resulting trust (and Quistclose trust)

A trust that arises by operation of law to give effect to the implied intention of the parties. In particular, a trust that arises when money is paid for property by one person, but the property is conveyed to another under circumstances that give rise to an implication that the property is to be held, partly or wholly, for the benefit of the payee. A resulting trust comes into effect when one party is making a payment for property, but is not intending to enrich the other (it does not arise if the payment is clearly intended as a gift or loan). The presumption of a resulting trust depends on the facts of the case, but prima facie a presumption may be made if there is: (i) a partial conveyance of property without a transfer of the entire beneficial interest; (ii) an entire conveyance of property, but in a way that leaves equitable obligations that are not satisfied; (iii) the payment of money and a transfer of the property to a third party; (iv) a transfer without valuable consideration, but not when a gift or loan is clearly intended. The presumption may be rebutted, or partially rebutted, by proof of some other intention at the time of the transfer, such as a clear intention to make a gift of the property and instead of the expectation of having any interest in the property. In particular, this form of implied trust may come into effect when a property is purchased by one party and the purchase price is paid (in whole or in part) by another on the understanding that the person paying the money will receive an interest in the property (Dyer v Dyer (1788) 2 Cox 92, 30 Eng Rep 42; Gissing v Gissing [1971] AC 886 (HL); Ducie v. Ford, 138 US 99, 11 S Ct 417, 34 L Ed 1091, Note (1891); 76 Am.Jur.2d., Trusts (Rochester, NY), § 178). The paper title is held by one party with a trust that 'results' back to the person who provided the money—the 'real purchaser'.

    As a rule, the benefit of a resulting trust is based on the action at the time of the purchase and not later contributions (such as carrying out improvements or paying the mortgage), although such payments may give rise to a constructive trust. A resulting trust is based on the contribution of money by one party in anticipation of an interest in a property, but unlike a constructive trust there is no common intention to share the property; the value of the interest in the property is based entirely on the amount of the contribution and not upon a course of dealing between the parties.

    A resulting trust must arise from the common intention of the parties at the time of the transfer. In that respect it may be distinguished from a constructive trust as, although both are premised upon intended beneficial ownership, the former arises from "the pattern of money purchase", whereas a constructive trust is "embodied in some antecedent bargain struck by the parties", K. Gray & S.F. Gray, Elements of Land Law (5th ed. Oxford: 2009), § 10.7. A constructive trust arises when there has not been an express declaration to create a trust, but because there is a need to prevent one party from receiving an undue profit or beneficial interest. A resulting trust terminates if an express trust is created or declared to the same effect.

    A similar form of trust that arises when money is advanced for a particular purpose, but is not then used for that purpose (e.g. to pay a company dividend, to a pay a specified creditor, to purchase goods or for a particular project) may be called a 'Quistclose trust' (Barclays Bank v Quistclose Investments Ltd [1970] AC 567 (HL)). Such a trust does not strictly 'result' for the actions of the donor of the money, but because there is no intention that the monies should benefit the donee. Accordingly it is sometimes given this distinguishing name, although it needs to be clear that the monies are advanced for that purpose and not for general commercial purposes. An advance of money to a solicitor by a prospective purchaser or a mortgagee to complete the purchase a property falls into a similar category (Twinsectra v Yardley [2004] 2 AC 164 (HL)). Nonetheless, many such instances may simply be an express trust that is not initially referred to as such (see further: www.alastairhudson.com/trustslaw/Quistclose.pdf).

    Under English statute law, a resulting trust does not have to be evidenced in writing (Law of Property Act 1925, s. 53(2); nor does the provision that a contract for the sale or other disposition of land must be in writing affect the creation or operation of a resulting trust (Law of Property (Miscellaneous Provisions) Act 1989, s. 2(5)(c)). A resulting trust is not implied in the case of a voluntary conveyance merely because the property "is not expressed to be conveyed for the use or benefit of the grantee", Law of Property Act 1925, s. 60(3).

    When money is provided by two or more parties, on the basis that they should have a shared interest in the property, and if there is an agreement on how much each party should have in the property, that is conclusive. But, if there is no agreement, their beneficial interest is based on the parties' contributions to the purchase price and "the whole course of dealing between them in relation to the property", Oxley v Hiscock [2005] 3 WLR 715 at [69] (Stack v Dowden [2007] UKHL 17, [2007] 2 WLR 831 (HL)).

    In the US, a resulting trust may also be called a 'presumptive trust', a 'purchase money resulting trust' or a 'purchase money trust'. In some states, that form of resulting trust is recognized as a statutory right. An alternative form of resulting trust may be said to arise "when a person (the 'transferor') makes or causes to be made a disposition of property under circumstances (i) in which some or all of the transferor's beneficial interest is not effectively transferred to another (and yet not expressly retained by the transferor) and (ii) which raise an unrebutted presumption that the transferor does not intend the one who receives the property (the 'transferee') to have the remaining beneficial interest", The American Law Institute, Restatement Third, Trusts (St. Paul, MN: 2003), § 7, Comment a (Lifemark Corp. v. Merritt, 655 S.W.2d 310, 316 (Tex Civ App 1983)). See also overreachable interest^(Eng).

Terms in bold are defined elsewhere in the Encyclopedia.
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