently valid, being simply a matter of ‘proprietary arithmetic’ and the application of the principle that ‘what I once had and have not granted away, I keep’. 29 However, this overlooks the fact that the interest which the claimant holds under a resulting trust is not, strictly speaking, something that he or she previously held. Before the creation of the resulting trust, he or she held the legal title to the property, giving him or her inter alia the right to sue anyone who interferes with the property and to transfer the property to whomever he or she chooses. After the creation of the resulting trust, he or she lost these rights but gained instead inter alia the right to insist that the trustee should sue anyone who interferes with the property and to compel the trustee to transfer the property to whomever the claimant chooses. Notwithstanding the rhetoric of retention, the rights that the claimant holds under the resulting trust are of a different nature to, and not ‘part of’, the legal title that he or she held before. 30

A person solely entitled to the full beneficial ownership of … property, both at law and in equity, does not enjoy an equitable interest in that property. The legal title carries with it all rights. 33

In the view of the current author, the appropriate response is to acknowledge that the retention analysis is no longer viable (and the implications of this will be explored shortly). However, a different approach has been advocated by Professor James Penner. He argues that the objections to the ‘retention’ model are ‘very theoretical ’, 35 and that the explanation can be defended if one is willing ‘to maintain a distinction between form and substance’. 36 It is certainly the case that, as Professor Penner argues, one could decide to look past the strict legal position and assert that, in substance, the settlor who benefits from a resulting trust is retaining something that he or she held before. The question is, however, what would be the normative justification for ignoring the strict legal position? The ‘retention’ argument appeals to a normative basis outside of itself: the point of emphasizing that the settlor is retaining something that he or she previously owned is that it leads to the conclusion that the settlor’s continued ownership is simply an expression of his or her pre-existing property rights and, therefore, justified on the same basis as the law’s initial recognition of those rights. Beyond that, the retention argument appears to be normatively inert. Thus, if one has to concede that the settlor is actually obtaining new rights, different to those which he previously held (and has given away), the retention idea loses its essential point and it does not seem that the argument can be rescued by rhetoric about substance and form. The retention idea might be a convenient metaphor to assist in the exposition of the relevant legal rules, assuming that some other normative justification could be found for them, but that is a different matter.

Consequences of the Insufficiency of the Retention Explanation

Although the deficiency, in doctrinal terms, of the retention explanation has been said to leave the ‘gap-filling’ resulting trust as ‘a rule in search of a rationale’, 37 it also has implications for presumed resulting trusts. These forms of resulting trust, the voluntary transfer and purchase money resulting trusts, involve an intention on the part of the claimant to make the defendant a trustee for the claimant 38 and it is tempting to see this trust-creating intention as providing a rationale for such trusts, independent of the concept of retention. However, the concept of retention is at the heart of equity’s traditional response to a key question (emphasized by commentators such as Professor Chambers 39 and Professor Swadling 40 ): why should the mere fact that the claimant intended to create a trust be sufficient to do so when the exercise of a settlor’s power to create a trust requires a declaration of trust?

The immediate answer to this question lies in the fact that, as reflected in the old equitable doctrine of ‘consideration’ 41 and its translation into the modern law of resulting trusts, the courts developed a rule of substantive law which dictates that the effect of a (direct or indirect) voluntary transfer depends on the intention of the transferor. 42 However, this rule itself requires explanation and the explanation, no longer satisfactory in modern times, is clearly supplied by the idea of retention and the historical circumstances that gave plausibility to that idea. In an era when a very large proportion of voluntary transfers were motivated by an intention, often taken for granted and so not declared expressly, that the recipient would hold as trustee, it made sense to take as the starting point that the transferor would ‘retain’ his ownership and to put the onus on the person arguing that the recipient was intended to take beneficially. Thus, the historical context does not simply explain the existence of a presumption of resulting trust in favour of the transferor but also the nature of that presumption, ie why it is a presumption of an intention to create a trust, rather than a declaration of trust. It is common for commentators to recognize that the presumption of resulting trust is outdated but to fail to see that the doctrine itself—turning on a mere intention to create a trust—was also decisively influenced by the same unusual historical circumstances.

What is the appropriate response to the conclusion that the rationale for a doctrine is based on social conditions which no longer prevail? The logical answer appears to be that the doctrine should be discarded unless some alternative, and more satisfactory, rationale can be identified. It will be argued in this article that the voluntary transfer and purchase money resulting trusts cannot be defended in modern times and should not form part of the law. In England and Wales, the purchase money resulting trust has, of course, already been impacted upon by the development of the common intention constructive trust. It is widely accepted that this newer doctrine has taken over much of the territory formerly occupied by the purchase money resulting trust. However, it will be pointed out that, if one looks past the misleading use of terminology in the case law, the process has gone further than is generally appreciated and, in fact, the purchase money resulting trust has essentially been deprived of any independent significance. It will also be suggested (although it will not be possible to explore the relevant arguments fully in the current article) that the voluntary transfer resulting trust should be discarded; in English law, the argument in favour of this is strengthened by the fact that it would be consistent with the demise of the purchase money resulting trust. The gap-filling resulting trust, however, stands in a different position. The fact that the claimant has expressly stipulated that the relevant transfer to the defendant is ‘on trust’ distinguishes the situation from one where the claimant merely intended to create a trust but did not expressly provide that this was to be the case. It will be argued that the gap-filling resulting trust doctrine is perfectly defensible in modern conditions and should remain part of the law of trusts. First, however, it is necessary to discuss an influential academic theory which identifies an alternative basis for resulting trusts and suggests that the scope of resulting trusts should be expanded rather than restricted.

In his An Introduction to the Law of Restitution , 43 Professor Peter Birks argued that resulting trusts operate to reverse unjust enrichment. In a 1992 book chapter, he elaborated the more ambitious argument that this understanding of resulting trusts justified a radical increase in their scope of application. 44 The argument has since been developed in detail by Professor Chambers, in his monograph on Resulting Trusts and in a series of later publications. 45 The relevant theory suggests that ‘[a]ll resulting trusts come into being because the provider of property did not intend to benefit the recipient.’ 46 This ‘absence of intention to benefit’ formulation does not appear to derive from any judicial authority but rather to represent Professor Chambers’ preferred phrasing of the applicable principle. Absence of intention to benefit is understood under this theory to include not merely cases where the claimant intended to pass the legal interest to the defendant but not the beneficial interest, ie intended to make the defendant a trustee (which the orthodox doctrine regards as covering the entire field), but also cases where the claimant lacked an intention to pass legal title to the defendant or had a vitiated intention to do so.

Overlooking the Role of Retention

In the days of institutional separation between law and equity, the courts of equity had nothing to say at all about the holding of property until some event occurred which attracted their jurisdiction. The notion of a legal owner as having, even before such an event, concurrent legal and equitable title would have been nonsense. 48

If it turns out that more events give rise to resulting trusts than previously suspected, the resulting trust is not moving, but getting an addition to its existing home. Complaints about imperialism should be directed, if anywhere, to Chancery. 53

Misreading Retention as Restitution: ‘Absence of Intention to Pass the Beneficial Interest’

The first, and seemingly most popular, is that the provider of the property intended to create a trust for himself or herself. The second and, it is respectfully suggested, better view is that the provider did not intend to give the benefit of that property to the recipient. 55

In contrast, it requires some verbal gymnastics to reconcile the relevant formulation with the Birks/Chambers theory. This is because the Birks/Chambers view suggests that resulting trusts can arise (i) where the claimant intended to give the defendant the legal title but not the beneficial interest (as under the orthodox view) and also (ii) where the claimant lacked the intention that the defendant would take the legal title. ‘Absence of intention to pass the beneficial interest ’ does not, at first sight, seem apt to cover the second set of cases. Professor Chambers suggests that ‘the phrase, “beneficial interest”, … can describe both legal and equitable ownership’. 57 However, he has not appreciated the influence of the retention analysis on the language used by equity to explain the doctrine of resulting trusts. It would be very confusing if, in the unqualified way required by Professor Chambers’ argument, the phrase ‘beneficial interest’ meant both ‘equitable ownership’ and ‘legal ownership’. Although Professor Chambers postulates the concept of ‘beneficial ownership at law’, 58 what is at issue (under the dominant retention analysis) is not legal ownership but rather that part of ownership which is not the legal title, ie the beneficial interest which is regarded as being conjoined to the legal title of an outright owner. Therefore, references to an absence of intention to pass the claimant’s beneficial interest suggest an intention to pass the bare legal title but not equitable ownership. Such references do not, on a natural reading, include an absence of intention to pass the conjoined package of legal title and pre-existing beneficial interest.

If he intends to transfer the beneficial interest in the property to B, the transaction will take effect as a gift and A will lose all interest in the property. If he intends to retain the beneficial interest for himself , [B] 61 will take the legal interest but will hold the property in trust for A. 62

A second example is provided by the leading American text, Scott and Ascher on Trusts, which explains that resulting trusts arise when ‘the circumstances indicate the absence of an intention to give the beneficial interest to the person in whom legal title is vested’. 63 Citing a similar passage from an earlier edition of this textbook, Professor Chambers implied in Resulting Trusts that it showed that his theory of resulting trusts was reflected in US law. 64 However, this is not the case. Scott and Ascher , in fact, sharply distinguishes constructive trusts (which are seen in US law as responding to unjust enrichment) from resulting trusts, which are explained on the orthodox basis discussed in this article. In the context of explaining the distinction, the textbook states that ‘a resulting trust arises in favour of the person who transfers property or causes it to be transferred under circumstances that raise the inference that he or she intended to transfer to the other bare legal title, but not the beneficial interest’. 65 This refers to a positive intention ‘to transfer to the other bare legal title’ (so that there would be a trust, involving the creation of a separate beneficial interest) combined with an absence of intention that the defendant should take the beneficial interest under that trust . To take a third and final example, Maitland stated that the presumption of resulting trust is a presumption that ‘I [the claimant] do not intend to benefit him [the defendant]’. This is a negative formulation of the test but its equivalence to the positive formulation is demonstrated by the remaining words in the relevant sentence: ‘… but intend that he shall hold as a trustee for me’. 66 Thus, ‘it is not the case … that the courts have been confused, alternating between inconsistent formulations of basic doctrine and failing to notice the serious practical consequences of this confusion, while frequently stating that the law is well settled and free from doubt’. 67 The equivalence of the positive and negative formulations of the presumption of resulting trust, as they have been understood in equity’s longstanding discourse on resulting trusts, 68 means that Professor Chambers was mistaken to discern a conflict in the case law.

By way of conclusion to this section, it may be pointed out that the fact that the presumption of resulting trust is a presumption that the claimant intended to make the defendant a trustee means that it does not encompass cases of ‘lack of authority/want of consent’. 69 Examples of this scenario are cases where a trustee improperly uses his or her beneficiaries’ money to purchase property, or a company director misdirects company funds into the purchase of assets in his or her own name. The argument that such scenarios do not fall within the presumption does not imply (as Professor Chambers suggested in Resulting Trusts ) that ‘a host of cases … are wrongly decided’, 70 only that these cases do not involve resulting trusts. 71 In fact, it is very difficult to relate the lack of authority/want of consent cases to the ‘absence of intention to benefit’ model. This is because the trigger for restitution in these cases is the defendant’s want of authority and not the state of mind of the claimant. As Professor Chambers himself has observed, in a jointly authored article, ‘the very idea of the claimant’s intentions fits ill here … the claimant’s knowledge or notice is irrelevant to the legal consequences of what the third party does’. 72 A proprietary remedy will not be excluded even if the claimant, knowing and silently approving of an unauthorized purchase by the trustee or other fiduciary, had in this sense an intention to benefit the person in whose name the property is being purchased. Conversely, if the defendant’s actions are authorized, eg by the terms of the trust, then no resulting trust will arise irrespective of whether the beneficiary knew or approved of the purchase. 73 Since the availability or otherwise of a remedy in this scenario does not turn on the claimant’s state of mind, it cannot sensibly be governed by a presumption as to the claimant’s mental state. This point may help to explain Professor Chambers’ move to the position that there is, after all, no presumption of resulting trust (which will be discussed shortly). 74

Some Difficulties with the Birks/Chambers Theory

Space does not permit a full exploration of the Birks/Chambers theory but a number of specific difficulties with it may be highlighted. The first relates to the path from the existence of an ‘absence of intention to benefit’ to the creation of a resulting trust based on unjust enrichment. Professor Chambers has described as ‘a very difficult issue’ the question of ‘how to relate the resulting trust to the recognised list of factors that make enrichment unjust’, conceding that it is ‘not an easy fit’. 75 He went on to suggest that perhaps his attempt in Resulting Trusts to identify an unjust factor was a ‘struggl[e] in vain’ because ‘[i]n hindsight, it might have been better to explain the law of unjust enrichment in terms of absence of basis rather than trying to explain the resulting trust in terms of unjust factors.’ 76 However, English law proceeds on the basis of the unjust factor approach, and not the failure of basis approach. 77 It follows from this that the unjust enrichment principle cannot be seen as explaining the creation of a resulting trust unless an unjust factor or factors can be identified, which (as Professor Chambers comes close to admitting) does not seem to be possible in all the situations regarded by Professor Chambers as falling within his central concept of ‘absence of intention to benefit’.

Consider one of the scenarios identified by Professor Chambers as leading to the creation of a resulting trust, the situation where the claimant ‘simply failed to address [his or her] mind to the issue of beneficial ownership’. 78 This is neither a recognized unjust factor in the law of unjust enrichment nor an established vitiating ground in the law of equity or the law of contract. It is simply a category invented by Professor Chambers himself—on the strength of his interpretation of one Australian case. 79 Although the task of analysis is not helped by the fact that the category’s parameters have not been explored in detail by Professor Chambers, it seems to cover some situations where the creation of a resulting trust would be the wrong result in principle. One example is the situation where a person enters into a voluntary transaction proposed by her advisors, and chooses not to read the relevant documentation (so that she does not appreciate the nature of the transaction) because she correctly believes that her advisors have her best interests at heart and can be trusted in this matter. Also relevant is a variation on this scenario, in which the person fails to address her mind to the consequences of the transaction because she is lazy and is reckless as to what the transaction in question might involve. In both those situations, although the claimant ‘failed to address her mind to the question of beneficial ownership’ it seems contrary to principle to suggest that the claimant should be able to rely on the principle of unjust enrichment. The fact that one cannot identify any unjust factor in these scenarios is not a mere technicality; it is indicative of the fact that this is not a case where the defendant has been unjustly enriched. 80

A second point is that it seems incorrect to suggest the existence of a pattern in the existing law whereby an ‘absence of intention to benefit the defendant’ generally leads to the creation of a resulting trust. In fact, the legal consequences of this are varied. In the classic resulting trust scenarios, where the claimant’s ‘absence of intention to benefit the defendant’ is attributable to his or her intention to create a trust, the response is indeed a resulting trust. However, in other situations, the consequence of ‘an absence of intention to benefit’, which Professor Chambers has interpreted broadly so as to include cases of vitiated intention to benefit, 81 is that the claimant obtains a ‘mere equity’, as for example in the case of undue influence. Such a claimant has a power to rescind the transaction but does not hold the beneficial interest under a resulting trust. 82 In another set of situations, the consequence of an ‘absence of intention to benefit’ is instead the voidness of the transaction in question. This occurs, for example, in cases of non est factum and in cases of gifts where the donor lacked mental capacity. 83 Finally, where the defendant has applied the claimant’s money in the purchase of property, again a situation which Professor Chambers regards as involving ‘absence of intention to benefit’, the claimant can elect between a proprietary remedy (which Professor Chambers would classify as a resulting trust) and the right to recover his or her money, secured by a lien on the purchased property. This is not the same as the law’s simply imposing a resulting trust, as would be the case if the claimant had, himself or herself, advanced the purchase price of the property. In light of this complex set of legal responses to what Professor Chambers terms ‘an absence of intention to benefit’, there seems to be no plausibility to the suggestion that, as the law stands, the resulting trust is the natural or default response in the relevant situations.

Finally, it is instructive to note the difficulties Professor Chambers’ argument encounters in explaining the nature of the presumption of resulting trust and the manner in which his position has changed in this respect. Initially, he argued that ‘[t]he presumption of resulting trust is that the provider of property to another did not intend to benefit the recipient’. 84 However, he has more recently retreated from this explanation, while insisting that he need not modify his argument in other respects 85 (although readers may be more familiar with his original position than with the rather less attractive position to which he has now moved). The occasion for Professor’s Chambers’ change of mind was a critique by Professor Swadling. 86 A key part of this critique was the argument that Professor Chambers had misunderstood the way in which presumptions of law operate, viz that, in the absence of rebutting evidence, ‘proof by evidence of one fact, the “basic” or “primary” fact, gives [one] party to the litigation the benefit of another fact, the “secondary” fact, without any need to adduce evidence in proof’. 87 According to Professor Swadling, in relation to the presumption of resulting trust, the secondary fact presumed cannot be—as Professor Chambers’ argument requires—that the claimant had ‘no intention to benefit’ the defendant because this is ‘a legal inference from facts proved by evidence, not the proof of an additional fact through the operation of a presumption’. 88

The presumption of resulting trust arises when one person acquires an asset at the expense of another and there is no apparent reason for the transaction. However, those are exactly the same facts that give rise to the resulting trust itself when proved by evidence. In other words, there is no ‘secondary fact’ being presumed. 91

Thus, Professor Chambers’ argument does not allow him to provide a convincing explanation of the presumption of resulting trust, a central feature of the law of resulting trusts. 99

This section of the article briefly traces the development of the purchase money resulting trust and explains how, despite misleading references in the recent case law to a continued role for ‘the presumption of resulting trust’, the purchase money resulting trust appears to have been completely displaced in English law by the common intention constructive trust. 100 The disappearance of the purchase money resulting trust resonates with the suggestion made previously in this article that this type of resulting trust is no longer defensible in modern times and should be discarded. The development in question, however, sits less easily with the view of the Birks/Chambers theory that resulting trusts reflect the modern principle against unjust enrichment and that their scope of operation should be increased.

The Purchase Money Resulting Trust

The purchase money resulting trust doctrine 101 was initially developed by analogy with the resulting use that arose upon a voluntary conveyance of land. 102 The idea was that a person who put up all the money for a purchase in the name of another could be seen as the ‘real’ purchaser; it was as if he had acquired the ownership of the land from the vendor and then voluntarily conveyed it himself to the nominal purchaser, so as to trigger the same principle as in the case of a voluntary conveyance of the land directly from the real purchaser to the nominee. Some further adjustment was required to deal with a situation where more than one person had contributed to the purchase price, but ultimately, 103 in this situation, each contributor was seen as the real purchaser of a fraction of the beneficial ownership of the property reflecting the proportion of the total purchase money that he or she had provided. By analogy with the treatment of the sole contributor scenario, each contributor was presumed to intend to retain the proportion of the beneficial interest of which he or she was the ‘real’ purchaser.

It is hard to reconcile with modern sensibilities this emphasis on the separate intentions of the individual contributors and the assumption that each person’s intention is determinative in respect of the proportion of the ownership that she has bought with her contribution to the purchase price. If, from a modern perspective and with a blank slate, one were developing a doctrine to deal with situations where a claimant has contributed to the purchase of property that is legally held in the name of another, the idea of focusing on the existence of an understanding between the parties would have attractions. Instead of regarding each contributor’s intention as sovereign in relation to the fraction of the ownership that he or she has purchased, one could instead concentrate on the injustice of the owning party’s seeking to go back on what was understood between the parties. The next section examines the common intention constructive trust doctrine, which represents a development along these lines.

The Common Intention Constructive Trust

A resulting, implied or constructive trust—and it is unnecessary for present purposes to distinguish between these three classes of trust—is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired. And he will be held to have so conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land. 105

Under the orthodox purchase money resulting trust analysis, the claimant’s contribution to the purchase price triggers a presumption that the claimant intended that the legal owner should hold the purchased property on trust. Under Lord Diplock’s common intention analysis, however, the contribution allows the court to infer the existence of a common intention between the parties. This involves the court’s concluding that the claimant’s conduct in making the contribution must, as a matter of fact, have been undertaken on the basis of a prior or contemporaneous common intention that the beneficial interests would differ from the legal title. In such cases, the claimant’s conduct in making the contribution to the purchase price also constitutes the detrimental reliance which makes it inequitable for the defendant to deny that the claimant has a beneficial interest in the disputed property. Therefore, the court will find that the claimant is entitled to the share that was commonly intended. The rationale for the creation of this form of trust clearly bears no relationship to the rationale for the creation of a resulting trust and it has now been accepted that the common intention trust is a constructive, rather than a resulting trust. 107

A Continued Role for the (Presumption of) Resulting Trust?

There has been some debate in the case law as to whether the resulting trust continues to exist despite the advent of the common intention constructive trust. The question has arisen in the context of the situation where a common intention has been inferred from conduct and does not extend to the question of the extent of the respective shares in the beneficial ownership. This issue was the major point of disagreement between the Law Lords in Stack v Dowden . 108 According to the majority in Stack , in such cases ‘the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property’. 109 However, Lord Neuberger took a different view, stating that ‘[w]here the only additional relevant evidence to the fact that the property has been acquired in joint names is the extent of each party’s contribution to the purchase price, the beneficial ownership at the time of acquisition will be held … in the same proportions as the contributions to the purchase price’. 110

According to Lord Neuberger, that ‘solution’ is ‘no more than a presumption’, 111 which is capable of being rebutted. He noted that in many cases there would be evidence available that ‘would often enable the court to deduce an agreement or understanding amounting to an intention as to the basis on which the beneficial interests would be held’. 112 He explained that ‘[i]t would be in this way that the resulting trust would become rebutted and replaced, or (conceivably) supplemented, by a constructive trust’. 113 Thus, Lord Neuberger’s approach means that the fact that the claimant has made a financial contribution to the purchase price raises a presumption of resulting trust and this will lead to the creation of a resulting trust in the proportions of the parties’ contributions unless the presumption is rebutted by evidence that shows that the parties had a common intention in favour of a specific alternative division of the beneficial interests, which would lead to a constructive trust instead.

While Lord Neuberger dissented in Stack , the majority seemed to limit their approach to ‘the domestic consumer context’, 114 leaving open the possibility that it might be appropriate to apply Lord Neuberger’s approach outside this context. 115 The recent Privy Council decision of Marr v Collie 116 suggests that the majority approach in Stack is not limited to the ‘purely domestic setting’, 117 encompassing also commercial investments made by a couple in an intimate personal relationship (what might be described as an example of the ‘domestic non-consumer context’). Nonetheless, it is still possible that the majority approach does not apply where there is no ‘domestic’ aspect to the case at all, ie when the parties are not in an intimate cohabitation or other close family relationship. 118 The key question for present purposes is whether the possible survival of ‘the presumption of resulting trust’, in at least some factual situations, is an indication of the survival of the purchase money resulting trust. The answer suggested in this article will be that it is not such an indication, and that the terminology used in Stack v Dowden has been misleading.

In the view of the current author, Lord Neuberger’s view that his approach involves the application of ‘the presumption of resulting trust’ involves a misunderstanding of the nature of presumptions. In the words of Lord Nicholls in Royal Bank of Scotland v Etridge (No 2) , 119 as quoted by Lord Neuberger in Stack , the ‘use of the term ‘presumption’ is descriptive of a shift in the evidential onus on a question of fact’. 120 The presumption of resulting trust, when it is not rebutted by contrary evidence, operates as a method of proof of a particular fact. The scope for operation of the presumption of resulting trust lies in situations where there is no available evidence as to intention (as, for example, if the relevant parties are dead by the time the matter is litigated), or where the available evidence is unreliable or difficult to interpret. The presumption cannot be of assistance in a case where there is no gap in the evidence. In response to the question ‘what happens if the evidence proves that the parties had a common intention as to ownership but that common intention did not extend to the issue of the size of the parties’ shares?’, it is not coherent to answer that if these facts are proven by the evidence, we will rely on the presumption of resulting trust to prove that the facts are otherwise and that the parties actually did have a common intention that extended to the size of the shares. As was famously pointed out by Lamm J in Mackowik v Kansas City 121 ‘presumptions may be looked on as the bats of the law, flitting in the twilight but disappearing in the sunshine of actual facts’. 122

The function of the presumption of resulting trust, as with other presumptions, is to fill an evidential gap. It is not possible to use a presumption to fill a doctrinal gap, eg to solve the problem of determining the appropriate remedy where the claimant has relied upon a proven common intention that the beneficial interests should differ from the legal interest where (the evidence shows) the common intention did not extend to the question of the quantification of each party’s share. 123 This is not to deny that it is possible to argue for the quantification rule under discussion. The important point is that this doctrinal solution would not represent the application of the ‘presumption of resulting trust’ leading to the creation of a ‘resulting trust’. Instead, the argument would merely be that, under the common intention constructive trust analysis, the appropriate default solution where there is a common intention which does not extend to the quantification of the parties’ shares is a quantification based on the respective financial contributions to the purchase price. This would lead to the creation of a constructive trust.

It might be protested that the preceding argument assumes what it seeks to prove, ie that the resulting trust has been absorbed into the common intention analysis. This counter-argument would insist that no common intention constructive trust can arise unless there was a common intention as to the parties’ precise shares. Therefore, the counter-argument would run, what is happening in the situation under discussion is that a resulting trust has arisen on the basis of well-established principles and that no common intention constructive trust has arisen to displace that resulting trust. If this counter-argument were correct, then a purchase money resulting trust could arise in favour of a claimant who unilaterally intended to gain a greater share for himself or herself, in circumstances where the absence of any common intention to this effect would preclude a common intention constructive trust. Significantly, however, there is appellate court authority to the contrary. In Fowler v Barron , 124 the Court of Appeal rejected the claim of a cohabitant who had provided all the purchase money for a property that was conveyed into the joint names of the parties. Arden LJ emphasized that ‘[t]he emphasis is on the parties’ shared intentions,’ 125 so that it was not possible to take account of ‘any secret intention of Mr Barron, that Miss Fowler should only benefit in the event of his death and on the basis that they were then still living together’. 126 She went to insist that ‘for the same reason, the fact that Mr Barron was mistaken as to the effect of putting the property into joint names, and did not appreciate that that would give Miss Fowler an immediate and absolute entitlement to a beneficial interest is of no materiality’. 127 This case shows a determination by the court to keep the focus on the common intentions of the parties; it was not enough that the claimant had an intention that would have been consistent with a purchase money resulting trust in his favour.

It is true that this case arose in the context of a dispute between cohabitants, so that it might be argued that the demise of the purchase money resulting trust is limited to the domestic context. However, there is no indication in the leading authorities of Stack and Jones v Kernott 128 that different substantive rules of law apply to disputes in the domestic context as compared to those applicable in other contexts. Baroness Hale suggested in Stack that ‘the presumption of resulting trust is not a rule of law’. 129 Considering this dictum, Briggs LJ, writing extra-judicially, has recently commented that: ‘the doctrine [of resulting trusts] is not really a rule of law at all, but an aspect of the evidential rules about burden of proof’. 130 Therefore, in suggesting in Stack that the presumption of resulting trust was not the appropriate ‘starting point’ 131 in certain situations, it seems clear that Baroness Hale was making a point about the location of the burden of proof, rather than suggesting that a different set of legal rules applied in one context as opposed to another. 132

It seems, therefore, that in English law—as a descriptive matter—the advent of the common intention constructive trust has effectively killed off the purchase money resulting trust. The fact that Stack and Jones contemplate the possible survival of the ‘presumption of resulting trust’ outside the domestic context does not mean that the outcome would be a resulting trust. Instead, the operation of a presumption in favour of a quantification of the beneficial interests in proportion to the parties’ contributions would lead to a constructive trust dependent on the existence of a common intention between the parties, with the so-called ‘presumption’ operating, in fact, as a default method of quantifying the beneficial interests under that constructive trust when the common intention did not extend to the precise shares of the parties.

It may be that the only situation where the purchase money resulting trust could have independent significance is where counsel has failed to plead the common intention constructive trust (or where, not recognizing the purchase money resulting trust’s lack of independent significance, a judge gives permission to appeal on the basis of the purchase money resulting trust claim but not the common intention constructive trust claim). 133 It does not make sense to allow a doctrine to make occasional random appearances like this. If, indeed, the purchase money resulting trust no longer has independent significance, then it would provide one element of clarity, in an area greatly in need of clarification, if the courts could explicitly recognize this. The difficult task facing judges and commentators would then be made plain: to try to bring some coherence to the common intention constructive trust. 134

While space does not permit a detailed analysis of this point, it seems that it would be a logical development if, consistent with the apparent elimination of the purchase money resulting trust, the voluntary transfer resulting trust were to be discarded also, since it depends on the same outdated rationale. 135 It is true that, in both the case of a contribution to the purchase price and of a voluntary transfer, the fact that the claimant intended the creation of a trust will probably indicate the existence of a mistake or other basis for an unjust enrichment remedy (even if the Court of Appeal in Fowler v Barron did not appear to see any room for such a remedy). However, the situation should be dealt with on the basis of ordinary unjust enrichment principles, and there should be no special doctrine, applicable only to such situations, which would lead to the creation of a trust in favour of the claimant. Once the outdated retention principle is discarded, having been recognized as the reason why in the past a resulting trust was recognized in such situations, there is no reason to provide the claimant with more than a personal remedy in the situations under discussion. 136

It was argued in the previous section that there is no justification, in modern times, for presumed resulting trusts. The position is different, however, in the context of gap-filling resulting trusts. The context in which these resulting trusts arise is crucially different because the claimant has not merely intended to create a trust but has expressly stipulated that the recipient is to take on trust.

As a starting point in exploring a possible justification for the ‘gap-filling’ resulting trust, 137 it is necessary to look at the justification for the law’s treatment of fully express trusts. Consider a situation where the settlor creates a trust by transferring property to the trustee to hold on trust for the beneficiary. On one view this can be seen as a straightforward instance of the settlor’s having exercised his or her power to create an express trust, having satisfied all the requirements stipulated by the law. This is not very informative, however, because it leaves open the question of the justification for those requirements. In fact, it is clear that, although the trust is a legal device or institution that settlors consciously choose to rely upon, there is an underlying normative foundation to the shape of this institution. As both Professor Ben McFarlane and Professor Simon Gardner have noted, there must logically have been a point in legal history where the ‘express trust’ did not exist as a recognized institution in the law, so that at first a settlor who entrusted property to a trustee was not consciously availing himself or herself of an established legal device. 138 Thus, the settlor was reposing trust in the trustee by transferring the property to him or her. What was ‘quaintly known as the problem of the ‘faithless feoffees’ 139 arose when the trust of the settlor was betrayed and the trustee sought to keep the trust property for himself or herself. The law’s response ultimately went beyond preventing the trustee from being unjustly enriched and extended to enforcing the trust in favour of the beneficiaries under the trust, including protecting their interest in the event of the trustee’s bankruptcy and allowing them to trace the trust property into the hands of third parties.

As a volunteer, it does not appear that the beneficiary has any independent claim to this highly favourable treatment. The normative foundation of the law’s protection of the third-party beneficiary must reside in the settlor’s conduct in reposing trust in the trustee by entrusting the trust property to him or her, and nominating the third-party beneficiary as the person for whom the property should be held. Thus, in its origins, the duty that the trustee owes is to the settlor and it is the settlor’s act in specifying the beneficiary that focuses that duty on the beneficiary instead. What, then, about the situation when there is no (validly) identified beneficiary? Does the absence of a validly nominated beneficiary mean that the settlor’s transfer on trust imposes no duties on the recipient in terms of dealing with the property he or she has received, having no greater effect in this respect than eg a transfer of property made by mistake, with no intention of making the recipient a trustee?

The answer, it is submitted, is that the absence of a validly nominated beneficiary does not remove the normative foundations for the imposition of a trust upon the intended trustee. By accepting the property on trust, the trustee has accepted the settlor’s stipulation that the trustee will not use the property for his or her own benefit. If he or she acts contrary to that duty, the trustee would be acting unconscionably and, in a situation where no beneficiary has been validly nominated, the person who would be wronged is the settlor; therefore, the law responds by making the trustee hold on trust for the settlor.

It should be noted that the legal response, the creation of a trust, matches the normative foundation of the settlor’s claim. The most important difference between making available a personal remedy for unjust enrichment and the recognition of a trust is that the trust property never forms part of the trustee’s patrimony and is not affected by his or her bankruptcy. This is an effect which the settlor deliberately acted to bring about, by making the transfer ‘on trust’. This amounts to a specification by the settlor that the basis on which the trustee was being given the property was that he or she could not use it for his or her own benefit and that it would not form part of his or her patrimony. As Maitland put it, ‘I have made A a trustee for somebody, and a trustee he must be—if for no one else then for me or my representatives.’ 140 The same point is also conveyed by the idea, discussed earlier in this article, 141 that resulting trusts arise because the trustee was not intended to take the beneficial interest in the property. This formulation emphasizes the key fact that, although the settlor has not validly specified beneficiaries under the intended trust, or has made an incomplete specification, he or she has expressly specified that the recipient is to be no more than a trustee. 142

As a descriptive matter, resulting trusts arise only in situations where the claimant intended to make the defendant a trustee. The cases show that the presumption of resulting trust is a presumption that the claimant intended to make the defendant a trustee or, in other words, did not intend to pass the beneficial (ie equitable) interest to him or her. The doctrine of resulting trusts is a remarkably antiquated one. It reflects historical conditions that made it reasonable for the courts to accept a mere intention to create a trust as sufficient to justify the settlor’s ‘retention’ of the beneficial interest. Having identified the outdated reasoning which still shapes the contours of the doctrine of resulting trusts, this article has argued that the retention idea is not defensible in doctrinal terms as a justification for the creation of a trust. It is a fiction that the law should no longer indulge.

A logical response would be to discard the category of presumed resulting trusts. As this article has noted, this process is, in fact, already well advanced in English law because the purchase money resulting trust has been completely eclipsed by the newer common intention constructive trust. The article has argued that it is important not to be misled by references in the cases to a continued role, in certain fact situations, for a ‘presumption of resulting trust’. In light of the case law, these must be understood as referring to a default method of calculating the share under a common intention constructive trust. The article has suggested that it would also seem to make sense for the law to discard the less commonly invoked voluntary transfer resulting trust. The position is different, however, in relation to the final category, the gap-filling resulting trust. In this scenario, the claimant’s intention to make the defendant a trustee has not remained in the realm of intention but has been expressly declared. As explained in the article, this means that the normative justification for the recognition of express trusts is engaged, so that the law is justified in giving effect to the claimant’s express specification that the defendant will take the property as a mere trustee. Thus, having sought to establish, as a descriptive matter, the nature of resulting trusts, this article has ultimately concluded that, as a normative matter, resulting trusts should play a smaller role in the modern law, arising only in cases where the claimant has expressly declared a trust.

The orthodox understanding of resulting trusts that has been discussed in this article, and criticized as antiquated, emerges clearly from the case law. The main source of confusion in recent years has been the coming to prominence of the Birks/Chambers theory of resulting trusts. This theory, based on a mistaken understanding of the historically determined nature of the current law, regards resulting trusts as responding simply to unjust enrichment. Contrary to the position elaborated over centuries in the case law, and authoritatively confirmed by the House of Lords in Westdeutsche , 143 the relevant theory makes no requirement that this enrichment should occur in the context of the claimant’s intention to make the defendant a trustee. Although space has not permitted a full-scale critique, this article has identified a number of flaws in the Birks/Chambers theory, including the difficulty in reconciling the theory with the requirement in the law of unjust enrichment that an unjust factor be identified and the fact that the theory requires that the presumption of resulting trust be regarded as something other than a presumption. When first advancing the theory, Professor Birks explained that if his ‘experimental’ view of the ‘nature and mission of the resulting trust is wrong, it is important that this error should be exposed before a heresy takes root’. 144 It seems best to avoid the term ‘heresy’, with its overtones of a quasi-religious attachment to one’s position. In more mundane language, it may be concluded that Professor Birks’ view was based on a misreading of the authorities and—notwithstanding the skill with which the theory has subsequently been championed by Professor Chambers—it should indeed be recognized as an error.

For helpful discussion and/or comments on a previous draft, I would like to thank Dr Niamh Connolly, Professor Mary Donnelly, Professor Birke Häcker, Professor Ben McFarlane, Professor Charles Mitchell, Dr Aruna Nair and Dr Charlie Webb, as well as the anonymous referees and all those who attended the CLP lecture. Any remaining errors are my own.

1 ie where the recipient gave no consideration for the transfer.

2 This label is intended simply to be descriptive. Megarry J suggested the label ‘automatic’ resulting trusts in Re Vandervell’s Trusts ( No 2 ) [1974] Ch 269 (Ch) 279. This label has, however, been criticized by Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL) 708 (and see also Willliam Swadling, ‘Explaining Resulting Trusts’ (2008) 124 LQR 72, 99–100). The alternative label ‘failed trust resulting trust’ (employed by Swadling, eg ibid 73) is misleading, in the view of the current author, because it suggests that the settlor’s expressed intention to create a trust has simply ‘failed'; contrast the justification offered in the section entitled ‘The Normative Justification for Gap-Filling Resulting Trusts’ below.

3 See generally Robert Chambers, Resulting Trusts (OUP 1997). It is sometimes suggested that the so-called Quistclose trust, named after the decision of the House of Lords in Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567, provides another example of a resulting trust. Space does not permit a detailed examination of the nature of Quistclose trusts in the present article. The current author finds convincing the theoretical explanation, in terms of express trusts, offered by Peter Millett, ‘The Quistclose Trust – Who Can Enforce It?’ (1985) 101 LQR 269 and supported by James Penner, ‘Lord Millett’s Analysis’ in William Swadling (ed), The Quistclose Trust (Hart Publishing 2004).

4 The argument suggests that the claimant’s intention to create a trust, where it is present, is relevant only to show that the claimant did not intend the defendant to take the benefit of the property; such an intention is not regarded as being effective to create a trust directly but, because it demonstrates that the defendant has been unjustly enriched, is regarded as triggering the creation of a trust to reverse the unjust enrichment.

5 cf Fred Wilmot-Smith’s criticism of this type of classification-based reasoning in ‘Reasons? For Restitution ?’ (2016) 79 MLR 1116, 1121–22.

6 Neil Jones, ‘Uses and “Automatic” Resulting Trusts of Freehold’ (2013) 72 CLJ 91, 94 (footnotes omitted).

7 AWB Simpson, A History of the Land Law (2nd edn, OUP 1986) 182.

8 C St Germain, ‘ Second Dialogue ’ , in TFT Plucknett and JL Barton (eds), Doctor and Student (Selden Society 1974) 91, ch 22 [56a]; the spelling here, and in later quotations from this source, has been modernized.

9 WH Rowe (ed), The Reading upon the Statute of Uses of Francis Bacon (W Stratford 1804) 22.

10 JH Baker, The Oxford History of the Laws of England: Vol VI 1483–1558 (OUP 2003) 675.

11 Swadling argues that the presumption of resulting trust is a presumption that the settlor expressly declared a trust for himself: see Swadling (n 2) 79–85. However, the case law conclusively shows that the modern presumption is a presumption as to the intention of the settlor: John Mee ‘Presumed Resulting Trusts, Intention and Declaration’ (2014) 73 CLJ 86, 90–94.

12 Note that, under the modern law also, resulting trusts have been found to exist in cases where the trustee was intended to be merely a passive nominee, who would not even be aware of the fact that legal ownership had been transferred to him or her. See eg Standing v Bowring (1881) 31 Ch D 282 (CA) 289; Re Vinogradoff [1935] WN 68 (Ch). cf Mee (n 11) 99–100.

13 St Germain (n 2), ch 22 [54b].

14 Rowe (ed) (n 9) 45. See further Jones (n 6) 94ff. See also Neil Jones, ‘Uses, Trusts and a Path to Privity’ (1997) 56 CLJ 175, 178–82; Neil Jones, ‘Trusts in England after the Statute of Uses: A View from the 16th Century’ in Richard Helmholz and Reinhard Zimmermann (eds), Itinera Fiduciae: Trust and Treuhand in Historical Perspective (Duncker & Humblot 1998) 190–92.

15 The First Part of the Institutes of the Lawes of England; or, a Commentary upon Littleton (4th edn, M Flesher and others 1639) 23a.

16 Samme’s Case (1609) 13 Co Rep 54, 56; 77 ER 1464, 1466.

17 cf Jones (n 6) 98–99 (see his fn 56).

18 Shortridge v Lamplough (1700) 7 Mod 71, 72 quoted by Jones (n 6) 99.

19 St Germain (n 2), ch 22 [54b].

20 Godbold v Freestone (1694) 3 Lev 406, 407. See also Abbot v Burton (1708) 11 Mod 181, 182 (Trevor CJ), discussed by Jones (n 6) 100. In the modern law also, there is no essential difference between a resulting trust and a bare express trust in favour of the settlor, a point which is relevant to understanding the modern case of Hodgson v Marks [1971] Ch 892; see the discussion in Mee (n 11) 104–05.

21 (1759) 1 Black W 123.

22 ibid 185. See also Northen v Carnegie (1859) 4 Drew 587, 593; 62 ER 225, 227 (Kindersley VC).

23 Richard Preston, An Essay in a Course of Lectures on Abstracts of Title Vol 2 (W Clarke & Sons 1818) 436.

24 See John Mee, ‘“Automatic” Resulting Trusts: Retention, Restitution, or Reposing Trust’ in Charles Mitchell (ed), Constructive and Resulting Trusts (Hart Publishing 2010) 215–18. Note also Re Robb’s Contract [1941] Ch 463 where, in the context of a dispute over stamp duty, it was held that a conveyance leading to a resulting trust is one ‘under which no beneficial interest passes in the property conveyed or transferred’ for the purposes of the Finance (1909–10) Act, 1910, s 74(6).

25 [1967] 2 AC 291 (HL).

26 ibid 313.

27 ibid 329. See also ibid 307–08 (Lord Reid).

28 Note eg Shephard v Cartwright [1955] AC 431, 454 (Lord Reid); Tribe v Tribe [1996] 1 Ch 107, 129, 134, 135 (Millett LJ); Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 (PC) 1412 (Lord Millett); Lavelle v Lavelle [2004] EWCA 223, [2004] 2 FCR 418 [13] (Lord Phillips MR).

29 Jeffrey Hackney, Understanding Equity and Trusts (Fontana 1987) 153, quoted by Chambers Resulting Trusts (n 3) 51–52.

30 See eg Chambers (n 3) 53; Swadling (n 2) 100; Mee (n 24) 219–21.

31 [1996] AC 669.

32 ibid 706.

34 ibid 708–09 (Lord Browne-Wilkinson). See also ibid 689–90 (Lord Goff); 718 (Lord Slynn); 720 (Lord Woolf); 738 (Lord Lloyd).

35 ‘Resulting Trusts and Unjust Enrichment: Three Controversies’ in C Mitchell (ed), Constructive and Resulting Trusts (Hart Publishing 2010) n(24) 262 (original emphasis).

36 ibid 263.

37 Jones (n 6) 114.

38 As noted in Mee (n 11) 97, the presumption of resulting trust encompasses also an intention that the trustee would hold according to the claimant’s instructions, which has always been regarded as equivalent to an intention that the trustee should hold on trust for the claimant.

39 Resulting Trusts (n 3) 34.

40 Swadling (n 2) 80.

41 In this context, ‘consideration’ was understood in its older sense of the reason or motive explaining a transaction. See AWB Simpson, A History of the Common Law of Contract (Clarendon Press 1975) 329–32.

42 Mee (n 11) 106–109.

43 Revd edn (OUP 1989) esp 57–73.

44 ‘Restitution and Resulting Trusts’ in Stephen R Goldstein (ed), Equity and Contemporary Legal Developments (Hebrew University Jerusalem 1992).

45 Chambers (n 3) and, for example, ‘Resulting Trusts in Canada’ (2000) 38 Alta L Rev 378; ‘Resulting Trusts’ in Andrew Burrows and Lord Rodger (eds), Mapping the Law: Essays in Memory of Peter Birks (OUP 2006); ‘Is There a Presumption of Resulting Trust?’ in Charles Mitchell (ed), Constructive and Resulting Trusts n(24) (Hart Publishing 2010).

46 Chambers (n 3) 2.

47 Birks (n 43) 71.

49 Chambers (n 3) 103.

50 ibid 104.

51 A point made by Swadling (n 2) 101.

52 Chambers (n 3) 151.

53 ibid 244.

54 Dullow v Dullow (1985) 3 NSWLR 531 (NSW CA) 535 (Hope JA; Kirby P and McHugh JA concurring). See also Benger v Drew (1721) 1 P Wms 781, 781 (Lord Macclesfield); Murless v Franklin (1818) 1 Swan 13, 18 (Lord Eldon); Sidmouth v Sidmouth (1840) 2 Beav 447, 454–57 (Lord Langdale MR); Standing v Bowring (1885) 31 Ch D 282, 289 (Lindley LJ); Re Kerrigan (1946) 47 SR (NSW) 76, 81 (Jordan CJ). See also the further authorities cited in Mee (n 11) 101 fn 97. Note that gap-filling resulting trusts do not arise through the operation of the presumption of resulting trust: see Swadling (n 2) 94–99; Mee (n 24) 210 fn 13. It is obviously true that, as Lord Millett’s observed in Air Jamaica v Charlton [1999] 1 WLR 1399, 1412, a gap-filling resulting trust ‘may arise even when the transferor positively wished to part with the beneficial interest, as in Vandervell v Inland Revenue Commissioners [1967] 2 AC 291’. This, however, does not cast any light on the nature of the presumption of resulting trust.

55 Chambers (n 3) 19.

56 See eg Charles Mitchell, Paul Mitchell, Stephen Watterson (eds), Goff and Jones The Law of Restitution (9th edn, OUP 2016) 955–56; Jamie Glister and James Lee (eds), Hanbury and Martin: Modern Equity (20th edn, Sweet and Maxwell 2015) 230.

57 Chambers (n 3) 52.

59 Lavelle v Lavelle [2004] EWCA Civ 223; [2004] 2 FCR 418.

60 ibid [14].

61 In the judgment, the reference is to ‘A’ but it seems clear that this should read ‘B’.

62 [2004] EWCA Civ 223 [13] (emphasis added).

63 AW Scott, WF Fratcher, Mark L Ascher, Scott and Ascher on Trusts (5th edn, Aspen Publishers 2006) §40.1.1.

64 Chambers (n 3) 3, referring to WF Fratcher and AW Scott , Scott on Trusts (4th edn, Little Brown & Co 1989) § 404.1.

65 Scott, Fratcher and Ascher (n 63) §40.1.2.

66 FW Maitland, Equity: A Course of Lectures (revd edn by J Brunyate, CUP 1936) 79.

67 Mee (n 11) 103.

68 It is not being suggested here that there is no difference between the positive and negative formulations as interpreted by Professor Chambers ; the point is that, in order for there to be a conflict in the case law, the courts would have to have shared Professor Chambers’ interpretation.

69 On this issue, see generally Mitchell, Mitchell and Watterson (n 56) ch 8.

70 Chambers (n 3) 227.

71 In terms of authority, Professor Chambers makes much of Ryall v Ryall (1739) 1 Atk 59, where an executor used trust funds to purchase land in his own name and Lord Hardwicke referred to resulting trusts (although the remedy in the case appears to have been the imposition of a charge or lien over the land in question). In fact, the case law of three centuries ago is full of false starts and dead ends. The drawing of an analogy with resulting trusts in Ryall is explained by the existence of a line of authority suggesting that s 7 of the Statute of Frauds had the effect , inter alia , of preventing the tracing of money into land: see Mee (n 11) 106. Resulting trusts fell within the exemption in s 8 of the Statute of Frauds (equivalent to s 53(2) of the LPA 1925). In tracing cases not involving land, where no ‘peculiar rules or habits of Courts of Equity in respect to the charging of land’ stood in the way ( Taylor v Plumer (1815) 3 M & S 562, 579 (Lord Ellenborough CJ)), there was no discussion of the resulting trust. In the event, the concern about the effect of the Statute of Frauds receded and the reference to resulting trusts in Ryall appears to have influenced only the tentative observations of Spragge C in the old Ontario case of Goodfellow v Robertson (discussed in n 83). Professor Chambers also relies ( Resulting Trusts (n 3) 22) on Lane v Dighton (1762) Amb 409, where the defendants cited Ryall v Ryall . However, the sentence from the judgment of Clarke MR that Professor Chambers quotes as the basis for the decision comes from the judge’s summary of the argument of the unsuccessful plaintiffs and it does not seem that the decision actually supports his position.

72 Robert Chambers and James Penner, ‘Ignorance’ in Simone Degeling and James Edelman (eds), Unjust Enrichment in Commercial Law (Lawbook Company 2008) 256.

73 ibid 273: ‘The claimant’s ignorance of the enrichment is not an element of the cause of action to recover it, being neither sufficient nor necessary for that purpose.’

74 See text to nn 84–99.

75 Chambers (n 45) 287.

77 See eg Lowick Rose LLP v Swynson Ltd [2017] UKSC 32 [22] (Lord Sumption).

78 ‘Resulting Trusts in Canada’ (2000) 38 Alta L Rev 378, 391.

79 Brown v Brown (1993) 31 NSWLR 582. Neither Laskar v Laskar [2008] EWCA Civ 347; [2008] 1 WLR 2695 nor Lattimer v Lattimer (1978) 82 DLR (3d) 587 (Ont) (both cited by Chambers in this general context in ‘Is There a Presumption of Resulting Trust?’ (n 45) 283) appears to provide any support for the proposition that a failure on the claimant’s part to address her mind to the issue of beneficial ownership triggers a resulting trust.

80 Note also the discussion at the end of n 132.

81 See his discussion in Chambers (n 3), ch 5.

82 It appears that Professor Chambers now accepts this as a statement of the current law. See Robert Chambers An Introduction to Property Law in Australia (3rd edn, Lawbook Co 2013) 376, adopting the analysis in Birke Häcker ‘Proprietary Restitution after Impaired Consent Transfers: A Generalised Power Model’ (2009) 68 CLJ 324. Note also Sarah Worthington ‘The Proprietary Consequences of Rescission’ [2002] RLR 28.

83 Re Beaney [1978] 1 WLR 770 (Ch); Kicks v Leigh [2014] EWHC 3926 (Ch). Professor Chambers’ argument that incapacity can trigger a resulting trust rests on the authority of one Ontario case, Goodfellow v Robertson (1871) 18 Gr 572 (see eg Chambers (n 3) 23). However, Goodfellow actually provides no support for this argument. In the case, R paid money to A and, consistently with Re Beaney , this voluntary transfer was void on the supposition that R had lacked capacity at the time. The consequence was that, in subsequently purchasing land from a third-party vendor, A was using R’s money without authorization, since R lacked the capacity to assent to A’s use of it. It was this subsequent transaction that, on Spragge C’s analysis, was possibly (note Spragge C’s very tentative language: ibid 578) capable of triggering a resulting trust. The incapacity of R was merely the background to the issue of lack of consent/want of authority, discussed in text to nn 69–74.

84 Chambers (n 3) 38.

85 See Chambers (n 45) 276–87.

86 Swadling (n 2).

87 ibid 74.

88 ibid 90.

89 Chambers (n 45) 284.

90 ibid 285–86.

91 ibid 284–85.

92 Swadling (n 2) 75–77.

93 [2007] 2 AC 432.

94 ibid [123].

95 ibid, referring to the discussion by Lord Nicholls in Royal Bank of Scotland plc v Etridge (No 2 ) [2002] 2 AC 773 [16]. Note also eg Drake v Whipp [1996] 1 FLR 826 (CA) 827 (Peter Gibson LJ): ‘The resulting trust … operates as a presumed intention of the contributing party in the absence of rebutting evidence of actual intention’; O’Kelly v Davies [2014] EWCA Civ 1606; [2015] 1 WLR 2725 [19] (Pitchford LJ): ‘a judicially created evidential presumption as to the parties' intention’.

96 (1788) 2 Cox Eq Cas 92.

97 ibid 93.

98 See eg Prest v Petrodel Resources Ltd [2013] UKSC 34; [2013] 2 AC 415 [49] (Lord Sumption).

99 Note also that in a comparatively brief discussion in a more recent case note, ‘The Presumption of Resulting Trust: Nishi v Rascal Trucking Ltd ’ (2013–14) 51 Alta L Rev 667, Professor Chambers made no mention of his previous suggestion that the presumption of resulting trust is not a ‘true’ presumption. The discussion there appears to treat the presumption of resulting trust as sharing the normal features of presumptions; note eg the statement (ibid 672) that ‘there is no room for a presumption once the relevant facts are known’. It is possible that this signals a further refinement in Professor Chambers’ position.

100 The focus here is on the position under English law. It is not suggested that other jurisdictions have taken the same approach. In Canadian law, for example, the common intention trust analysis has been rejected by the Supreme Court of Canada: Kerr v Baranow [2011] 1 SCR 269, 2011 SCC 10 [21]-[29] (Cromwell J). Orthodox resulting trust principles were reaffirmed in Nishi v Rascal Trucking Ltd 2013 SCC 33; [2013] 2 SCR 438, where the Supreme Court rejected an argument that the purchase money resulting trust should be abandoned in favour of an unjust enrichment analysis.

101 This paragraph is adapted from John Mee, ‘ Pettitt v Pettitt (1970) and Gissing v Gissing (1971)’ in Charles Mitchell and Paul Mitchell (eds), Landmark Cases in Equity (Hart Publishing 2014) 630–31.

102 Dyer v Dyer (1788) 2 Cox Eq Cas 92, 93; 30 ER 42, 44 (Eyre CB). See the discussion in John Mee, ‘Resulting Trusts and Voluntary Conveyances of Land 1674–1925’ (2011) 32 JLH 215, 223–24.

103 See Wray v Steele (1814) 2 V & B 388 and contrast Crop v Norton (1740) 2 Atk 74.

104 [1971] AC 886.

105 ibid 905.

106 See Mee (n 11) 110–11, referring to Duke of Norfolk v Browne (1697) Pr Ch 80; Sidmouth v Sidmouth (1840) 2 Beav 447; Re Vinogradoff [1935] WN 68; Shephard v Cartwright [1955] AC 431.

107 See eg Jones v Kernott [2011] UKSC 53; [2012] 1 AC 776 [17] (Lord Walker and Lady Hale).

108 [2007] 2 AC 432.

109 Oxley v Hiscock [2005] Fam 211 [69] (Chadwick LJ), quoted in Stack v Dowden [61] by Baroness Hale.

110 Stack [110].

111 ibid [123].

112 ibid [124].

114 ibid [58] (Baroness Hale).

115 Note the judgment of Lord Neuberger in Laskar v Laskar [2008] EWCA Civ 347.

116 [2017] UKPC 17.

117 ibid [39] (Lord Kerr).

118 In Marr v Collie [53], Lord Kerr suggested that it would be ‘simplistic’ to conclude that a presumption of equal ownership applies in the domestic context and a presumption of resulting trust applies in the (wholly) non-domestic context. He went on to argue ([54]) that what is really important is the common intention of the parties and that ‘save perhaps where there is no evidence from which the parties’ intentions can be identified, the answer is not to be provided by the triumph of one presumption over another’. It is somewhat difficult to interpret this, however, because it appears to assume that the purpose of a presumption is to ‘provide the answer’ rather than merely to represent a starting point which ceases to be relevant if there is evidence of the parties’ actual intentions. See also n 123.

119 [2002] 2 AC 773, [16].

120 Stack [123] (Lord Neuberger).

121 (1906) 94 SW 256.

122 ibid 262–63.

123 The fact that Lord Kerr felt obliged to point out in Marr v Collie [2017] UKPC 17 ([54] that there should be no resulting trust when it is ‘the unambiguous mutual wish of the parties’ that ‘joint beneficial ownership should reflect their joint legal ownership’ may indicate the existence of a tendency in the cases and commentary to see ‘the presumption of resulting trust’ as a solution to the problem of quantifying the parties’ interests, unrelated to the actual intentions of the parties, that might be imposed in certain situations. See also ibid [49] and n 118.

124 [2008] EWCA Civ 377.

125 ibid [36].

126 ibid [37].

128 [2011] UKSC 53; [2012] 1 AC 776.

129 [2007] 2 AC 432 [60].

130 ‘Resulting Trusts after Prest’ (2014) 181 ACTAP Newsletter 4, 5.

131 Stack [59].

132 Lord Kerr’s judgment in Marr v Collie [2017] UKPC 17 gives contradictory signals in relation to the survival of the purchase money resulting trust as an independent doctrine. On one hand, the judgment focuses strongly on ‘the common intention of the parties’: ibid [56]. The claimant had contributed all of the purchase price for each of a number of investment properties that the couple in dispute had taken in joint names. Under the orthodox resulting trust, the only intention that would have been relevant was that of the claimant but the decision of the Privy Council was that the issues raised in the judgment, ‘particularly the intention of the parties at the time of the purchase’, should be remitted to a lower court for decision. The way that the decision in the case is framed does not seem to be consistent with the view that the claimant could succeed on the basis of a unilateral intention to obtain all the beneficial interest and the implication seems to be that a common intention would have to be demonstrated. On the other hand, Lord Kerr commented at one point (ibid [54]) that it ‘may’ be appropriate to apply the ‘resulting trust solution’ where the parties ‘have not formed any intention as to beneficial ownership but had, for instance, accepted advice that the property be acquired in joint names, without considering or being aware of the possible consequences of that’ (and where, therefore, there would be no common intention that the beneficial interests should differ from the legal interests, seeming to rule out a common intention constructive trust). This latter comment might seem to support Professor Chambers’ view that a resulting trust can arise where the claimant ‘gave no thought to the question of the beneficial interest’ (see the discussion in text to nn 78–80). However, in the relevant paragraph, Lord Kerr focused on the parties’ common intention, or lack of it, rather than on the separate intention of the claimant as required by Professor Chambers’ analysis. It seems, in any case, that Lord Kerr mischaracterized the problem that arises where a couple accepted advice that the property be taken in joint names. The issue is not that they formed no intention ‘as to beneficial ownership’; unless they specifically thought about some divergence between the two, they would have believed that joint legal ownership meant joint beneficial ownership. What they might well have failed to consider is the possibility that their relationship would end in disharmony, so that important practical consequences would attach to the way in which, without dwelling on the matter, they had agreed to share ownership. Other jurisdictions have invented new doctrines, not explicable on the basis of the orthodox law of unjust enrichment, to address this issue: see n 134.

133 Curley v Parkes [2004] EWCA Civ 1515.

134 This doctrine is highly unsatisfactory in doctrinal terms, partly because of the manner in which it evolved from the purchase money resulting trust and partly because the courts have distorted it in order to provide remedies in disputes arising in family situations. See the critique in John Mee, The Property Rights of Cohabitees (Hart Publishing 1999), ch 5. The courts in other Commonwealth jurisdictions have developed alternative doctrines which, although seeming to lack doctrinal legitimacy, are better adapted to provide such remedies. See ibid, chs 7–9, discussing the approaches of the courts in Canada, Australia and New Zealand.

135 The status of the voluntary conveyance resulting trust may already be somewhat less secure than that of the purchase money resulting trust. It does not appear to be capable of arising in relation to land (see John Mee ‘Resulting Trusts and Voluntary Conveyances of Land’ [2012] Conv 307) and it is not recognized as a category of resulting trust in US law ( Scott and Ascher (n 63) §40.1.1).

136 It is arguable that, in line with the views expressed by Deane J in Calverley v Green (1984) 155 CLR 242 (HCA) 266 in the context of a suggestion that the presumptions of resulting trust and advancement should be dropped, it would be best if the law were changed ‘by legislative intervention which will not disturb past transactions which may conceivably have been structured by reference to [the existing law]’. On the other hand, the existence of a personal remedy in unjust enrichment would limit the extent of the impact on individuals of a change in the law and it may not be all that realistic to expect the change under discussion to be accomplished by legislation.

137 Note the earlier discussion of this issue in Mee (n 24) 230–34.

138 See Gardner, ‘Reliance-Based Constructive Trusts’ in Charles Mitchell (ed), Constructive and Resulting Trusts (n 24) 84; Ben McFarlane ‘The Centrality of Constructive and Resulting Trusts’ in ibid 199.

139 John H Langbein ‘The Contractarian Basis of the Law of Trusts’ (1995) 105 YLJ 625, 634.

140 Maitland (n 66) 77.

141 See text to nn 54–67.

142 Following on from the suggestion that only this form of resulting trust should be recognized in the law, it could be argued that the category of ‘resulting trusts’ should be downgraded to a lower level in the hierarchy of trusts. It might be logical to divide trusts into only two categories and to allocate ‘resulting trusts’ to one or other category—either to the category of ‘constructive trusts’ or perhaps more appropriately, given the close relationship between gap-filling resulting trusts and express trusts, to a category of ‘express (including resulting) trusts’. Space does not permit a full exploration of this point in the current article.

143 [1996] AC 669.

144 Birks (n 44) 373.

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Democracy Dies Behind Paywalls

The case for making journalism free—at least during the 2024 election

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Produced by ElevenLabs and News Over Audio (NOA) using AI narration.

How many times has it happened? You’re on your computer, searching for a particular article, a hard-to-find fact, or a story you vaguely remember, and just when you seem to have discovered the exact right thing, a paywall descends. “$1 for Six Months.” “Save 40% on Year 1.” “Here’s Your Premium Digital Offer.” “Already a subscriber?” Hmm, no.

Now you’re faced with that old dilemma: to pay or not to pay. (Yes, you may face this very dilemma reading this story in The Atlantic .) And it’s not even that simple. It’s a monthly or yearly subscription—“Cancel at any time.” Is this article or story or fact important enough for you to pay?

Or do you tell yourself—as the overwhelming number of people do—that you’ll just keep searching and see if you can find it somewhere else for free?

According to the Reuters Institute for the Study of Journalism, more than 75 percent of America’s leading newspapers, magazines, and journals are behind online paywalls. And how do American news consumers react to that? Almost 80 percent of Americans steer around those paywalls and seek out a free option.

Paywalls create a two-tiered system: credible, fact-based information for people who are willing to pay for it, and murkier, less-reliable information for everyone else. Simply put, paywalls get in the way of informing the public, which is the mission of journalism. And they get in the way of the public being informed, which is the foundation  of democracy. It is a terrible time for the press to be failing at reaching people, during an election in which democracy is on the line. There’s a simple, temporary solution: Publications should suspend their paywalls for all 2024 election coverage and all information that is beneficial to voters. Democracy does not die in darkness—it dies behind paywalls.

The problem is not just that professionally produced news is behind a wall; the problem is that paywalls increase the proportion of free and easily available stories that are actually filled with misinformation and disinformation. Way back in 1995 (think America Online), the UCLA professor Eugene Volokh predicted that the rise of “cheap speech”—free internet content—would not only democratize mass media by allowing new voices, but also increase the proliferation of misinformation and conspiracy theories, which would then destabilize mass media.

Paul Barrett, the deputy director of the NYU Stern Center for Business and Human Rights and one of the premier scholars on mis- and disinformation, told me he knows of no research on the relationship between paywalls and misinformation. “But it stands to reason,” he said, “that if people seeking news are blocked by the paywalls that are increasingly common on serious professional journalism websites, many of those people are going to turn to less reliable sites where they’re more likely to encounter mis- and disinformation.”

In the pre-internet days, information wasn’t free—it just felt that way. Newsstands were everywhere, and you could buy a paper for a quarter. But that paper wasn’t just for you: After you read it at the coffee shop or on the train, you left it there for the next guy. The same was true for magazines. When I was the editor of Time , the publisher estimated that the “pass-along rate” of every issue was 10 to 15—that is, each magazine we sent out was read not only by the subscriber, but by 10 to 15 other people. In 1992, daily newspapers claimed a combined circulation of some 60 million; by 2022, while the nation had grown, that figure had fallen to 21 million. People want information to be free—and instantly available on their phone.

Barrett is aware that news organizations need revenue, and that almost a third of all U.S. newspapers have stopped publishing over the previous two decades. “It’s understandable that traditional news-gathering businesses are desperate for subscription revenue,” he told me, “but they may be inadvertently boosting the fortunes of fake news operations motivated by an appetite for clicks or an ideological agenda—or a combination of the two.”

Digital-news consumers can be divided into three categories: a small, elite group that pays hundreds to thousands of dollars a year for high-end subscriptions; a slightly larger group of people with one to three news subscriptions; and the roughly 80 percent of Americans who will not or cannot pay for information. Some significant percentage of this latter category are what scholars call “passive” news consumers—people who do not seek out information, but wait for it to come to them, whether from their social feeds, from friends, or from a TV in an airport. Putting reliable information behind paywalls increases the likelihood that passive news consumers will receive bad information.

In the short history of social media, the paywall was an early hurdle to getting good information; now there are newer and more perilous problems. The Wall Street Journal instituted a “hard paywall” in 1996. The Financial Times formally launched one in 2002. Other publications experimented with them, including The New York Times , which established its subscription plan and paywall in 2011. In 2000, I was the editor of Time.com, Time magazine’s website, when these experiments were going on. The axiom then was that “must have” publications like The Wall Street Journal could get away with charging for content, while “nice to have” publications like Time could not. Journalists were told that “information wants to be free.” But the truth was simpler: People wanted free information, and we gave it to them. And they got used to it.

Of course, publications need to cover their costs, and journalists need to be paid. Traditionally, publications had three lines of revenue: subscriptions, advertising, and newsstand sales. Newsstand sales have mostly disappeared. The internet should have been a virtual newsstand, but buying individual issues or articles is almost impossible. The failure to institute a frictionless mechanism for micropayments to purchase news was one of the greatest missteps in the early days of the web. Some publications would still be smart to try it.

I’d argue that paywalls are part of the reason Americans’ trust in media is at an all-time low. Less than a third of Americans in a recent Gallup poll say they have “a fair amount” or a “a great deal” of trust that the news is fair and accurate. A large percentage of these Americans see media as being biased. Well, part of the reason they think media are biased is that most fair, accurate, and unbiased news sits behind a wall. The free stuff needn’t be fair or accurate or unbiased. Disinformationists, conspiracy theorists, and Russian and Chinese troll farms don’t employ fact-checkers and libel lawyers and copy editors.

Part of the problem with the current, free news environment is that the platform companies, which are the largest distributors of free news, have deprioritized news. Meta has long had an uncomfortable relationship with news on Facebook. In the past year, according to CNN, Meta has changed its algorithm in a way that has cost some news outlets 30 to 40 percent of their traffic (and others more). Threads, Meta’s answer to X, is “not going to do anything to encourage” news and politics on the platform, says Adam Mosseri, the executive who oversees it. “My take is, from a platforms’ perspective, any incremental engagement or revenue [news] might drive is not at all worth the scrutiny, negativity (let’s be honest), or integrity risks that come along with them.” The platform companies are not in the news business; they are in the engagement business. News is less engaging than, say, dance shorts or chocolate-chip-cookie recipes—or eye-catching conspiracy theories.

As the platforms have diminished news, they have also weakened their integrity and content-moderation teams, which enforce community standards or terms of service. No major platform permits false advertising, child pornography, hate speech, or speech that leads to violence; the integrity and moderation teams take down such content. A recent paper from Barrett’s team at the NYU Stern Center for Business and Human Rights argues that the greatest tech-related threat in 2024 is not artificial intelligence or foreign election interference, but something more mundane: the retreat from content moderation and the hollowing-out of trust-and-safety units and election-integrity teams. The increase in bad information on the free web puts an even greater burden on fact-based news reporting.

Now AI-created clickbait is also a growing threat. Generative AI’s ability to model, scrape, and even plagiarize real news—and then tailor it to users—is extraordinary. AI clickbait mills, posing as legitimate journalistic organizations, are churning out content that rips off real news and reporting. These plagiarism mills are receiving funding because, well, they’re cheap and profitable. For now, Google’s rankings don’t appear to make a distinction between a news article written by a human being and one written by an AI chatbot. They can, and they should.

The best way to address these challenges is for newsrooms to remove or suspend their paywalls for stories related to the 2024 election. I am mindful of the irony of putting this plea behind The Atlantic ’s own paywall, but that’s exactly where the argument should be made. If you’re reading this, you’ve probably paid to support journalism that you think matters in the world. Don’t you want it to be available to others, too, especially those who would not otherwise get to see it?

Emergencies and natural disasters have long prompted papers to suspend their paywalls. When Hurricane Irene hit the New York metropolitan area in 2011, The New York Times made all storm-related coverage freely available. “We are aware of our obligations to our audience and to the public at large when there is a big story that directly impacts such a large portion of people,” a New York Times editor said at the time. In some ways, this creates a philosophical inconsistency. The paywall says, This content is valuable and you have to pay for it . Suspending the paywall in a crisis says, This content is so valuable that you don’t have to pay for it . Similarly, when the coronavirus hit, The Atlantic made its COVID coverage—and its COVID Tracking Project—freely available to all.

During the pandemic, some publications found that suspending their paywall had an effect they had not anticipated: It increased subscriptions. The Seattle Times , the paper of record in a city that was an early epicenter of coronavirus, put all of its COVID-related content outside the paywall and then saw, according to its senior vice president of marketing, Kati Erwert, “a very significant increase in digital subscriptions”—two to three times its previous daily averages. The Philadelphia Inquirer put its COVID content outside its paywall in the spring of 2020 as a public service. And then, according to the paper’s director of special projects, Evan Benn, it saw a “higher than usual number of digital subscription sign-ups.”

The Tampa Bay Times , The Denver Post , and The St. Paul Pioneer Press , in Minnesota, all experienced similar increases, as did papers operated by the Tribune Publishing Company, including the Chicago Tribune and the Hartford Courant . The new subscribers were readers who appreciated the content and the reporting and wanted to support the paper’s efforts, and to make the coverage free for others to read, too.

Good journalism isn’t cheap, but outlets can find creative ways to pay for their reporting on the election. They can enlist foundations or other sponsors to underwrite their work. They can turn to readers who are willing to subscribe, renew their subscriptions, or make added donations to subsidize important coverage during a crucial election. And they can take advantage of the broader audience that unpaywalled stories can reach, using it to generate more advertising revenue—and even more civic-minded subscribers.

The reason papers suspend their paywall in times of crisis is because they understand that the basic and primary mission of the press is to inform and educate the public. This idea goes back to the country’s Founders. The press was protected by the First Amendment so it could provide the information that voters need in a democracy. “Our liberty depends on the freedom of the press,” Thomas Jefferson wrote, “and that cannot be limited without being lost.” Every journalist understands this. There is no story with a larger impact than an election in which the survival of democracy is on the ballot.

I believe it was a mistake to give away journalism for free in the 1990s. Information is not and never has been free. I devoutly believe that news organizations need to survive and figure out a revenue model that allows them to do so. But the most important mission of a news organization is to provide the public with information that allows citizens to make the best decisions in a constitutional democracy. Our government derives its legitimacy from the consent of the governed, and that consent is arrived at through the free flow of information—reliable, fact-based information. To that end, news organizations should put their election content in front of their paywall. The Constitution protects the press so that the press can protect constitutional democracy. Now the press must fulfill its end of the bargain.

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NPR in Turmoil After It Is Accused of Liberal Bias

An essay from an editor at the broadcaster has generated a firestorm of criticism about the network on social media, especially among conservatives.

By Benjamin Mullin and Katie Robertson

NPR is facing both internal tumult and a fusillade of attacks by prominent conservatives this week after a senior editor publicly claimed the broadcaster had allowed liberal bias to affect its coverage, risking its trust with audiences.

Uri Berliner, a senior business editor who has worked at NPR for 25 years, wrote in an essay published Tuesday by The Free Press, a popular Substack publication, that “people at every level of NPR have comfortably coalesced around the progressive worldview.”

Mr. Berliner, a Peabody Award-winning journalist, castigated NPR for what he said was a litany of journalistic missteps around coverage of several major news events, including the origins of Covid-19 and the war in Gaza. He also said the internal culture at NPR had placed race and identity as “paramount in nearly every aspect of the workplace.”

Mr. Berliner’s essay has ignited a firestorm of criticism of NPR on social media, especially among conservatives who have long accused the network of political bias in its reporting. Former President Donald J. Trump took to his social media platform, Truth Social, to argue that NPR’s government funding should be rescinded, an argument he has made in the past.

NPR has forcefully pushed back on Mr. Berliner’s accusations and the criticism.

“We’re proud to stand behind the exceptional work that our desks and shows do to cover a wide range of challenging stories,” Edith Chapin, the organization’s editor in chief, said in an email to staff on Tuesday. “We believe that inclusion — among our staff, with our sourcing, and in our overall coverage — is critical to telling the nuanced stories of this country and our world.” Some other NPR journalists also criticized the essay publicly, including Eric Deggans, its TV critic, who faulted Mr. Berliner for not giving NPR an opportunity to comment on the piece.

In an interview on Thursday, Mr. Berliner expressed no regrets about publishing the essay, saying he loved NPR and hoped to make it better by airing criticisms that have gone unheeded by leaders for years. He called NPR a “national trust” that people rely on for fair reporting and superb storytelling.

“I decided to go out and publish it in hopes that something would change, and that we get a broader conversation going about how the news is covered,” Mr. Berliner said.

He said he had not been disciplined by managers, though he said he had received a note from his supervisor reminding him that NPR requires employees to clear speaking appearances and media requests with standards and media relations. He said he didn’t run his remarks to The New York Times by network spokespeople.

When the hosts of NPR’s biggest shows, including “Morning Edition” and “All Things Considered,” convened on Wednesday afternoon for a long-scheduled meet-and-greet with the network’s new chief executive, Katherine Maher , conversation soon turned to Mr. Berliner’s essay, according to two people with knowledge of the meeting. During the lunch, Ms. Chapin told the hosts that she didn’t want Mr. Berliner to become a “martyr,” the people said.

Mr. Berliner’s essay also sent critical Slack messages whizzing through some of the same employee affinity groups focused on racial and sexual identity that he cited in his essay. In one group, several staff members disputed Mr. Berliner’s points about a lack of ideological diversity and said efforts to recruit more people of color would make NPR’s journalism better.

On Wednesday, staff members from “Morning Edition” convened to discuss the fallout from Mr. Berliner’s essay. During the meeting, an NPR producer took issue with Mr. Berliner’s argument for why NPR’s listenership has fallen off, describing a variety of factors that have contributed to the change.

Mr. Berliner’s remarks prompted vehement pushback from several news executives. Tony Cavin, NPR’s managing editor of standards and practices, said in an interview that he rejected all of Mr. Berliner’s claims of unfairness, adding that his remarks would probably make it harder for NPR journalists to do their jobs.

“The next time one of our people calls up a Republican congressman or something and tries to get an answer from them, they may well say, ‘Oh, I read these stories, you guys aren’t fair, so I’m not going to talk to you,’” Mr. Cavin said.

Some journalists have defended Mr. Berliner’s essay. Jeffrey A. Dvorkin, NPR’s former ombudsman, said Mr. Berliner was “not wrong” on social media. Chuck Holmes, a former managing editor at NPR, called Mr. Berliner’s essay “brave” on Facebook.

Mr. Berliner’s criticism was the latest salvo within NPR, which is no stranger to internal division. In October, Mr. Berliner took part in a lengthy debate over whether NPR should defer to language proposed by the Arab and Middle Eastern Journalists Association while covering the conflict in Gaza.

“We don’t need to rely on an advocacy group’s guidance,” Mr. Berliner wrote, according to a copy of the email exchange viewed by The Times. “Our job is to seek out the facts and report them.” The debate didn’t change NPR’s language guidance, which is made by editors who weren’t part of the discussion. And in a statement on Thursday, the Arab and Middle Eastern Journalists Association said it is a professional association for journalists, not a political advocacy group.

Mr. Berliner’s public criticism has highlighted broader concerns within NPR about the public broadcaster’s mission amid continued financial struggles. Last year, NPR cut 10 percent of its staff and canceled four podcasts, including the popular “Invisibilia,” as it tried to make up for a $30 million budget shortfall. Listeners have drifted away from traditional radio to podcasts, and the advertising market has been unsteady.

In his essay, Mr. Berliner laid some of the blame at the feet of NPR’s former chief executive, John Lansing, who said he was retiring at the end of last year after four years in the role. He was replaced by Ms. Maher, who started on March 25.

During a meeting with employees in her first week, Ms. Maher was asked what she thought about decisions to give a platform to political figures like Ronna McDaniel, the former Republican Party chair whose position as a political analyst at NBC News became untenable after an on-air revolt from hosts who criticized her efforts to undermine the 2020 election.

“I think that this conversation has been one that does not have an easy answer,” Ms. Maher responded.

Benjamin Mullin reports on the major companies behind news and entertainment. Contact Ben securely on Signal at +1 530-961-3223 or email at [email protected] . More about Benjamin Mullin

Katie Robertson covers the media industry for The Times. Email:  [email protected]   More about Katie Robertson

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Hollywood & media deaths in 2024: photo gallery & obituaries, npr editor resigns in aftermath of his essay criticizing network for bias.

By Ted Johnson

Ted Johnson

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UPDATE: The NPR editor who penned an essay criticizing the network for what he saw as bias in its coverage of Donald Trump and a host of other issues has resigned.

Uri Berliner , who had been a senior business editor and reporter, posting his resignation letter to NPR CEO Katherine Maher on his X/Twitter account.

A spokesperson for the network declined to comment.

Berliner had been temporarily suspended from NPR after publishing on essay for The Free Press that called out the network for losing “an open minded spirit” and lacking viewpoint diversity. He cited, among other things, audience research showing a drop in the number of listeners considering themselves conservative.

While Berliner’s essay was immediately seized upon by right wing media as evidence of NPR’s bias, some of his colleagues criticized him for making mistakes in his piece in for using “sweeping statements” to make his case, in the words of NPR’s Steve Inskeep. Maher criticized the essay in a note to staffers, writing, “Questioning whether our people are serving our mission with integrity, based on little more than the recognition of their identity, is profoundly disrespectful, hurtful, and demeaning.”

But Berliner’s essay did trigger some discussion within NPR, as some voices on the right, including Trump, called for defunding the network.

PREVIOUSLY: NPR has put on temporary suspension the editor who penned an essay that criticized the network for losing the trust of listeners as it has covered the rise of Donald Trump and coverage of Covid, race and other issues.

Uri Berliner has been suspended for five days without pay, starting last Friday, according to NPR’s David Folkenflik.

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“That wouldn’t be a problem for an openly polemical news outlet serving a niche audience. But for NPR, which purports to consider all things, it’s devastating both for its journalism and its business model,” Berliner wrote. He also wrote that “race and identity became paramount in nearly every aspect of the workplace,” while claiming that the network lacked viewpoint diversity.

His essay set off a firestorm on the right, with Trump blasting the network and Fox News devoting extensive coverage to the criticism, along with calls for ending government funding for NPR.

In his essay, Berliner wrote that “defunding isn’t the answer,” but that its journalism needed to change from within. The network’s funding has been a target of conservatives numerous times in the past, but lawmakers ultimately have supported public radio.

Berliner shared his suspension notice with Folkenflik, who wrote that it was for failure to seek approval for outside work, as well as for releasing proprietary information about audience demographics.

Katherine Maher, who recently became CEO of the network, published a note to staff last week that appeared to take issue with Berliner’s essay, writing that there was “a criticism of our people on the basis of who we are.”

“Asking a question about whether we’re living up to our mission should always be fair game: after all, journalism is nothing if not hard questions,” Maher wrote. “Questioning whether our people are serving our mission with integrity, based on little more than the recognition of their identity, is profoundly disrespectful, hurtful, and demeaning.”

Maher herself has become a target on the right, with some figures citing her past social media posts, including one from 2020 that referred to Trump as a “deranged racist sociopath.” At the time, she was CEO of the Wikimedia Foundation. In a statement to The New York Times , Maher said that “in America everyone is entitled to free speech as a private citizen.” “What matters is NPR’s work and my commitment as its C.E.O.: public service, editorial independence and the mission to serve all of the American public,” she said.

An NPR spokesperson did not immediately return a request for comment. The network told The Times that Maher is not involved in editorial decisions.

Some of Berliner’s colleagues have been vocal in their own criticism of his essay. Eric Deggans, the network’s TV critic and media analyst, wrote that Berliner “set up staffers of color as scapegoats.” He also noted that Berliner “didn’t seek comment from NPR before publishing. Didn’t mention many things which could detract from his conclusions.”

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NPR editor Uri Berliner resigns with blast at new CEO

David Folkenflik

Uri Berliner resigned from NPR on Wednesday saying he could not work under the new CEO Katherine Maher. He cautioned that he did not support calls to defund NPR. Uri Berliner hide caption

Uri Berliner resigned from NPR on Wednesday saying he could not work under the new CEO Katherine Maher. He cautioned that he did not support calls to defund NPR.

NPR senior business editor Uri Berliner resigned this morning, citing the response of the network's chief executive to his outside essay accusing NPR of losing the public's trust.

"I am resigning from NPR, a great American institution where I have worked for 25 years," Berliner wrote in an email to CEO Katherine Maher. "I respect the integrity of my colleagues and wish for NPR to thrive and do important journalism. But I cannot work in a newsroom where I am disparaged by a new CEO whose divisive views confirm the very problems at NPR I cite in my Free Press essay."

NPR and Maher declined to comment on his resignation.

The Free Press, an online site embraced by journalists who believe that the mainstream media has become too liberal, published Berliner's piece last Tuesday. In it, he argued that NPR's coverage has increasingly reflected a rigid progressive ideology. And he argued that the network's quest for greater diversity in its workforce — a priority under prior chief executive John Lansing – has not been accompanied by a diversity of viewpoints presented in NPR shows, podcasts or online coverage.

Later that same day, NPR pushed back against Berliner's critique.

"We're proud to stand behind the exceptional work that our desks and shows do to cover a wide range of challenging stories," NPR's chief news executive, Edith Chapin, wrote in a memo to staff . "We believe that inclusion — among our staff, with our sourcing, and in our overall coverage — is critical to telling the nuanced stories of this country and our world."

Yet Berliner's commentary has been embraced by conservative and partisan Republican critics of the network, including former President Donald Trump and the activist Christopher Rufo.

Rufo is posting a parade of old social media posts from Maher, who took over NPR last month. In two examples, she called Trump a racist and also seemed to minimize the effects of rioting in 2020. Rufo is using those to rally public pressure for Maher's ouster, as he did for former Harvard University President Claudine Gay .

Others have used the moment to call for the elimination of federal funding for NPR – less than one percent of its roughly $300 million annual budget – and local public radio stations, which derive more of their funding from the government.

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Berliner reiterated in his resignation letter that he does not support such calls.

In a brief interview, he condemned a statement Maher issued Friday in which she suggested that he had questioned "whether our people are serving our mission with integrity, based on little more than the recognition of their identity." She called that "profoundly disrespectful, hurtful, and demeaning."

Berliner subsequently exchanged emails with Maher, but she did not address those comments.

"It's been building up," Berliner said of his decision to resign, "and it became clear it was on today."

For publishing his essay in The Free Press and appearing on its podcast, NPR had suspended Berliner for five days without pay. Its formal rebuke noted he had done work outside NPR without its permission, as is required, and shared proprietary information.

(Disclosure: Like Berliner, I am part of NPR's Business Desk. He has edited many of my past stories. But he did not see any version of this article or participate in its preparation before it was posted publicly.)

Earlier in the day, Berliner forwarded to NPR editors and other colleagues a note saying he had "never questioned" their integrity and had been trying to raise these issues within the newsroom for more than seven years.

What followed was an email he had sent to newsroom leaders after Trump's 2016 win. He wrote then: "Primarily for the sake of our journalism, we can't align ourselves with a tribe. So we don't exist in a cocoon that blinds us to the views and experience of tens of millions of our fellow citizens."

Berliner's critique has inspired anger and dismay within the network. Some colleagues said they could no longer trust him after he chose to publicize such concerns rather than pursue them as part of ongoing newsroom debates, as is customary. Many signed a letter to Maher and Edith Chapin, NPR's chief news executive. They asked for clarity on, among other things, how Berliner's essay and the resulting public controversy would affect news coverage.

Yet some colleagues privately said Berliner's critique carried some truth. Chapin also announced monthly reviews of the network's coverage for fairness and diversity - including diversity of viewpoint.

She said in a text message earlier this week that that initiative had been discussed long before Berliner's essay, but "Now seemed [the] time to deliver if we were going to do it."

She added, "Healthy discussion is something we need more of."

Disclosure: This story was reported and written by NPR Media Correspondent David Folkenflik and edited by Deputy Business Editor Emily Kopp and Managing Editor Gerry Holmes. Under NPR's protocol for reporting on itself, no NPR corporate official or news executive reviewed this story before it was posted publicly.

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