Lecture 8

Beneficiary Principle and

the Resulting Trust
BY : UZA. HAWWA  SHAZNA AHMED
2023 / FSL / VILLA COLLEGE
 Introduction
◦ These groups of trusts can defy simple definition because even within
themselves they include many different types or arise in quite different
situations.
◦ The essential feature linking them all is that they are not expressly stated
in a trust instrument but are implied from the circumstances in which
they arise.
◦ Although resulting trusts have been defined in various ways they are in
essence used as the basis of an action for return of one’s own property;
the modern view is that they arise because of the absence of any
intention by the transferor to pass any beneficial interest to the
transferee.
◦ Even then, while some resulting trusts are implied from the presumed
intention of the settlor not all are – so the area is far from straightforward.
◦ Constructive trusts, as resulting trusts do not meet formality requirements
for express trusts – but the two are still distinct.
◦ The distinction is that while resulting trusts involve the real equitable owner
of property asserting a continuing interest in the property, the court
imposes the constructive trust in order to redress a breach of a fiduciary
relationship.
◦ It has been said that the constructive trust is a residual category, which is
used by the court in circumstances where it wishes to impose a trust, and
no other category is appropriate.
◦ Extra confusion has been added at times by the application of the principles
to shared ownership of domestic property.
RESULTING
TRUSTS
◦ A resulting trust is one that comes about through operation of law, as
would a constructive trust, only for different reasons.
◦ In effect it occurs where a settlor retains beneficial interest in trust
property – or there are indications that settlor did not intend to part with
beneficial ownership of the property.
◦ So often said to be based on presumed intention of settlor – though that
will not always seem to be case – e.g. Vandervell v IRC (1967) where effect
of resulting trust was to impose an extra tax burden on a settlor who
was trying to avoid tax.
◦ Resulting comes from the Latin ‘resultare’ meaning ‘to spring back’ – in
essence, what happens to the beneficial entitlement.
◦ Although it could be argued that the beneficial entitlement is actually
never disposed of.
◦ Resulting trusts are sometimes referred to as:

Ø Presumed – where they are said to arise from the presumed intent of
the settlor;
Ø Automatic – where settlor merely fails to dispose of all of the
beneficial interest.
◦ There are many different situations where such trusts arise:

Ø Property is transferred to the trustees but the trust fails to take effect
as the settlor intended it to;
Ø The settlor fails to dispose of the entire interest;
Ø Property bought by one person but in name of another;
Ø Property, which is already owned, is transferred into the name of
someone else.
FAILURE OF AN
EXPRESS TRUST
◦ An express trust may fail for numerous reasons:
◦ The settlor fails to identify the property that passes; or
◦ Fails to identify some or all of the beneficiaries; or
◦ Fails to properly identify what the interests are.
◦ Or a gift may fail where a settlor fails to properly identify the specific
purpose in a charitable gift – property then returns to the settlor’s estate on
resulting trust (Re Diplock (1947)).
◦ If a gift fails for becoming void then again a resulting trust is created (Re
Ames’ Settlement (1946)).
◦ And if any contingent requirement is not met, again, the trust fails and a
resulting trust will arise (Essery v Cowlard (1884)).
◦ A resulting trust has been accepted in respect of a loan made for a specific
purpose when the purpose was not then carried out (Barclays Bank v
Quistclose (1970)), Lord Wilberforce stating that a secondary trust arose
from the failure to carry out the primary trust:
Ø Lord Millet in Twinsectra v Yardley (2002) suggested this was wrong since
‘the primary trust was for an abstract purpose with no one but the lender
to enforce performance’;
Ø The High Court has stated that a resulting trust is created in favor of
the payer but subject to a power exercised by the recipient to use the
fund for the stated purpose (Templeton Insurance Ltd v Penningtons Solicitors
(2006));
Ø The effect of a Quistclose trust is that the payee is the fiduciary of the
payer so that on bankruptcy of the payee the payer can trace his funds
(Cooper v PRG Powerhouse Ltd (2008)).
FAILURE TO DISPOSE
OF THE ENTIRE
BENEFICIAL
INTEREST
◦ Arguably the most common reason why resulting trusts occur – it
certainly leads to the most case law.
◦ Can occur quite accidentally, e.g. as a result of poor drafting, or by a
failure to provide for a particular eventuality.
◦ There are four possible outcomes – not just a resulting trust:
Ø If fund for charitable purposes may be redirected cy-près;
Ø Or court might construe outright gift to one beneficiary;
Ø In the absence of beneficiaries on intestacy the property may be
redirected to the Crown by bona vacantia;
Ø But there may indeed be a resulting trust.
◦ General rationale of applying resulting trust in such situations is
argument that settlor must keep what he has not parted with – and
courts must construe whether or not he has disposed of entire interest
(Vandervell v IRC (1967)).
◦ Where gifts are made to specific persons for specific purposes then
generally the ‘court always regards the gift as absolute, and the purpose
merely as the motive for the gift’ (Page-Wood V-C in Re Sanderson’s Trusts
(1857)).
◦ So surplus after purpose achieved may still pass absolutely to
beneficiary rather than resulting trust (Re Osoba (1979)).
◦ In rare situations, if it can be shown that there was no intention to
provide absolute benefit then a resulting trust of surplus property is
possible (Re Abbot Fund Trusts (1900)).
◦ Resulting trusts may often occur on surplus from, e.g. a disaster fund
(Re Gillingham Bus Disaster Fund (1958)).
◦ Surplus funds on dissolution of unincorporated associations can lead
to a number of possible outcomes – although in general what happens
depends on rules of association which acts as a contract between the
members:
Ø In certain situations if a trust is accepted surplus is distributed
amongst existing members on resulting trust (Re Printers’ and
Transferors’’ Society (1899));
Ø Although applying resulting trusts is more problematic if not
limited to existing members (Re Hobourn Aero Components Air Raid
Distress Fund (1946));
Ø If members are said to be receiving contractual benefit then no
resulting trust (Cunnack v Edwards (1896));
Ø Usually no resulting trust possible where fund arose from variety of
sources not just subscriptions of members (Re West Sussex
Constabulary’s Widows, Children and Benevolent (1930) Fund Trust (1971));
Ø More modern solution is that (even if fund held on trust) it is
distributed to members if constitution of association permits (Re
Bucks Constabulary Fund (No 2) (1979));
Ø Where entitlement is by resulting trusts then distribution of surplus
is to all members past and present according to their contribution
(Re Sick and Funeral Society of St John’s Sunday School Golcar (1973)).
 VOLUNTARY
CONVEYANCES AND
PRESUMPTION OF
RESULTING TRUST
◦ In land, prior to 1925 in order to prevent a resulting trust from arising
in a voluntary conveyance it was necessary to insert an express
statement that beneficial interest also transferred:
Ø S 60(3) Law of Property Act 1925 then provided that a resulting
trust would not arise merely because an express statement to the
contrary was not included;
Ø However, if an outright gift is intended then it is still best to
expressly state so – to prevent a resulting trust being construed as
settlor’s intention (Hodgson v Marks (1971)).
◦ Section 60(3) does not apply to pure personalty – transfer governed by
general principles of equity – in voluntary transfer of personalty a
resulting trust arises and transferee holds on trust for transferor (the
presumption of a resulting trust) – based on idea that transferor would
not wish to part with beneficial interest where there is only a voluntary
transfer (although it is hard to see why they cannot be construed as
outright gifts) (Re Vinogradoff (1935)).
◦ The presumption of a resulting trust can of course be rebutted by
evidence of a contrary intention – this may also be the case where the
presumption of advancement applies:
Ø Presumption is based on relationship between settlor and
beneficiary – so in certain cases outright gift presumed, e.g.
husband/wife, father/children, father/any person for whom he is in
loco parentis (Re Eykyn’s Trusts (1877));
Ø S 199 Equality Act 2010 has abolished the presumption of
advancement but this section has not yet been brought into force;
Ø While presumption derives from moral obligation – Lord Diplock
in Pettitt v Pettitt (1970) said it is ‘based upon inferences of fact which
an earlier generation of judges drew as the most likely intentions of
earlier generations of spouses belonging to the propertied classes of
a different social era’;
Ø Presumption will not apply to a mother’s gift to her child (Bennett v
Bennett (1879)), or a father‘s gift to his illegitimate child (though in
practice both should now be covered by loco parentis), nor to
voluntary transfer from a wife to her husband, or from a man to his
mistress – although in all these it is suggested that a more modern
approach should be taken (Re Cameron (Deceased) (1999)).
◦ Both presumptions of a resulting trust and of advancement can be
rebutted by evidence to the contrary – though there are limitations on
what evidence is available to rebut the presumption (Shephard v Cartwright
(1954)).
◦ Traditionally, courts were reluctant to let a party introduce evidence of
an improper motive in order to rebut a presumption (Gascoigne v
Gascoigne (1918)):
Ø As Lord Denning put it in Tinker v Tinker (1970) it may leave the
judge ‘on the horns of a dilemma’;
Ø The whole area of improper motive was reviewed by both CA and
HL – with HL determining that interests under illegal transactions
can be enforced only if the party seeking to can establish their title
without relying on their own illegality – and rejecting CA’s idea that
the answer should be based on what does or does not offend public
conscience (Tinsley v Milligan (1993));
Ø One further point established is that presumption of advancement
can be rebutted by evidence of unlawful or improper motive when
purpose not actually carried out – the so-called ‘repentance’ principle
(Tribe v Tribe (1996));
Ø The Law Commission has been critical of courts’ handling of these
issues and has suggested reforms.
 PURCHASE IN THE
NAME OF OTHERS AND
THE PRESUMPTION OF
RESULTING TRUST
◦ As Chief Baron Eyre said in Dyer v Dyer (1788), ‘the trust of a legal
estate . . . results to the man who advances the purchase money’.
◦ So whenever a person has bought property in another’s name, unless
there is some indication that he does not intend to keep beneficial
interest, there is a presumption of a resulting trust in his favor (Fowkes
v Pascoe (1875)).
◦ As with voluntary transfers of property, the presumption of
advancement can rebut the presumption of a resulting trust and the
same rules apply as to admissibility of evidence (Warren v Gurney
(1944)).
◦ Where a purchase by several parties is made in name of one then title is held
on resulting trust in proportion to which each contributed to purchase:
Ø And this is particularly appropriate to implied co-ownership cases – Bull v
Bull (1955), Pettitt v Pettitt (1970) and Gissing v Gissing (1971);
Ø And criticisms of earlier cases were aired and precise difference between
application of resulting trust and constructive trust was identified in Drake
v Whipp (1995);
Ø And members of a lottery syndicate who have contributed their share can
enforce their rights to the winnings through a resulting trust (Abrahams v
Abrahams (1999));
Ø And where parties have bought property with one paying their share and
lending the other, even though the debt is not paid off, the debtor still
gains an interest in the property (Elithorn v Poulter (2009)).
◦ If a joint purchase is put in name of one person who is wife or child of
the other party then presumption of advancement arises in any case as
a last resort and can be rebutted by very comparatively slight evidence
(McGrath v Wallis (1995)).

◦ Law Commission has been critical and suggested reforms.

THE BENEFICIARY
PRINCIPLE
◦ For a trust to be valid, there must be an identifiable beneficiary, which
is either an individual or a company.
◦ If there is no such beneficiary, and consequently the trust is for the
achievement of some abstract purpose, then the trust is void.
◦ Therefore, where there is a trust for the benefit of ‘people’, the trust
will be valid, whereas a trust created to carry out an abstract purpose
will be void, except in a group of anomalous cases.
◦ The cases differ on what will constitute a ‘people trust’.
◦ The traditional view preferred a literal interpretation of the terms of
the trust: if there was no beneficiary, then the trust was simply void.
This approach has been supported in more recent cases.
◦ The alternative approach suggests that as long as there is some direct
or indirect benefit for some ascertainable beneficiaries who can bring
the matter before the court in the event of a dispute, then that will be
sufficient to satisfy the beneficiary principle.
◦ It was a feature of the older cases involving trusts, which satisfied the
beneficiary principle that such trusts must nevertheless have been
subject to a perpetuity period or else they would be void under the
rules against perpetuities.
◦ Such ‘people trusts’ may now be rendered valid by the operation of the
Perpetuities and Accumulations Act 1964, which enables the trustees
to ‘wait and see’ if the trust is wound up within the perpetuity period.
◦ Where the trust is not so wound up, the 1964 Act provides a
mechanism for bringing the trust to an end automatically.
THE BASIS OF THE
BENEFICIARY
PRINCIPLE
◦ Two ideas are fundamental to the law on express trusts.
◦ The first idea is that the consciences of the trustees can only be
controlled if there are beneficiaries who can bring the trustees to court
when the trustees have failed to perform their obligations under the
trust adequately.
◦ Therefore, the courts insist on being able to take control of a trust in
the event that there is some failure to perform the terms of the trust
properly.
◦ If there were nobody entitled to bring the trustees before the court by
virtue of being a beneficiary, then the court would not be able to
control the administration of the trust.
◦ In consequence, it is a requirement of English trusts law that there
must be at least one beneficiary in whose favour the court can decree
performance of the trust.
◦ The second idea is that a trust requires that some property be held on
trust for some person as beneficiary such that the beneficiary acquires
a proprietary right in the trust property.
◦ It is the beneficiary’s proprietary right in the trust property which gives
the beneficiary the locus standi to petition the court if the trustees fail
to perform their duties.
◦ In consequence, the so-called ‘beneficiary principle’ which we consider
in detail in this chapter has become an essential feature of English
trusts law.
◦ The ‘beneficiary principle’ is a requirement that there must be an
ascertainable beneficiary or beneficiaries for a trust to be valid.
◦ The policy underlying this principle, and arguably the whole of the law
of trusts, is that there must be a beneficiary in whose favour the court
can exercise the trust and that there must be beneficiaries with
proprietary rights in the trust fund.
◦ The principle that there must be a beneficiary under a trust and that that
class of persons must be sufficiently certain is generally taken to have
been expressed most clearly in Morice v Bishop of Durham in the words of
Lord Grant MR:
“There can be no trust, over the exercise of which this court will not assume
control . . . If there be a clear trust, but for uncertain objects, the property . . .
is undisposed of . . . Every . . . [non-charitable] trust must have a definite
object. There must be somebody in whose favour the court can decree
performance.”
◦ It is clear from these words that the court requires the existence of a
beneficiary precisely because there must be a beneficiary who is able to
keep the trustees in check by bringing any contentious matters before
the court. Lord Eldon expressed the rationale behind the beneficiary
principle as requiring also that the court be able to administer the trust
if the trustees failed to do so or that the court be able to prevent
maladministration of the trust.
◦ In either circumstance, it was only considered possible for the court to
maintain certainty and to ensure that trustees are observing the terms
of the trust if there is a beneficiary capable of suing the trustees.
◦ Given that the settlor disappears out of the picture once the trust has
been properly created, there is no one else capable of policing the
activities of the trustees other than the beneficiaries.
◦ In Re Endacott, it was said, in relation to the beneficiary principle, that
‘no principle has greater sanction or authority’ in the law of trusts than
that requiring the existence of a beneficiary.
◦ In the cases considered below, it will be seen that traditional judicial
attitudes tended to invalidate trusts, which did not satisfy the
beneficiary principle on a literal interpretation of their provisions.
◦ By contrast, more recent cases have tended to validate trusts provided
that there is some person or group of persons who could sensibly be
said to be capable of controlling the trust by bringing matters to court.
Thank You! J
Any Questions?