A resulting trust is an implied trust that comes into existence by operation of law, where property is transferred to someone who pays nothing for it; and then is implied to hold the property for the benefit of another person.
The trust property is said to "result" or revert back to the transferor (as an implied settlor). This use of "result" means spring back: on the face of it the property in question has been transferred to the recipient (and indeed it has come into the recipient's legal ownership), but the legal owner is not permitted to benefit from it, and so beneficial ownership of the property springs back to the settlor.
Not all trusts where the settlor is also the beneficiary are resulting trusts. In common law systems, express trusts that clearly state the settlor as the beneficiary are typically not considered resulting trusts.
Beneficial Interest and Outcome
The beneficial interest results to the settlor, or if the settlor has died, to the settlor's estate. This concept is illustrated in the case of Vandervell v Inland Revenue Commissioners [1967], where the beneficial interest vanishes while the beneficiary interest remains.
Closely-Related Parties
Some jurisdictions might establish a rebuttable presumption of gift for property transfers between relatives. This presumption could serve as an affirmative defense in petitions to establish a resulting trust implied by operation of law.
The law presumes that transferring property to a family member, particularly for supporting a relative, is legitimate. However, when an unrelated party receives substantial value without providing consideration, it's usually presumed that they hold the property in trust for the transferor, unless proven as a gift. This presumption of gift applies to transfers between siblings, uncles, aunts, children, and grandchildren.
An exception to the presumption of gift is property transfers between spouses. This exception arises from the fiduciary duty spouses owe each other, based on a special trusted relationship implying utmost good faith and fair dealing. Spouses are generally incapable of transmuting property, except under specific circumstances where they make an EXPRESS DECLARATION of transmutation through a clear statement in a dignified document.
Unlawful Purpose
In common law jurisdictions, a resulting trust is an equitable creation, rather than a common law concept. Consequently, equitable defenses like laches, unclean hands, and the duty to do equity may be recognized in some jurisdictions. For instance, if a transferor conveys property for an unlawful purpose and benefits from it, a court might rule that the transferor has waived the right to claim a resulting trust. Courts in these situations balance the transferee's unjust enrichment against enabling cheating by the transferor. Allowing a cheater to gain from such transactions would undermine the court's integrity.
Other jurisdictions might disregard an unlawful purpose.
In scenarios involving illegality, distinguishing the implementation of a resulting trust theory (implied by operation of law) from an oral express trust (implied by facts) can become difficult. A transferor failing under one theory might still succeed under the other.
Resulting Trusts in English Law
Classification
An attempt to classify resulting trusts was made by Megarry J in Re Vandervell's Trusts (No. 2) [1974] Ch 269. According to Megarry J, there are two sorts of resulting trusts in English law.
Presumptive Resulting Trusts
These trusts arise when A transfers property to B, and the law creates a rebuttable presumption of a resulting trust if A's intention is unclear (absence of written evidence).
For instance, if A transfers property to B, except when the transfer is between parents and children or spouses, the law presumes a resulting trust for A in the absence of evidence to the contrary (unless A provides evidence that the property is actually owned by B).
The main categories of fact situations giving rise to a presumption of a resulting trust are: - A voluntary conveyance of property by A to B - A monetary contribution by A to purchase property for B (The Venture, [1908] P 218, (1907) 77 L.J.P. 105.)
These presumptions are rebuttable. In Fowkes v Pascoe, evidence was presented that a woman had purchased stock in the names of herself and her grandson; the grandson and granddaughter-in-law's evidence that this was a gift was admissible. However, the presumption only considers an intention to create a trust, not ulterior motives. Tinsley v Milligan exemplifies this, where fraudulent intent didn't defeat the presumption of a resulting trust.