Classification

Re Vandervell (No 2) [1974] Ch 269
Held: Megarry J identifies two categories:

•    Presumed: Where A transfers (or directs a trustee to transfer) the legal estate in property to B otherwise than for valuable consideration, and there is no presumption of advancement, and no evidence that A intended that B should take the property beneficially, then it is presumed that B holds the estate on trust for A

•    Automatic: Where A attempts to give away a beneficial interest and transfers the legal estate or bare ownership to trustees, but by some mistake or accident or failure to comply with formalities, A fails to effectively part with all or part of that beneficial interest, there will be a resulting trust for A of the beneficial interest which A failed effectively to dispose.


(A)    Non-Disposal of Beneficial Interest
“Automatic”: Non disposal of a beneficial interest

•    This is where a settlor attempts to create an express trust, but fails to completely exhaust the trust property in favour of the beneficiaries, or alternatively, where a surplus arises after the original purpose of the trust has been achieved or no longer exists

Re Gillingham Bus Disaster Fund [1958] Ch 3000
Facts:    This was a memorial fund raised from donations to pay funeral expenses and assist disabled victims of a bus crash. The question was what should be done with the surplus after all the charitable objects of the trust were satisfied? There were two alternatives. It could either go back to the people who gave the money, or it could go to the Crown as “bona vacantia” (money without an owner).

Held:    The donors (even the anonymous donors of small change to street collectors) had not been shown to have given the money “out-and-out”. The surplus was therefore to be held upon a resulting trust for those donors. The trustees would just have to put an add in the paper to find out who those donors were.

Re West Sussex Constabulary’s Widows, Children & Benevolent Trust Funds [1971] Ch 1
Facts:    This was a fund for the widows and orphans of police killed in duties. The police ran this fund, but they actually collected it from various sources:
(a)    Members subscriptions
(b)    Police balls, raffles and football sweepstakes
(c)    Collection boxes
(d)    Other donations, including legacies
After the amalgamation of the constabulary in Sussex, the members sought to wind up the fund and distribute the fund among members. The question was who owned the fund? The court had to work out who had the beneficial interest in the money. They had to decide whether any of it resulted back to the people who provided it.

Held:   

(a)    Members subscriptions
o    These members had given these subscriptions on a contractual basis, not on trust. Any surviving members would have a claim in contract based on frustration or failure of consideration. These members could claim back reimbursement for the subscriptions
o    Former members have already received the benefit contracted for (i.e. payments to their widows and orphans)

(b)    Entertainments
o    Only the profit component of the price paid by participants went into the trust fund. The price was paid on a contract basis, and the participant received the entertainment bargained for, so there could be no resulting trust

(c)    Collection boxes
o    It is inconceivable that a person contributing a coin in a street collection should intend that it should be returned.
Hence, there was no resulting trust

(d)    Donations and legacies
o    The proportion of the fund attributable to specific donations and legacies was held on resulting trust for donors or their estates. The remainder of the fund was bona vacantia

•    A resulting trust arises when someone gives money and they have not effectively given it away, so it results back to them
•    If they have effectively given it away, there is no resulting trust. If they have got consideration for it, there is no resulting trust
•    Only if they have intended to give it to a particular source, and that fails, will they be able to get it back

Re British Red Cross Balkan Fund [1914] 2 Ch 419
Facts:    This was a fund raised by the Red Cross from known subscribers to provide relief during the Balkan War. Some subscribers agreed to allow the Red Cross to apply the surplus to general funds, while other requested a refund. The question was how much of their donation should be refunded, given that a large amount of the total donated money had been spent on war relief?

Held:    The court held that the balance of the fund belonged to all subscribers on a resulting trust in proportion of their subscriptions.

(B)    The Quistclose Trust
Commercial applications: The Quistclose trust

•    Quistclose trust – a special purpose trust by which it is recognised that money held by one person is held on trust for a special purpose
o    If the money is paid for the special purpose, the person becomes a debtor of the settlor
o    If the purpose fails, a resulting trust arises in favour of the settlor

•    Where money is advanced upon a condition that it will be used for a certain purpose, and that purpose becomes impossible to fulfill, the money loaned will be held on a resulting trust for the lender and will not be treated as part of the general assets of the borrower: Barclays Bank Ltd v Quistclose Investments

Barclays Bank Ltd v Quistclose Investments [1970] AC 567
Facts:    Rolls Razor Ltd owed the bank a large sum of money. Rolls was in financial trouble and wanted to issue shares to existing shareholders to raise money. Before doing so, the company declared a dividend to shareholders (which constitutes a debt to shareholders), but had not paid it yet. Quistclose was a private company which had an interest in Rolls surviving. Quistclose provided funds to Rolls for the dividend payment only. Rolls went into voluntary liquidation prior to paying out the dividend. The question was who owned the dividend fund?

The bank argued that Quistclose had lent money to Rolls, and so Quistclose was just another unsecured creditor. As an unsecured creditor, it would rank behind the bank’s secured charge. Quistclose argued that the money never belonged to Rolls. It was held on trust for a purpose (to pay the dividend to shareholders), and when that purpose failed, the money resulted back to Quistclose.

Held:    The court found in favour of Quistclose. The loan funds were held on trust to pay the dividend. When that trust became impossible, there was a resulting trust back to the lender (Quistclose).

Here, the money held by Rolls is held on trust for a special purpose (to pay the dividend to shareholders). If that purpose is fulfilled, the trust no longer exists, and Rolls simply becomes a debtor of Quistclose. If that purpose fails, there is a resulting trust in favour of Quistclose.

The conceptual problem with Quistclose’s arrangement was that this was a trust for a purpose which was not charitable. This problem was solved in the Carreras Rothmans case.

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