RESULTING TRUSTS
CONTENTS
1.0 Introduction
2.0 Objectives
- Main Content
- Nature of Resulting Trusts
- Presumption of Advancement
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignment (TMA)
7.0 References/Further Readings
INTRODUCTION
Resulting trusts are special and peculiar trusts which are not in the class of express trusts. This class of trusts can arise in varying situations and are very fundamental to our consideration of trusts by virtue of wide areas that they can arise. In fact, any consideration of trusts without the resulting trusts will be grossly deficient. The examination of the issues to be covered in this unit will enable you to appreciate the practical application and benefits of resulting trusts.
OBJECTIVES
In this Unit, you will learn about what can be described as resulting trusts, the nature of resulting trusts, situations where resulting trusts could be presumed or imposed and statutory provisions negating resulting trust in cases of voluntary transfer of land by one person to another. You will further learn about the equitable principle of presumption of advancement and cases where such presumption could be rebutted and. At the end of this Unit, you should be able to:
- Know is a resulting trust and the varying circumstances where it can arise
- Explain the equitable principle of the presumption of advancement
- Explain when and how the presumption of advancement can be rebutted
- Appreciate the practical importance of the resulting trusts
MAIN CONTENT
Nature of Resulting Trusts
Essentially, a resulting is a creation of equity and one regarded as the presumed intention of the settlor, testator or any other party and which is imposed from the circumstances of each case and not a trust expressly declared. A resulting trust can therefore be described as one which is presumed or implied from the conduct of the parties and the surrounding circumstances.
Yet, it may be a difficult task to attempt a definition of a resulting trust, judging from the variety of ways which may arise. In Re Vandervell’s Trust [1971] 1 All
E.R. 47, however, an attempt was made to classify resulting trusts by its nature and circumstances when they may arise. The classification will be considered shortly.
Some of the characteristics of resulting trusts are that, its objects need not be immediately identifiable see Re Gillingham Bus Disaster Fund (1958) Ch. 300; and are not subject to the rule against perpetuities.
By virtue of the nature of resulting trusts, they are exempted from the requirements for the creation of express trusts. See Section 78(2) of Property and Conveyancing Law.
In Re Vandervell’s Trust (No. 2) [1974] Ch. 269 resulting trusts were further classified into “presumed” and “automatic” resulting trusts. Presumed resulting trusts will arise in cases where the intention of trust is presumed or implied from the circumstances on the part of one party in the transaction; while automatic resulting trusts relates to situations where trust is not the presumed intention of the settlor or testator but one which is an automatic consequence of the circumstances of the case. The effect of this classification is that it is not in all cases that an intention of resulting trust is implied or presumed, although it has been generally expressed that the distinction is merely cosmetic.
Situations where resulting trusts could be presumed or imposed are as follows:
Failure of Express Trust
Resulting trust can arise in cases where an express trust fails either totally or partially. For instance, a trust can fail totally where it was declared void by reason of uncertainty or that it offends against the rule of perpetuity and for any other reason, apart from those declared void on the grounds of illegality and public policy. In situations like these, there is a resulting trust to the settlor or testator except where the settlor or testator has indicated other purposes which the beneficial interest could be applied if the primary purpose fails. See Hodgson v. Marks (1975) Ch. 892.
The principle here is based on the fact that unless a clear intention was expressed to the contrary, the trustee cannot take beneficially where the trust fails. See Re Gillingham Bus Disaster Fund (supra) and Morice v. Bishop of Durham (1804) 9 Ver. Jr. 399.
Where a resulting trust is in respect of the residue of a will, there be a resulting trust in favour of the residuary devisee or legatee. Where there is no provision in a will as to who will be entitled to the estate’s residue and there is a failure of the trust, relatives or next-of kin can claim benefit. See Morice v. Bishop of Durham (supra). In the absence of eligible relatives, the trustee is to convey or transfer the trust property to the State as bona vacantia. See Hodgson v. Marks (supra).
In cases where there is a partial failure of a trust, the part that fails will result to the settlor or testator. However, where the partial failure will not vitiate the trust, a resulting trust may not arise.
Unexhausted Residue of a Trust
Where there is a surplus after the terms of a trust whether created by will or inter vivos, has been performed or the beneficial interests were not wholly exhausted or disposed, the remainder of what is left will result to the testator’ s estate or settlor. The exception is where a contrary intention was expressed. See Re Gillingham Bus Disaster Fund (supra).
It may however be possible that there were several donors in respect of a particular trust fund, in which case, the surplus will be shared pro rata among the contributors, in accordance to the proportion of their contribution. It may also happen that some of the donors are anonymous and hence can’t be identified, in that situation their interest in the surplus fund will be regarded as lost for life; in such a situation the portion of what belongs to them should be transferred to the State as bona vacantia. See Re Gillingham Bus Disaster Fund (supra).
Purchase in the Name of Another
In situations where someone purchases a property in the name of another and the person in whose name the property was purchased gave no value or consideration for the same, equity treats such a person as holding on resulting trust for the person who advanced the purchase money, unless a contrary intention is shown. See Dyer v. Dyer (1788) 2 Cox Eq. 92 and the Nigerian case of Coker v. Coker [1964] L.L.R. 188 where the principle in the former English case was approved and applied.
The principle of equity under consideration here has been held applicable to varying situations, some of which are as follows:
i.) Purchase in the name of another – this covers cases where someone provided money for the purchase of landed property in the name of another. See Ukata v. Emembo [1963] 7 E.N.L.R. 137.
ii.) Joint purchase by two or more persons in the name of one person. iii.) Joint purchase.
iv.) Joint mortgage. v.) Joint account. vi.) Joint leases.
vii) Voluntary transfer of land by one person to another, except the conveyance is expressed to be for the use of the transferee. In the former Western Nigeria however, there is no resulting trust in the situations aforesaid. See Section 85(3) of the Property and Conveyancing Law.
SELF ASSESSMENT EXERCISE (SAE) 1
Discuss the nature of resulting trusts and the importance or otherwise of the further classification of these trusts into “presumed” and “automatic” resulting trusts in
Re Vandervell’s Trust (No. 2) [1974] Ch. 269.
Presumption of Advancement
You need to know that in certain cases of purchase in the name of another, there may be presumption of advancement where there is such level of intimacy between the person who advanced the purchase money and the person in whose name the property was purchased. In that case, it is presumed that the person who provided the purchase money wished to advance it for the benefit of the other.
This may arise in cases where the person who provided the purchase money stands in loco parentis or some other special relationship to the other person, such as father to son, or husband to wife. The property advanced in this case is presumed to be a gift and a resulting trust is rebutted. See Bennet v. Bennet (1879) 10 Ch. D. This is usually the case in purchases involving family members.
From the above discussion, presumption of advancement will be made in a transaction involving:
i.) Father and child.
ii.) Husband and wife. See Petitt v. Petitt (1970) A.C. 777. iii.) Persons in loco parentis.
Rebuttal of Presumption of Advancement
In spite of the presumption of advancement in above given cases, it is possible to rebut such presumption by the party contending it. According the dictum of Viscount Simonds in Shephard v. Cartwright (1955) A.C. 431 at 449, evidence admissible in rebuttal of presumption of advancement shall be the acts and declarations of the parties before or at the time of purchase. Subsequent acts are only admissible as evidence against the party who made the advancement and not in his favour.
You have to note that evidence which indicates that a transfer was made for illegal, fraudulent or purposes contrary to public policy shall be not admissible in rebuttal of the presumption of advancement.
Also, evidence in rebuttal of the presumption of advancement which revealed that a transfer of property was made in order to defeat a creditor’s claim will not be admissible. See Tinker v. Tinker [1970] 1 All E.R. 540.
SELF ASSESSMENT EXERCISE (SAE) 2
Mention and discuss with the aid of decided cases, two situations where resulting trusts could be presumed or imposed.
CONCLUSION
Resulting trusts are vital to the practical application of trusts and our examination of the issues should be able to equip you for the application of the principles. You need to be able to navigate your ways through the intricacies involved in situations where resulting trusts can arise and when there would be presumption of advancement.
SUMMARY
In this Unit, you have learnt about resulting trusts, their nature, the further classification of these trusts into “presumed” and “automatic” resulting trusts and the varying circumstances when it could arise or be imposed, such as failure of express trusts, unexhausted residue of trusts and purchase in the name of another, among others. You further learnt about the principle of presumption of advancement, which may arise in cases where the person who provided purchase money stands in loco parentis or some other special relationship to the other. Also learnt in this unit is about possibility to rebut the presumption of advancement by the party contending it. In the next Unit, you will learn about constructive trusts.
TUTOR-MARKED ASSIGNMENT (TMA)
- Discussed the equitable principle of presumption of advancement and circumstances when this could be rebutted
- Fikemi bought a three-bedroom bungalow with the gratuity she was paid on her retirement. Fikemi’s husband - Orikanbody, expended his personal money generously to renovate and put the house in good shape after which it was let out to a tenant. Three years after the purchase, Orikanbody fell in love with a young lady – Susan, who got pregnant for him. On hearing information about the amorous affairs of her husband and the consequent pregnancy, Fikemi moved out of their matrimonial home and filed for a divorce. Orikanbody claimed that the house bought by Fikemi is jointly owned by them owing to the money he spent on improving the house. Orikanbody then requested that the same be sold and his own share of the proceeds of the sale be given to him. Fikemi however disputes Orikanbody’s claim and contends that the money expended on the house by Orikanbody was an advancement to her. Meanwhile, Fikemi demanded that the Nissan X-Terra jeep which she presented to her husband – Orikanbody as gift on his 55th Birthday but which she bought in her own name be returned to Discuss the legal issues involved and advice the parties.
REFERENCES/FURTHER READINGS
Hayton, D.J. (2001). Hayton & Marshall Commentary and Cases on The Law of Trusts and Equitable Remedies. London: Sweet & Maxwell.
Jegede, M.I. (1999). Law of Trusts, Bankruptcy and Administration of Estate.
Lagos: MIJ Professional Publishers Limited.
Property and Conveyancing Law.