Written Assignment:

Question 1 & Question 4

Completely Constituted and Resulting Trust

Prepared By

Muhammad Nurkhadzim bin Ahmad Sharibi (1727203)

Mohd Shahreza Ikhmal Bin Sahidan (1717597)

Equity and Trust II

Section 2

Dr. Muhammad Amrullah Nasrul

30th November 2020

Question 1 (Completely Constituted Trust)

Adam told Alberta that he wanted her to hold some shares in a private company on trust for
Ally and Aiwa. He then telephoned the director of the company asking him to carry out the
details of the transfer. The next day Adam was involved in an accident at his office. When
Ally and Aiwa visited him at the hospital, he told them of his conversation with Alberta and
handed the share certificates to them. Unexpectedly, Adam died that night from his injuries.

Advise Ally and Aiwa.

Answer Script:

Whether there was a completely constituted trust made by Adam to Ally and Aiwa by
handing the share certificates to them?

A completely constituted trust is one in which there is an express declaration of trust

and the disposition of trust properties by the trustee at law and the beneficiary at equity. Until
that has been done, the trust is incompletely constituted. In the case of Milroy v Lord [1862]
4De GF & J 264 where Tuner LJ stated that “in order to render a voluntary settlement valid
and effectual, the settlor must have done everything which, according to the nature of the
property comprised in the settlement, was necessary to be done in order to transfer
the property and render the settlement binding upon him”. By referring to the statement
above, it can be said that trust can be completely constituted only until the trust property is
effectively passed to the trustee and the settlor declares that he is a trustee.

Also, in the case of Lee Eng Teh v The Thiang Seong [1967] 1 MLJ 42 whereby the
court clarified that whether or not the trust is enforceable relies on whether the trust is
completely or incompletely constituted. The court explained that a trust is said to be
completely constituted when the trust property has been vested in trustees for the benefit of
beneficiaries. Until that has been done the trust is incompletely constituted.

Next, in the case of Re Rose [1952] Ch 499, where the deceased transferred 10, 000
shares to his wife and another 10,000 shares in the same company to trustees to hold
on trust. These were eventually stamped and registered in April 1943 and registered in
the company’s books in June 1943. On the death of the deceased, estate duty was claimed on
the ground that the gift was not completed by April 1943. It was held that the deceased had
done everything in his power to pass the legal and beneficial interest in the shares. Once the
settlor has done everything in his power to give their property away, so the trust will be
enforceable. In this matter, the court will intervene and remedy the actions of a donor who
has done everything within their own power necessary to transfer the gift, even if acts to be
performed by third-parties have not yet been completed.

On the other hand, in the case of Pennington v Waine [2002] 1 WLR 2075 whereby
Mrs. Ada Crampton decided to pass her share in the company called Crampton Bros.
(Coopers) Ltd to her nephew, named Harold. She asked Mr. Pennington, who served as the
auditors of the company, to prepare a transfer document. She filled it in and handed it back to
Mr. Pennington. Mr Pennington put it on the auditors’ files but never gave it on to the
company for the registration. Then, Mrs Ada died. The other people who were to inherit
claimed that unlike in the case of Re Rose, Mrs Ada had not done everything she could,
because she had not handed over the completed transfer form to Harold or the company. It
was held that the shares indeed belong to Harold.It would be unwise and unconscionable for
Mrs Ada to change her mind and go back to the transfer.

By applying into our present case, firstly, the action by the donor in instructing the
trust to be settled by the trustee must be assessed based on the case of Pennington v Waine. In
this present case, it was clearly seen that Adam has telephoned the director of the company
asking him to carry out the details of the transfer to be given to Ally and Aiwa. Consequently,
there is no issue regarding the legal title of the trust has been transferred or not to trustee. In
addition, it can be seen that Adam handed the share certificates to Ally and Aiwa can be
presumed that the share certificates have been registered with the Registrar of Companies
under the Companies Act 1965. Hence, the trust was properly constituted and the decision
rests on two situations in which Adam had made a declaration of trust by instructing the
director of the company asking him to carry out the details of the transfer.

Next, there was clear evidence that Adam intended an immediate gift of the shares in
the company to both Ally and Aiwa. On the facts it would be unconscionable in view of all
that he had done to transfer the shares to then turn around and change her mind and say that
they were not. A valid declaration of trust shall be rendered as completely constituted when
the legal title of the trust property is transferred to the trustee. Where the trust has been
completely constituted, the beneficiaries shall automatically have the right to a reasonable
interest in the property kept in trust for them.
Question 4 (Resulting Trust) - Presentation Written Assignment

Robert made a declaration of trust whereby he settled $60,000 for the purposes of education
of his two sons George and Tom who are completing their SPM examination. He also made a
proposition whereby $20,000 is to be used for the wedding ceremony of his daughter Janet
which is scheduled to be held in March 2021, $20,000 for the maintenance of his wife Nicole
and on her death to his two sons George and Tom and on their death to the issues of their
marriage. The trustees of the above trust seek your legal advice:

a) George and Tom having completed their SPM decided to get a job because they are not
very keen to further their studies at the college. They claim that the balance of $20,000 from
the trust fund is to be divided equally among them. The trustee disagreed on the ground that
since they are not interested to further their education they should not be entitled to the
balance of the trust fund.

b) Janet who was supposed to get married in January 2020, met an accident and died. Upon
her death, Nicole claimed that the $10,000 should be given to her as she has the duty to
maintain George and Tom but the trustees refused her request.

Answer Script:

The first legal issue that can be derived in this case is whether George and Tom are
entitled to claim the balance of the trust fund ($20,000) despite they are not interested in
furthering their education?

First of all, a general analysis of resulting trusts was given by Megarry J in Re

Vandervell's Trusts (No. 2) [1974] 1 Ch 269. In this case, Megarry J established two
distinct categories of resulting trust, "presumed resulting trusts" and "automatic resulting
trusts". In regard to automatic resulting trust, it can be defined as where the beneficial interest
in the transfer of assets remains undisposed. These trusts are formed in order to fill the
ownership gap. Here the transferee automatically retains the resulting trust to the point that
the beneficial interest has not been passed on to him or to another person. The resulting trust
does not create the trust, but merely reflects the beneficial interest of the transferor.
 To make it more clear regarding automatic resulting trust, in the case of Re Abbot
Fund [1900] 2 Ch 326 whereby the fund was collected from several contributors for the
maintenance of two ladies. But, surplus remained once both ladies died. What should happen
to surplus funds? In this matter, the Court held that those contributors never intended the
money to be the absolute property of ladies. Hence, it must be given back the money on trust
for the purpose of maintaining ladies. This is because the purpose did not exhaust the fund by
meaning that the partial failure of trust & resulting surplus paid back to contributors.

In addition, in the case of Barclays Bank Ltd v Quitclose Investments Ltd [1970]
AC 567 whereby a loan of money has been made subject to a particular condition. But, the
condition was not satisfied and then the failure of the condition gave rise to an automatic trust
being restored to the lender. In this case, the House of Lords held that the purpose of the deal
was that the money invested should not become part of Rolls Razor's assets, but that it should
be used solely for the paying of the dividend. By giving that, the basic intent of the loan
specified by the lender must be adequate to impress upon the borrower the duty to use the
amount exclusively for the purposes stated by the lender. It may also be argued that a
resulting trust has been formed in respect of a loan rendered for a specific purpose that has
not been carried out or has not met the requirements.

Furthermore, in the case of Twinsectra v Yardley [2002] 2 AC 164 in which 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. He explained that the role is
fiduciary in character because a person who makes money available on the grounds that it is
to be used for a specific reason only and not for any other purpose puts his faith and
confidence in the recipient to ensure that it is duly implemented. This is a classic case in
which a confidence relationship occurs, and because it arises with respect to a particular fund,
it gives rise to a trust.

By applying into our present case, it can be said that one of the things that made the
trust become automatic resulting trust is when the beneficial interest in respect of the transfer
of property remains undisposed. This can be seen in the current case that $60,000 allocated
by the trustor for the purposes of education for Tom and George who are completing their
SPM examination at that time. After both completing their SPM examination, the education
trust fund for both of them has the balance of $20,000 which the purpose is still on the
education only. Hence, by looking at the fact that mentioned before, the balance is not fully
utilized or did not exhaust the beneficial interest which is for the “purpose of education” as
George and Tom decided to get a job because they are not very keen to further their studies at
the college.

Also, automatic resulting trust occurs when subject to a condition precedent that has
not been achieved for the trust. By applying in this current case, the condition or purpose of
the trust can be seen that Mr Robert has made a declaration of trust whereby he settled
$60,000 for the purposes of education of his two sons George and Tom who are completing
their SPM examination”. So, in this matter, after both Tom and George completed their SPM
Examination, they decided to get a job because they are not very interested in furthering their
studies in a higher education institution. Thus, because of their decision not to proceed to
further their studies. The condition or purpose that stipulated by Mr Robert as trustor has not
been achieved as both decided to get a job. So, the balance of the trust fund will become
automatic resulting trust.

To conclude, the beneficial interest in respect of the transfer of property remains

undisposed and condition precedent that has not been achieved both are not satisfied. The
beneficial title in which undisposed or balance of the trust funds will revert back to Mr
Robert. This due to the fact that Mr Robert did not intend to part with his money absolutely,
but only to the extent that his wishes as declared by the declaration of trust are carried into
effect with the money of $60,000 just for the purposes of education and not for employment.

Moving on to the second question. The main legal issue in this question is Whether
Nicole can claim $10,000 due to the fact that she has the duty to maintain George and Tom.
on this second issue, we divide it into two sub-issues to deal with this current case.

First sub issue is, Whether the trust made by Mr Robert to Janet which is to be used
for the wedding ceremony is considered as resulting trust ?

A resulting trust means property returns to the rightful owner or settler who becomes
the beneficial owner under the resulting trust. Riddall 1996. The Law of Trust.s.
Butterworth. P216 defined resulting trust as "...the beneficial interest springs back to the
settlor,". A resulting trust does not come into existence based on the actual intention of the
settlor, but arises from the presumed intention founded on the existence of state of affairs.
Contrary to constructive trust which is imposed by operation of law on common intention by
express communication and conduct of the parties where it is unconscionable for the holder
of the legal title to deny the other a beneficial share, resulting trust is imposed because of the
non-disposal of the beneficial interest or the presumed intention of the settlor.

In case Re Abbott Fund [1990] 2 Ch 326 a fund had been raised for the maintenance
and support of two deaf and dumb ladies. On the death of the survivor of the two there was a
portion of the fund which remained unapplied in the hands of the trustees. The court held
that, as the ladies had no interest in the capital sum in the trusts, there must be a resulting
trust in favour of the subscribers to it.

The principle can be taken in this case is when trust is set up for a particular purpose
and remains as trust property on the fulfilment of the purpose, but the purpose not achieved
due to some reasons. When the settlor of an express trust fails to tell the trustees what to do
with the trust property For example, A sets up a discretionary trust for the benefit of her
siblings, but never mentioned if her siblings died, what will happen to the trust fund once. If
this situation happens and there are assets still held in trust. Because of that the trust assets
held on a resulting trust for A then revert back to the transferor/settlor.

Hence, by applying into our present case, it is clear that the declaration trust of
$20,000 is to be used for the wedding ceremony of his daughter Janet but it needs to be
reverted back to Mr Robert as a transferor. This is because the purpose of that trust has been
failed and therefore held on resulting trust.

The second sub issue in this question is Whether there is presumption of resulting
trust on the part of trust made by Robert to Janet?

In the case of Re Vinogradoff [1935] WN 68 a war loan had been transferred into
the joint names of a grandmother and her four year old granddaughter. The grandmother
continued to take the dividends and on her death the granddaughter became absolute legal
owner by survivorship. However, Farwell J concluded that the granddaughter had no
beneficial interest as the loan had been held by the joint legal owners on a resulting trust for
the grandmother and now by the granddaughter on a Resulting trust for the grandmother's
estate. A woman on her name and her granddaughter’s, had transferred £800 of War Loan
stock, in which she received the dividends of that stock. The grandmother continued to take
the dividends and on her death the granddaughter became absolute legal owner by
survivorship. Since there was no proof that it was a gift, it was presumed that she was holding
it on resulting trust.

Granddaughter had no beneficial interest as the loan had been held by the joint legal
owners on a resulting trust for the grandmother and now by the granddaughter on a resulting
trust for the grandmother's estate.

It can be said that there is presumption of resulting trust on the part of stock of the
woman’s estate as presumed resulting trust arises when it is presumed that the transferor of
property did not intend to dispose of his entire ownership interest in the property transferred.

In case Ali v Khan [2002] EWCA Civ 974, Mr Khan as a father & beneficial owner
of the house, has transferred the house to his daughters for the purpose of raising money as
preparation for their wedding. Then one of Mr Khan's daughters transferred her interest to
another daughter as a gift. So, Mr Khan claimed he still retained his beneficial interest. The
court held that the property is on resulting trust for Mr Khan although legal title has been
transferred but Mr Khan still had a beneficial interest in the house.

By applying, in this present case, it can be seen that Janet died first before the
marriage ceremony taken place and declaration of trust which $20,000 must be given back to
Mr Robert (transferor) as it is presumed that there is presumption of resulting trust in which
there is no proof that the presence of intention to make such payments as a gift. This is also
because Mr Robert still had a beneficial interest in that resulting trust.

The third and last sub issue is Whether Nicole can use the presumption of
advancement to claim $10,000 due to the fact that she has the duty to maintain George and
Tom?

In the case of Re Robert [1946] Ch 1, traditionally, there was a strong presumption

of advancement between a father and his child. A father took out a life insurance policy for
his son and paid all the premiums. The father was named as trustee of the policy, and after his
death, it was argued that the premiums paid could be recovered by the estate, that is, there
was a resulting trust of the premiums paid which could be recovered by a lien over money
under the policy. Evershed J held that "it is well established that a father is making payments
on behalf of his son prima facie, and the absence of contrary evidence, is to be taken to be
making and intending an advance in favour of the son.." Evershed J held that the presumption
of advancement applied where a father had made payments on a policy of assurance taken out
on his son’s life. Furthermore, Presumption of Advancement is A voluntary conveyance is
made to the wife or child of the donor or to a person to whom he stands in loco parentis (a
person taking himself the duty of a child) the presumption is that the gift was intended.

But in contrast, In Pecore v. Pecore, (Canadian Case), on the advice of his financial
advisor he (father) puts money into a joint bank account with his daughter in order to avoid
probate fees. But, His daughter could not access the account without his consent. After the
death of the father, the daughter claimed the assets as her own. Thus, the issue was whether
or not the daughter had possession over the bank account or if the account was part of the
estate. The court’s decision was based on the issue of presumption of advancement. Held:
Presumption of advancement only applies to minor children.

By applying to the current case, Where the parties are related, the presumption of a
resulting trust may be replaced by a “presumption of advancement”. We can see in the
relationship between Mr Robert - Janet as Father - Child. Hence, Nicole as a mother for Janet
will become her representative for her estate after She dies. But, applying the case of Pecore
v. Pecore, the presumption of advancement cannot be applied to adults even if there is a
relationship of Father-Child. In this case, it is clearly seen that Janet is an adult and not
minor. So, the presumption of resulting trust will prevail instead of presumption of
advancement.