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Law Notes Trusts and Equity Notes

Implied Trusts Notes

Updated Implied Trusts Notes

Trusts and Equity Notes

Trusts and Equity

Approximately 1016 pages

Equity notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB trusts cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

These were the best Equity and Trusts Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest re...

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Implied Trusts

Implied Trusts’: Arise without the express declaration of trust by the settlor. Implied trusts fall outside the requirement for formalities required by s.53 LPA 1925.

S.53(2) LPA 1925: ‘This section does not affect the creation or operation of resulting, implied or constructive trusts’.

There are two types of implied trusts:

  1. Resulting trusts – automatic or presumed

  2. Constructive trusts


1. Resulting Trusts

Resulting Trusts’: Operate independently of the intention of the party, but this is not an absolute. The ‘settlor’ may not intend to create a trust but they may still intend to benefit another person with the property. The courts look at the intention to benefit another person rather than the intention to create a trust (Twinsectra v. Yardley [2002]).

Traditional Analysis: Two types of resulting trust

- Vandervell v. IRC [1967]; Per Lord Upjohn at pp. 312-313:

“Where A transfers, or directs a trustee for him to transfer, the legal estate in property to B otherwise than for valuable consideration it is a question of the intention of A in making the transfer whether B is to take beneficially or on trust and, if the latter, on what trusts. If, as a matter of construction of the document transferring the legal estate, it is possible to discern A’s intentions, that is the end of the matter…If, however, the document is silent, then there is said to arise a resulting trust in favour of A; but this is only a presumption and is easily rebutted...”

“The doctrine of resulting trust, however, plays another very important part in our law... If A intends to give away all his beneficial interest in a piece of property and thinks that he has done so, but, by some mistake or accident or failure to comply with the requirements of the law, has failed to do so, either wholly or partially, there will, by operation of law, be a resulting trust for him of the beneficial interest which he has failed effectively to dispose of.”

Per Megarry J at p.64:

“The distinction between the two categories of resulting trusts is important because they operate in different ways. Putting it shortly, in the first category, subject to any provisions in the instrument, the matter is one of intention, with the rebuttable presumption of a resulting trust applying if the intention is not made manifest. For the second category, there is no mention of any expression of intention in any instrument, or of any presumption of a resulting trust: the resulting trust takes effect by operation of law, and so appears to be automatic. What a man fails effectively to dispose of remains vested in him, and no question of any mere presumption can arise. The two categories are thus of presumed resulting trusts and automatic resulting trusts.”

Issue: Megarry J’s description of the second category of resulting trust as ‘automatic’, and independent of the intention of the parties, has been questioned by Lord Browne-Wilkinson in Westdeutsche Landesbank v Islington LBC [1996].

(a)Automatic’ resulting trusts –

Traditional basis for the rule

  • Vandervell v. IRC; Per Lord Reid: “The basis for the rule is, I think, that the beneficial interest must belong to or be held for somebody; so, if it was not to belong to the donee or be held by him in trust for somebody, it must remain with the donor”.

  • Twinsectra v Yardley [2002]; the automatic resulting trust arises despite the intentions of the parties.

Situations where automatic resulting trusts arise:

‘Gap’ and ‘complete failure’ resulting trusts - Automatic resulting trusts arise either where there is a gap in the beneficial ownership (e.g. Vandervell v IRC), or where there is a complete failure of the trusts upon which the donee was to hold the property (e.g. Re Leek [1969] 1 Ch 563; Re Astor's Settlement Trusts [1952] Ch 534).

However, there must always be a primary trust, which either fails for uncertainty of objects or under which there is a gap in the beneficial ownership. (In cases of uncertainty of intention or of subject-matter, there is no primary trust at all, and there can be no resulting trust.)

An automatic resulting trust also arises where a primary trust, which was hitherto perfectly valid, comes to an end or fails (e.g. its purpose has been completed). An example of this is Re Abbott [1900] 2 Ch 326. Sometimes, however, a stated purpose is interpreted as an expression of motive only, so that once it is completed the property belongs to the beneficiaries absolutely, and there is no room for a resulting trust (e.g. Re Andrew's Trust [1905] 2 Ch 48; Re Osoba [1979] 2 All ER 393). The difference is really just a matter of construction in each individual case.

  1. Uncertainty of objects – Failure to specify Bs means that the trust fails because equity abhors a vacuum. The beneficial interest must be owned by someone and not exist in suspension. So the property is held on resulting trust for the settlor (Vandervell v IRC [1967]).

Poor drafting may also result in failure. Where a purported charitable purpose trust is actually construed as a purpose which does not fall within one of the accepted anomalous exceptions, then the property will result back to the settlor or his estate (Re Diplock [1948]).

  1. Failure of a contingency – A person with a contingent interest has not vested interest in the property; if he cannot or does not meet the contingency then the trustee must hold the property for someone. This problem is resolved by an automatic resulting trust for the settlor (Re Ames Settlement [1946]).

  2. Failure to dispose of whole beneficial interest – A failure to specify who owns the whole beneficial interest will mean that it is held for the settlor (Re West [1900]).

    • E.g. A leaves her shares to B for his lifetime. The trustee is clear that it is for B whilst he lives, but who gets the property when he dies? Property will result back...

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