200757 Equity and Trusts

School of Law │MODULE 5

NOTES
Written by Dr Ludmilla Robinson

Autumn
2021

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 200757 EQUITY AND TRUSTS

MODULE 5

WEEK 12
RESULTING TRUSTS

1. Basic themes discussed under this topic:

 INTRODUCTION
 AUTOMATIC RESULTING TRUSTS
 PRESUMED RESULTING TRUSTS
 PRESUMPTION OF ADVANCEMENT
 ILLEGALITY AND THE RESULTING TRUST
 FUTURE OF THE RESULTING TRUST

Prescribed readings:
Evans, Ch 25 [25.7-25.13], Ch 26
H & L, Ch 31
Additional readings:
Jacobs, Ch 12
Key Cases:* Must read
*** Nelson v. Nelson (1995) 184 CLR 538

Re Vandervell’s Trusts (No.1) [1967] 2 AC 291

Boyce v Boyce (1849) 16 Sim 476.
Re Goulbenkian’s Settlement Trusts [1970] AC 508; [1968] 3 All ER 785

Re Gillingham Bus Disaster Fund [1958] Ch 300

* Calverley v Green (1984) 155 CLR 242

** Jain v Amit Laundry Pty Ltd [2019] NSWCA 20 (19 February 2019) available in Week
12 folder

*** Henley v Bone [2019] NSWSC 254 (18 March 2019) available in Week 12 folder

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 RESULTING TRUSTS

Evans Ch 26
A. INTRODUCTION
Evans [26.1 – 26.2]

1. Resulting and constructive trusts are created by the court, in some instances irrespective
of the intentions of the parties. This is in contrast to express trusts, which can only be created
if it is the settlor’s intention that property be held on trust.

A constructive trust will be imposed by the court over property (always created irrespective
of the intentions of one of the parties):

 acquired by a fiduciary in breach of duty;

 on the application of the rule in Barnes v Addy;
 acquired by a trustee de son tort;
 as a remedy in a claim pursuant to equitable estoppel;
 as a remedy for claims against property when there has been an intermingling of funds
and/or non-financial contributions by one person to the property of another, eg
Property (Relationships) Act;
 where property has been acquired in contravention of other equitable principles. E.g.
undue influence or unconscionable conduct.

Constructive trusts are a temporary remedy which remain in place until the consequential
orders have been put into effect.

You will study constructive trusts in much greater detail in 200756 Remedies.

A resulting trust will be imposed when:

(a) there is a failure of one of the three certainties which leads to a failure in the beneficial
interest (automatic resulting trust); or

(b) one person has purchased property and placed it in the name of another (presumed
resulting trust).

In both types of resulting trust, the beneficial interest results in (goes back to) the settlor,
the testator’s residuary estate or the person who purchased the property.

2. Categories of resulting trust

As seen above, there are two categories of resulting trust:

a) automatic
b) presumed

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In Re Vandervell’s Trusts (No.1) [1967] 2 AC 291, Lord Upjohn described the differences
between them:

(a)
An automatic resulting trust is imposed to fill what would otherwise be a gap in the
beneficial interest in property and takes effect by operation of equitable principles.
An automatic resulting trust therefore concerns the incomplete disposition of an
equitable interest in property.

In such circumstances an automatic resulting trusts will be imposed as a result of the

application of the beneficiary principle (Morrice v Bishop of Durham (1804) 9 Ves. 399; 32
ER 656), which provides that a trust cannot exist without a beneficiary or a beneficial
purpose. If there is no beneficiary, the trustee holds the legal title to the trust property free of
any beneficial interest. This would defeat the intention/purpose of the trust. Therefore, the
court imposes a resulting trust to create the necessary beneficial interest.

Therefore, if a settlor has failed to dispose effectively of the beneficial/equitable interest in

an express trust (e.g., he has transferred property to trustees but has not disposed of the
beneficial interest), that beneficial interest automatically results in (goes back to) the
settlor. For example, when a trust fails because the beneficiary has not been chosen yet or is a
sole beneficiary who has died, the beneficial interest that was not disposed effectively will
automatically go back to the settlor.

Another example will arise when the Testator has failed to identify the subject matter of a
trust: Boyce v Boyce (1849) 16 Sim 476.

(b) A presumed resulting trust arises:

. . . where A transfers [or directs a trustee for him/her to transfer] the legal
estate to B otherwise than for valuable consideration: it is a question of A’s
intention whether B to take beneficially or on trust.

If the document transferring the legal estate is silent as to A’s intentions,

“then there is said to arise a resulting trust in favour of A. But this is only a
presumption and is easily rebutted. All the relevant facts and circumstances
can be considered in order to ascertain A’s intention with a view to rebut this
presumption.”

In other words, it is a rebuttable presumption that B holds the property on resulting trust for
A. An effective property disposition of some kind has taken place and, in the absence of
obvious intention, there is a rebuttable presumption that the settlor intended to create a
trust.

For example, when B purchases property with funds provided by A, and the property is
placed in B’s name, a resulting trust will be presumed in favour of A, unless evidence shows
that A had a different intention: see Nelson v Nelson (1995) 184 CLR 538.

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Further, it is not necessary that the whole of the purchase price of a property be provided by
another party for a resulting trust to be imposed. When a financial contribution has been
made to the purchase of a property, the court may declare that the holder of the legal title
holds the property on resulting trust in equal or unequal shares – depending upon the
contributions.

For example, in Jain v Amit Laundry Pty Ltd [2019] NSWCA 20 (19 February 2019) the
judge at first instance, declared that the appellant, Jain, held the property on resulting trust for
the respondent and another party and ordered that ‘title to the property be rectified in the
register of land to record that it was held’ as tenants in common in various shares of the
parties [7]. The Court of Appeal affirmed this ruling.

(c) No writing requirement

S..23C Conveyancing Act 1919 (NSW): writing requirements do not apply to resulting or
constructive trusts.

B. AUTOMATIC RESULTING TRUST: NON-DISPOSAL OF BENEFICIAL

INTEREST

Evans [26.3 – 26.11]

1. Situations in which an automatic resulting trust will arise

When an express trust fails, the equitable interest results or goes back to the creator of the
trust.

For example if:

 there is a failure of one of the three certainties;

 there is property left in the trust (e.g. unexhausted revenue) after its determination;
 property is conveyed “on trust” without any beneficial interests being stated;
 property is conveyed to “on trust to X,” but the gift fails for illegality, uncertainty,
contravention of the rule against perpetuities or lapse;
 property is conveyed “on trust to X on a condition,” but the condition is not satisfied
(e.g., Re Gardiner [1971] NSWLR;
 property is conveyed on trust for a particular loan purpose which becomes
impossible to achieve (“Quistclose” trust);

2. A Quistclose trust

Quistclose trusts are imposed in commercial situations and is named after the case:
Barclays Bank Ltd v. Quistclose Investments [1970] AC 567:

Facts: Rolls Razor borrowed money from Barclays to pay dividends to its shareholders.
Before the dividends could be paid, the company went into liquidation. Quistclose, a

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shareholder of RR maintained that the money borrowed from Barclays was intended to be
used to pay dividends, it was held on a primary trust for the shareholders. Barclays claimed
that the money was held on trust for its benefit,

Held by the House of Lords: a “primary trust” between the borrower and creditors
(shareholders) failed because the purpose of the loan could not be achieved (i.e. to pay a
dividend to the shareholders). Upon such a failure, a “secondary trust” arises whereby the
loan monies are held on trust to return to the lender. Where the property is conveyed only for
a particular purpose which is NOT fulfilled, the beneficial interest in the property will
automatically result back to the settlor.

(See Evans, [25.7] – [25.13])

2. Unexhausted revenue from a private express trust

When there is a surplus of trust property after the objective of a trust has been achieved, a resulting
trust of any surplus which might exist after the beneficiaries have taken their entitlements or have
died, will go back to the settlor.

For example, A gives B $100,000 to hold on trust for C, D and E, who are to receive $30,000
each. A has given no instructions as to the disposition of the remaining $10,000. This will
therefore result in the settlor A.

4. Property in testamentary trust is not completely distributed

If the trust is a testamentary trust, any property not disposed of in the will results (goes back)
to the deceased estate. For example, if there is no residuary beneficiary and there is still
property remaining in the estate after completion of administration (distribution of gifts,
payment of debts etc): Smith v Cooke [1891] AC 297.

Similarly, in Re Goulbenkian’s Settlement Trusts [1970] AC 508; [1968] 3 All ER 785, in

which a gift to the ‘friends’ of the deceased’s son failed for lack of certainty of object and
Boyce v Boyce, in which a bequest to the deceased’s daughters failed for lack of certainty of
subject. In both examples the property resulted in the residuary estate.

If the settlor’s purpose is fulfilled, but his or her intention is not to retain any beneficial
ownership, the Crown takes the property as bona vacantia (meaning: no
beneficiary/beneficial interest): Westdeutsche Landesbank Gorozentrale v Islington LBC
[1996] AC 669, 708 (Lord Browne-Wilkinson).

5. Cases where monies are raised by public subscription for some

particular purpose

Quite often, money will be raised from the general public for a particular purpose. For
example, funds may be raised from public donations to purchase a wheelchair for a disabled
person. The question then arises as to the disposition of any surplus, after the purpose has

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been achieved. If the wheelchair costs $1,500 and $2,000 is raised, what happens to the
surplus of $500?

There are a number of possibilities:

 The funds may be held upon a resulting trust for the benefit of each of the donors.
 If the fund was raised for a charitable purpose and a “general charitable intention”
can be found by the court, the money will be applied upon a cy-pres scheme.
 If the fund was raised for a charitable purpose, but no general charitable intention
is evident, a resulting trust will be raised in favour of the donors.
 If the donors intended to part with the money for ever (once and for all) and thereby
relinquished any claim to it, the money will go to the Crown bona vacantia, In
Australia, property that is held to be bona vacantia goes to the State.

The resolution of each case depends upon the particular facts and circumstances involved.

For example, in Re the Trusts of the Abbott Fund; Smith v Abbott [1900] 2 Ch 326:

Facts: A fund was raised by subscription for the maintenance and support of two elderly
ladies left in poverty stricken circumstances. The names and addresses of the donors and the
amounts contributed were recorded in a ledger. At the death of the survivor, there was a
portion of the fund unused.

Held: that a resulting trust of the balance arose in favour of each of the subscribers.

In this case, because a detailed record of donations was kept by the trustees, it was possible to
identify each and every one of the contributors individually.

However, where individual donors of the fund are unascertainable, a different approach
must be taken. For example, in Re Gillingham Bus Disaster Fund [1958] Ch 300:

Facts: A car accident caused the death of 24 cadets marching along a road. The mayors of the
surrounding towns set up a memorial trust fund to assist the survivors and the families of the
deceased. Only a fraction (1/3) of the fund was used. The issue arose as to the disposition of
the surplus.

Held: that the surplus should not be paid to the Crown as bona vacantia merely because the
donors were unascertainable. However, the donors could not to be taken to have “parted
with their money absolutely out-and-out.” Therefore, trustees held the fund on resulting trust
in favour of the donors and were required to pay the fund into the court like any other trustee
who cannot find the beneficiary. The trustees were ordered to make enquiries as to the
identity of the donors so that the surplus of each donor’s contribution to be returned to him or
her. The donations of any donors who could not be found went to the Crown bona vacantia.

In Re West Sussex Constabulary’s Widows, Children and Benevolent (1930) Trust Funds
[1971] 1 Ch 1, (Goff J):

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Facts: Anonymous donors contributed funds into a collection box in aid of disaster victims.
After payments to those entitled to receive a distribution, there were funds left over.

Held: The donors intended to make an “out and out gift.” Therefore, the surplus should go
to the Crown as bona vacantia. The Court also stated that people who buy a contract for a
benefit (e.g., by buying a ticket for an entertainment, raffle or sweepstake) will be held to
have “parted with their money out and out,” i.e. the contributors did not want any surplus to
be returned and had intended to part with the money once and for all.

The decisions in each of the above cases highlight the importance of

ensuring that when money is being raised for a particular purpose (for
example, for new computers for a school) it must be raised either:

 in such a way as to clearly demonstrate that the donors intended to

part with their money ‘out and out’ or ‘once and for all.’ For
example, through a raffle, a cake stall or a concert; AND
 the purpose of the fund raising is sufficiently broad, to allow any
surplus to remain with the institution raising the funds.

C. PRESUMED RESULTING TRUSTS

Evans [26.1 – 26.29]

PURCHASE MONEY TRUSTS

1. The classic authority for this category of resulting trust is Dyer v Dyer (1788) 2 Cox 92,
93; 30 ER 42, 43, in which Eyre LCB stated:

[T]he trust of a legal estate … whether taken in the names of the purchasers or other
jointly, or in the name of others without that of the purchaser … results to the man
who advances the purchase money.
That position was confirmed by the High Court in Napier v. Public Trustee (WA) (1980) 32
ALR 153, 158 (Aickin J):

Where a property is transferred by one person into the name of another without
consideration, [and where a purchaser pays the vendor and directs him to transfer the
property into the name of another person without consideration passing from that
person], there is a presumption that the transferee holds the property upon trust for
the transferor or the purchaser as the case may be.

The proposition is subject to the exception that in the case of transfers to a wife or a
child (including someone with respect to whom the transferor stands in loco parentis)
there is a presumption of advancement so that the beneficial as well as the legal
interest will pass.

Each of the presumptions may be rebutted by evidence.

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2. Presumption of a resulting trust

A presumed resulting trust may apply to both real property and personal property. In Russell
v. Scott (1936) 55 CLR 440, a resulting trust over a bank account was claimed, but then
rebutted by evidence of an intention to convey a beneficial interest to the transferee.

The presumption of a resulting trust will not arise where the purchase money has been
provided as a loan.

3. Contributions to the purchase of property

A leading authority is Calverley v Green (1984) 155 CLR 242 (Please note that the
decision in Calverly was handed down before the enactment in NSW of the De Facto
Relationships Act 1984 (NSW), which is now the Property (Relationships) Act 1984
(NSW)),

Facts: A man and woman lived in a de facto relationship as a couple for more than 10 years.
They decided to purchase a house to live in. M told W that a finance company required the
purchase to be in joint names. M provided the deposit (1/3 of purchase price) and the couple
jointly borrowed the balance on a mortgage (i.e., jointly and severally liable to make
repayments).
M made the repayments on the mortgage whilst the W paid all household expenses.
The parties were held the property as joint tenants and lived in the house for 5 years, until W
left.
W claimed a 1/2 share in the property and M claimed that she held her interest in the house
on resulting trust for him.

At first instance the W had no beneficial interest in the property because the only reason she
was named as joint tenant was to obtain finance.

The Court of Appeal reversed the decision and held that parties were joint owners.

Held by the High Court: (majority 4-1: Gibbs CJ, Mason, Brennan and Deane JJ - Murphy J
dissenting) that the W’s liability under the mortgage was a “contribution to the purchase
price”

Gibbs CJ, 245-7:

[I]f two persons have contributed the purchase money in unequal shares, and the
property is purchased in their joint names, there is, … in the absence of a relationship
that gives rise to a presumption of advancement, a presumption that the property is
held by the purchasers in trust for themselves as tenants in common in the proportion
in which they contributed the purchase money.

The fact that the W executed the mortgage made her a contributor of 1/2 the money
borrowed as a joint liability. She was considered to have made a direct contribution to the
purchase price.

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The presumption of “proportionate shares” in a resulting trust may be displaced by
evidence of contrary intention.

The presumption of advancement does not apply to de facto couples:(Mason and Brennan JJ
and Deane J)

4. Rebuttal of presumption of a resulting trust

When the presumption of a resulting trust arises, evidence can be adduced of the actual
intention of the parties, to prove that no such trust was intended

The onus of rebutting the presumption is on the person who did not contribute to the
purchase money, e.g., by evidence that transfer of property was intended as a gift (see
Nelson v Nelson).

The evidence must refer to the intention at the relevant time of the purchase (i.e., time
when interest was created). The “relevant time” is “before or at the time of purchase, or so
immediately thereafter as to constitute a part of the transaction:” Martin v Martin (1959)
110 CLR 297

D. PRESUMPTION OF ADVANCEMENT

1. The rationale for the presumption of advancement is said to be based on the moral duty of
a father to provide for his wife and children.

In Scott v Pauly (1917) 24 CLR 274, 282 (Isaacs J):

[The presumption of advancement] is an inference which the courts of equity in

practice drew from the mere fact of the purchase being the father, and the head of the
family, under the primary moral obligation to provide for the children of the
marriage, and in that respect differing from the mother.

“Advancement” means a provision for the health, education and general well-being of
another person.

In certain relationships equity infers or presumes that any benefit has been provided by way
of advancement.

The presumption of advancement applies to transfers from

 husband to wife. H either provides the purchase price or makes contributions to the
purchase price of property in which the wife is given a legal interest: Kais v Turvey
(1994) 11 WAR 357. But not from wife to husband (March v March (1945) 62 WN
(NSW) 111)

 between a man and his intended wife/fiancée: Wirth v. Wirth (1956) 98 CLR 228

 BUT not between de facto couples (Napier v Public Trustee (WA) (1980) 32 ALR
153; Calverley v Green (1984) 155 CLR 242 HC)

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  father to child. This may also apply to a transfer from step-father to step-child
(Oliveri v Oliveri (1993) 38 NSWLR 665)

 mother to child and mother to adult child: Nelson v. Nelson (1995) 184 CLR 538.

2. Rebuttal of the presumption of advancement

The presumption of advancement can be rebutted by evidence that the intention at the
relevant time was not to make a gift (see Nelson v Nelson).

For example, in Calverley v Green evidence was adduced that M did not intend to make a
gift, but merely wanted to comply with the finance company’s insistence on joint names on
the mortgage. The presumption of advancement could have been rebutted if a de facto
relationship was admitted as a category which falls within such a presumption.

Evidence of the acts or declarations of the parties before or at the time of purchase, or so
immediately thereafter as to constitute a part of the transaction will be admissible for and
against the actor or declarant. Subsequent acts and declarations may also be adduced in
rebutting the presumption. However, evidence of subsequent acts are admissible only against
a person, not in their favour Shepard v Cartwright [1954] 3 All ER 649; [1955] AC 431 (the
High Court reaffirmed this as the law in Australia: Calverley v. Green (1984) 155 CLR 242).

In Henley v Bone [2019] NSWSC 254 (18 March 2019), a son purchased a property with
money provided by his mother, who had obtained it from the sale of her business, in which
the son had worked for eight years. He had not owned a property before and was therefore
entitled to the first home owner’s grant. The son allowed the mother and his sister to live in
the property. After his death, the mother claimed that he had held the property on resulting
trust for her because of her payment of the purchase price. The Court held that although there
was no presumption of a resulting trust or presumption of advancement in this instance, the
son’s ownership of the property was ‘subject to a personal obligation to permit [the mother]
to treat the property as her own’ [49]. No decision was made as to the status of the property
and further proceedings are necessary to determine this.

E. ILLEGALITY AND THE RESULTING TRUST

Nelson v. Nelson (1995) 184 CLR 538

Facts: Mrs N purchased a home in the name of her two children. Later she filled a statutory
declaration under the Defence Service Homes Act 1918 (Cth), stating that she had no interest
(equitable or legal) in any other property. The declaration entitled her to be eligible for a
$25,000low interest loan from the Commonwealth, which she used towards the purchase of
another home (balance provide by mortgage over first property). When she discovered that
the children were going to sell the house, she commenced proceedings claiming that they
held the property on resulting trust for her.

Issues:

 Did a resulting trust arise in her favour for the first property?
 Did a presumption of advancement arise in favour of her children?

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  Could the presumption of advancement be rebutted, using evidence of her illegal
purpose in registering the house in the names of her children?

Held by the High Court: Illegality could prevent rights from arising i.e., could prevent the
presumption of a resulting trust.

The “presumption of advancement” between mother and child exists, but it may be
rebutted by evidence of contrary intention.

Evidence rebutting the presumption is admissible even where it may disclose an illegal or
immoral purpose.

If a “presumption of resulting trust” is rebutted, where does the equitable title lie?
If an illegal purpose has been carried through, it will not necessarily preclude the
presumption of a resulting trust. If the illegality flows from the statute, then the issue is
whether the purpose of the statute will be defeated if the resulting trust is enforced. This
approach requires an examination of the statute and the policy behind it.

McHugh J: the remedy (i.e., application of a resulting trust) should not be denied, unless:

 the statute discloses an intention that those rights should be

unenforceable in all circumstances; or
 the sanction of refusing to enforce those rights is not disproportionate
to the seriousness of the unlawful conduct; or
 the imposition of the sanction is necessary, having regard to the terms
of the statute, to protect its objects or policies; and
 the statute does not disclose an intention that the sanctions and
remedies contained in the statute are to be the only legal consequence
of a breach of the statute or the frustration of its policies

On the facts therefore:

 the illegality of obtaining a subsidised loan by deceit did not

contravene a significant section of the relevant Statute, nor did it
defeat or destroy the purpose of the Act
 the purpose was “to provide assistance to Defence Force personnel in
acquiring homes”.

Mrs. N was granted a resulting trust on condition that she returned the fraudulently obtained
$25,000 ( she was allowed to “wash her hands clean”)

F. THE FUTURE OF THE RESULTING TRUST

In Calverley v. Green (1984) 155 CLR 242 in dissent, Murphy J said that the presumptions of
resulting trust and of advancement should be discarded because:

 they were “inappropriate in our times, and are opposed to a rational

evaluation of property cases arising out of personal relationships”

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  “presumptions” can only be made in law when they accord with
common experience

If standards of behaviour change, so should the presumptions, “otherwise the rationale for
the presumptions is lost, and instead of assisting the evaluation of evidence, they may detract
from it.”

In Nelson v. Nelson (1995) 184 CLR 538, 602, McHugh J called upon the legislature to
abolish the presumptions on the grounds that they could cause significant injustice to parties
who are unaware of their existence.

However, despite the statements of Murphy and McHugh JJ, the resulting trust continues to
survive, not only in the form of the Quistclose trust, but also as presumed resulting trusts and
in cases were there has been a failure to dispose completely of the beneficial interest or where
there has been a substantial contribution to the purchase price of a property. The two recent
cases of Jain and Henley, above, indicate that resulting trusts are still very much alive and
regarded as relevant in the equity jurisdiction in the twenty first century.

Cases
Vandervell’s Trusts (No.1) [1967] 2 AC 291
Re Gardiner [1971] NSWLR
Barclays Bank Ltd v Quistclose Invest. [1970] AC 567
Re the Trusts of the Abbott Fund; Smith v. Abbott [1900] 2 Ch 326
Re West Sussex Constabulary’s Widows, Children and Benevolent (1930) Trust Funds [1971]
1 Ch 1
Dyer v Dyer (1788) 2 Cox 92 at 93; 30 ER 42
Napier v Public Trustee (WA) (1980) 32 ALR 153
Russell v Scott (1936) 55 CLR 440
Martin v Martin (1959) 110 CLR 297
Scott v Pauly (1917) 24 CLR 274
Kais v Turvey (1994) 11 WAR 357
Wirth v Wirth (1956) 98 CLR 228
March v March (1945) 62 WN (NSW) 111
Napier v Public Trustee (WA) (1980) 32 ALR 153
Oliveri v Oliveri (1993) 38 NSWLR 665
Shepard v Cartwright [1954] 3 All ER 649; [1955] AC 431

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