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5. Resulting Trusts
Equity and Trust (University of Hertfordshire)
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Part 1: Presumed and Automatic resulting trusts
a) “Presumed” Resulting Trusts

Purchase money presumption of RT and gift of property RT


Counter-presumption of advancement
Section 60(3) LPA
Trusts Week 5: Resulting Trusts
b) “Automatic Resulting Trusts
Part 2: The Birks v Swadling debate on when a resulting trust arises
a) The Swadling theory

Lord Browne-Wilkinson’s variation of the Swadling theory

Problems with the Browne-Wilkinson/Swadling theory?
b) The Birks/Chambers theory

Lord Millet’s variation of the Birks/Chambers theory

Problems with Birks/Chambers/Millet
______________________________________________ _________ ______________________________________________________________________________________________________________ _ __
_ ______________**_INTRODUCTORY DISCUSSION ** _________
__

A resulting trust is where the transferee holds property on trust for the transferor (or the person who
provided the purchase money for the transfer). The beneficial interest results (comes back) to the transferor
(or the party who provided the purchase money).
-


Thus, we can see a RT as a way of getting back your own property.

RT’s and CT’s are not subject to the formalities requirements that ET’s are subject to [section 53(2)]

Note: The metaphor of “springing back” associated with RT’s is misleading. In truth, a RT is a new interest which
is created not a springing back or resulting back interest.

Issues of debate regarding the nature of the RT:
1. The role of intention. When does a RT arise? (the Birks/Swadling debate)
2. Whether the beneficial interest remains in the transferor or is returned to him.
What is happening to the beneficial interest?

VIEW 1: The transferor starts with both legal and beneficial interest and in cases of RT the beneficial
interest remains in the transferor when he transfers the legal interest.
Lord Reid in Vandervell v IRC: the beneficial interest must belong to or be held by
someone. So if it is not to belong to the donee/trustee, then it must remain in the donor.

VIEW 2: The transferor just starts with absolute ownership rather than title consisting of legal and
beneficial interests. Beneficial interest is then created when he tries to pass title to the transferee and
the RT means it returns to him (ie, he gets it for the first time)
Lord B-W favours this view in Westdeutsche. Birks says he is right to
It is vital that this view is the right one if Birks/Chambers’ theory that RT’s give effect to
restitution to the transferor and are thus part of the law on unjust enrichment is right.
My view: View 2 is right.
In what situations does a RT arise?


Presumed RT’s – (1) gift of property to volunteers; (2) purchase money RT’s
Automatic RT’s – Failure of an express trust
_____ THE LANGUAGE OF TWO TYPES OF RESULTING TRUST_____

The traditional approach is that there are two types of RT

Re Vandervell’s ST (No2) [1974]: Megarry J identified that RT’s fall into 2 categories:
automatic and presumed.

Under the traditional classification:
 A presumed RT (arising in the case of transfers to volunteers (ie, voluntary conveyances &
purchase money RTs) depended on the presumed intent of the transferor
 On the other hand, an automatic RT (arising on the failure to dispose of the beneficial interest)
were imposed by operation of law, without regard to intention.

The traditional classification is no longer favoured

Swadling and Lord B-W say all RT’s arise where there is an intention to create a RT;
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
Birks/Chambers and Lord Millet say all RT’s arise where there is no intent to benefit
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______________________________________________ _________ ______________________________________________________________________________________________________________ _ __
_ _**_1. “PRESUMED” AND “AUTOMATIC” RESULTING TRUSTS **
__
___________A. “PRESUMED” RESULTING TRUSTS_____________
 PURCHASE MONEY PRESUMPTION OF RT; AND
GIFT OF PROPERTY PRESUMPTION OF RT
1. Gift of property presumption of RT
 In relation to personalty, there is a rebuttable presumption that a voluntary transfer to a third party gives rise
to a resulting trust
Eg: Fowkes v Pascoe (A purchased personalty in B’s name. Presumption of RT in A’s favour)
Eg: Re Vinogradoff (Held: Even though a child may not be appointed a trustee, presumption of RT applied)


It is questionable whether this actually coincides with the real intention of the transferor (does he
really intend to create a RT?). Thus, casts some doubt onto Swadling/Lord B-W theory.
In relation to realty (ie land), it is uncertain if there is still a rebuttable presumption of RT


Lohia suggests that Section 60(3) means there is no longer a presumption of RT here
But despite Lohia, it remains uncertain what effect s60(3) has had.
2. Purchase money contribution presumption of RT [purchase in another’s name]
 In relation to purchase money, there is also a rebuttable presumption that where A contributes money to the
purchase price but the property is conveyed to B, then A has a RT in his favour.

The presumption of RT arises when property conveyed in joint names of person who paid purchase money
and a third party (eg, the husband) and in cases where property conveyed solely to the third party.
Example:- Fowkes v Pascoe (shows presumption of RT applies to purchase of personal property in another’s name)
- Dyer v Dyer (1788) (shows presumption of RT applies where money provided to purchase real property (ie, a house))
There is a RT in proportion to the contributions provided.
But note B Hale in Stack v Dowden: there is no presumption of a RT in cases of purchase monies to the family home.
Rebutting the presumptions of RT



Re Sharpe: the presumption of RT will be rebutted where the contribution to the purchase price was intended as
a loan
The presumption of RT will also not apply if the purchase money/gift was intended as an absolute gift
Can the presumption of resulting trust be rebutted where there is evidence of illegal conduct (ie,
transfer/purchase in another’s name for illegal reasons such as tax evasion)?
-
Answer: No – The presumption of RT will be upheld despite the fact that he has transferred the
property for an illegal purpose (Tinsley v Milligan)
This rule in Tinsley v Milligan has been heavily criticised. It has the result that if the transfer is by a
husband, then he will not get a RT because the presumption of advancement applies whereas if the
transfer is by a mother then she will get a RT as the presumption of advancement does not apply. This
seems to be an arbitrary distinction.
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 COUNTER-PRESUMPTION OF ADVANCEMENT

In certain cases, the presumption of advancement applies under which it is presumed that the settlor
intended to make a gift to the third party. Thus, in such cases, it is presumed there will be no RT.
The basis behind this is that in relationships where the donor is under an obligation to
provide for the donee, he will intend it as a gift to the donee.
When does the presumption of advancement arise?

Husband and wife (but not wife to husband or husband to a mistress)
Pettitt v Pettitt criticises the presumption of advancement for transfers made from the
-

husband to the wife. Lord Diplock said the rule was outdated as in the modern context, we
should not presume that women are dependent on men to provide for them.
The case shows that the presumption in the context of husband & wife is weaker than it was
before although it still exists.
Father and legitimate child (but not mother and child)
Examples: Dyer v Dyer (father bought property and put it into the name of the child);
Shephard v Cartwright [1955] (father put property into children’s names for tax reasons.
Held that the presumption of advancement was not rebutted as he could not prove he did not intend it as a gift)
-
Bennet v Bennet (1879) (there is no presumption of advancement where a mother pays into
the name of the child);
-
Criticism: There appears no good reason why the rule should be different for mothers. The
rule needs to be updated. Perhaps we should follow the approach of the NSW CoA in Australia:
Nelson v Nelson (1995): The New South Wales Court of Appeal decided that there is a
presumption of advancement where property is transferred from the mother to the child.
My view: we should follow Australia: Our law is outdated and arbitrary.
-

Poersons in loco parentis
Where A assumes the position of B’s lawful father, there is a presumption of RT (eg,
stepfather-stepson)
Rebutting the counter-presumptions of advancement (and # holding on RT)



Either of the presumptions of advancement can be rebutted by showing an intention that the donor
did not intend to make a gift to the wife/child.
Warren v Gurney [1944] – Presumption of advancement where father bought house for his daughter
- The fact the father retained the title deeds showed he did not intend it as
a gift for his daughter and thus the presumption was rebutted.
Can the presumption of advancement be rebutted where there is evidence of illegal conduct (ie,
transfer/purchase in another’s name for illegal reasons such as tax evasion)?
-
The fact that the purpose was illegal can not usually be used as evidence that the presumption of
advancement should be rebutted. (Tinker v Tinker)
But, where the party has withdrawn from the transaction before the illegal purpose has taken effect,
then he may rely on it as evidence the presumption of advancement should be rebutted (Tribe v Tribe)
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 SECTION 60(3) LPA

Prior to section 60(3) there was a presumption of a RT where a voluntary conveyance was made which did
not declare the use of the property. However, there is no longer a presumption of RT with regard to land.

SECTION
LAND
60(3) LPA
REMOVES THE PRESUMPTION OF AN
RT
WITH REGARD TO
“a resulting trust for the grantor shall not be implied merely [because] the property
is not expressed to be for the benefit of the grantee”

LOHIA V LOHIA [2001]
held at first instance that s60(3) ousts the presumption of RTs for land!
-
 STACK V DOWDEN

Stack v Dowden [2007]: (suggests no presumption of a RT in the family home context in
cases of conveyance into joint names)



Ms Dowden put in much more than Mr. Stack to purchase the second home. But when they bought the
second home, they co-owned it as joint owners.
Held at first instance: agreed with Mr. Stack that it should be 50:50 split.
House of Lords (affirming CofA) decided that the 65:35 split was appropriate
 Baroness Hale [60]: Said the law had moved on from the past in response to changing social and

economic conditions. Thus, now in the context of the family home, there was to no
presumption of a resulting trust
Lord Hope [31]: Agreed with B Hale that in the context of a matrimonial or quasi matrimonial
home, there should not be a presumption of RT.
-
Thus, they are saying that there is no RT in the family home. To find any trust, the person would have to show
there is a constructive trust [common intention she was to have an interest + detrimental reliance]
 Lord Neuberger (dissenting) [110-122] disagreed with her. He thought the majority were wrong
to outlaw the purchase money RT so quickly and felt that it should have arisen.
-
-
Indeed, he said the presumption of RT should remain as often the only reason the parties have
transferred into joint names is because of advice from their solicitor – not because they intend to
take 50:50. Parties are often anxious not to discuss how to divide so the solicitor might just assume
and they may just follow the solicitor.
Moreover, he thinks the presumption of RT still remains with regard to purchases made in the sole
name of the other. Thus, for consistency he thinks the presumption of RT should also remain for
purchases made in joint names.
Swadling : It is a pity the issue of RTs was not more fully ventilated by the HoL
B Hale’s act of abolition of the RT in such cases of conveyance into joint names was
made with the benefit of almost no reasoning (except that the law has moved on in
response to changing social & economic conditions).
Indeed, her abolition may even have been made with the mistaken view about RT’s as she
said the presumed RT reflected equity’s presumption against apparent gifts without
expressing why equity took such a stance. Moreover, she failed to notice this was the
very argument of Professor Birks which had been rejected by the HoL in Westdeutsche.
-
I agree with Swadling. The problem with B Hale abolishing the presumption of RTs in
such cases is that she has not explained properly why she has done so.
It is not entirely clear whether the majority are abolishing the presumption of RT with
regard to both purchases made for conveyances into joint names and also for conveyances
made into the sole name of the non-contributor.
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Lord Neuberger [at 114] says that the majority seems to only be abolishing the presumption of RT with regard
to purchases made for conveyances into joint names. The presumption of RT will still apply where A
contributes but the property is conveyed into the sole name of B.
___________B. “AUTOMATIC” RESULTING TRUSTS____________


Automatic RT’s have nothing to do with the intention of the parties. They arise by operation of law
even if the settlor did not want to have a beneficial interest (eg, Vandervell 1)
The main contexts in which such automatic resulting trusts arise by operation of law are:
Type of case
1. Failure of Express Trust
Situation
Notes
 Where property passes to trustees under an
express trust that is not effectively declared (eg,
does not fulfil formalities requirements or does
not satisfy certainty of beneficiaries)
 Where an express trust fails because it is subject
to a condition which is not fulfilled
Example:- Morice v Bishop of Durham (uncertainty of beneficiaries)
 Note: If the trust fails (ie, voided) because it is
ultra vires, then there will not be a RT
Example: Westdeutsche
-Vandervell v IRC
Example: Re Ame’s Settlement (where purpose of giving money
was for marriage but the marriage was annulled so purpose failed = RT)
-
Bank paid money to LA under an interest swap agreement
which was subsequently declared ultra vires.
-
HoL (overturning the CoA) held the money paid to the LA was not
held under a RT. It was simply recoverable at law under a personal
restitutionary claim not a RT.
2. Incomplete Disposal of
Beneficial Interest
 Failure of express trust to dispose of the entire
beneficial interest (usually when draftsman has
made a blunder)
Example:- Re Cochrane.
- Re Gillingham Bus Disaster
3. No declaration of trust
 Where the beneficial interest has not been dealt
with it is held on RT.
Example: Vandervell v IRC –
Shares to be transferred subject to an option in favour of
V’s trustees to repurchase for £5,000.
Revenue claimed V had to pay surtax on the dividends on the
[Vandervell v IRC shows that as no effective trusts
of the option were declared (as the trust failed for
lack of certainty of objects), the company (V’s
trustees) held the option on an automatic RT for V)]
ground that he had not entirely disposed of all his interest in the
property because in the absence of a declaration of trust of the
option, it must be held on RT for him.
-
Held: the beneficial interest (the option to repurchase shares)
had not been disposed of so it was held on automatic RT for
the settlor (V). Thus, he had to pay surtax.
Note: This case (and Air Jamaica) show that a donor’s mere intention
not to have a beneficial interest can not prevent an auto RT.
4. Surplus funds
 Surplus left after trust purpose has been
accomplished
 Surplus left after dissolution of an unincorporated
association
5.
Money for a purpose
 Money advanced for a purpose but the money
-
RT of surplus for settlor/contributors
Example: Re Gillingham Bus Disaster Fund where
Government took over responsibility for the welfare of the
cadets. The purpose therefore failed and the money was held on
RT for the contributors.
-
(Note: But if it is intended as an absolute gift then there will not be a
RT [Eg, Re Osoba])
Two possible outcomes:
-
If the court takes the trust approach, there will be a RT for
whoever contributed in proportion to their contributions
[Example: Air Jamaica]
-
If the court takes the contract approach, then distribution determined by
the terms of the contract between the members (not RT)
Quistclose type RT.
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but can no longer be
applied for that purpose
can no longer be used for that purpose
______________________________________________ _________ ______________________________________________________________________________________________________________ _ __
_ **_2. THE BIRKS / SWADLING DEBATE ON WHEN A RT ARISES**
_
Lord B-W
(intend to create a trust + conscience
of transferee + bona vacantia approach)
Swadling
Lord Millett
Birks/Chambers
(intend to create a trust)
(narrow view of no intent to benefit)
(broad view of no intent to benefit)
 Swadling: presumption of RT arises where you intend to create a trust [ie, based on unjust enrichment]

Lord B-W’s variation [Westdeutsche]:
- He believes the conscience of the transferee has to be affected by realising he has
received property not intended for his benefit. Swadling disagrees.
- He thinks the beneficial interest must simply go bona vacantia in cases where there is
no intention to create a trust (eg, the auto RT cases presumably). Swadling does not
subscribe to this approach.
- Lord B-W thinks that failed trust RTs can be explained by the presumption of intent to
create a trust. Swadling disagrees and says that actually there is no presumption at
play in such cases – it is just an automatic RT and Swadling can’t explain auto RTs
 Birks/Chambers: presumption of RT arises where there is no intent to benefit the recipient

Lord Millett’s variation [Air Jamaica + Twinsectra]:
- He takes the narrow view of no intent to benefit. Whereas Birks/Chambers take
the broad view that a RT will also arise where the intent to benefit the recipient
has been vitiated (eg, mistaken intent to benefit counts as no intent to benefit)
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________________A. THE SWADLING THEORY_______________
Swadling (2008): Presumption of RT only where you intend to create a trust
A.
He argues the Birks/Chambers view that the
presumption of RT arises due to “no intention to benefit” is completely wrong because:
1.
2.
The presumption of a RT was and still is proof of intent to create a trust. Birks/Chambers are wrong to
say it has changed so that it is now proof of no intent to benefit.
The 5 propositions Birks/Chambers rely on to argue a presumed RT is about no intent to benefit are false.
1.
2.
3.
Lord B-W is wrong to think failed trust RT’s arise from a presumption of intent to create a trust
Vandervell v IRC is wrong that the beneficial interest “remains”
Chambers is wrong to think automatic RTs arise due to no intention to benefit
Argues that we can not explain automatic RTs
B.
__________________________________________________________________________________
Intro_____________________________________________________________________________

The 3 types of trusts we traditionally call RT’s are:
Voluntary transfer (ie, presumed RT)
Purchase money (ie, presumed RT)
Auto RT’s (operation of law) where trust fails (eg, for lack of certainty/formalities)

We need to understand how presumptions work in order to know what a presumed RT is

“True” legal presumptions prove an additional fact. They arise because the existence of the secondary
fact is the most likely inference we can draw from the evidence of the basic (primary) fact.
This can be distinguished from “false” presumptions which do not prove the secondary fact but
simply describe the situation. They tell us nothing about proof.
-

So for the presumption of RT to be a “true” legal presumptions, we must be able to say that because there is
a voluntary transfer/purchase money (ie, the basic fact), this allows us to infer (prove) the secondary fact that
it was intended to be held on RT not as a gift
So can we say that presumed RT’s are “true” legal presumptions?
- Answer: Yes they are. The presumptions of RT rebuttably prove the fact that the transferor
declared a trust for himself (ie, intended to declare a RT)
_________________________________________________________________________________
A. THE BIRKS/CHAMBERS VIEW THAT THE PRESUMPTION OF RT ARISES DUE TO
________________________“NO INTENTION TO BENEFIT” IS
WRONG________________________
1. Birks / Chambers are wrong to say the presumption of RT has changed to now acting as proof
of the fact the settlor had no intention to benefit the donee of no intention to benefit:
[According to Swadling, the presumption is still proof of intent to create a trust]

Birks & Chambers agree that in the early period (ie, before 1660 when trusts replaced uses) the presumption of RT
was proof of a declaration of trust (ie, presumption was about intention to create a trust). However, they say that the
presumption changed after 1660 so that now the presumption proves the fact that there was no intention to benefit.

Swadling disagrees and says that actually the presumption is still proof of intent to create a trust. There has been
no change in the presumption in the view of the courts.

He says the judges post 1660 saw the resulting trust as no different from the resulting use
-

Neither did the content of the presumption change in the 20th century
-

Eg, in Dyer v Dyer (1788) the Court said the purchase money RT operates on a “strict analogy” to the old law on uses.
Eg, in Pettitt v Pettitt, Ld Diplock criticised the presumption of RT precisely because it infers the intentions of parties.
Thus while the presumption of RTs might be criticisable, it still has the same content as always.
He agrees that there are some dicta in recent cases which seem to support the Birks/Chambers view that actually
the content of the RT has now changed to being about proving no intent to benefit. But, he rejects these dicta:
-
Firstly, Nelson v Nelson suggests the presumed RT is about no intent to benefit. But Swadling says we should not make
too much of this case as the precise nature/content of the presumption was not actually the issue in the case.
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Note: Prior to
1660, we had
‘uses’ rather
than ‘trusts’.
Uses were the
forerunner of
the modern
trust
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Secondly, Air Jamaica also suggests a no intent to benefit content of presumed RTs. But Swadling says actually this
shows nothing as it simply follows the approach in Vandervell which in itself can not be authority for anything since two
of the majority judges were working under a false assumption that the benefit is “retained”.
2. Birks & Chambers are also wrong to say that the presumption of RT shows no intent to
benefit because each 5 propositions necessary for their theses are wrong


Birks & Chambers theses rely on 5 propositions, each of which Swadling says is false.
The 5 propositions are: a) Gratuitous transfers are “apparent gifts”; b) Equity is suspicious of gifts; c) Equity
presumes apparent gifts are “not gifts”; d) The presumption of not gift is a presumption of a “non-beneficial
transfer”’ e) the presumption of non-beneficial transfer triggers a RT.
1.
Gratuitous transfers are “apparent gifts”

Swadling says this is wrong as gratuitous transfers are just ambiguous transfers not apparent gifts.
2.
Equity is suspicious of gifts

Swadling says this is false because it fails to explain why equity is not suspicious of all gifts. For example, equity is not
suspicious of (1) gifts of life estates, or (2) post mortem gifts, or (3) gifts proved by evidence that it was a gift Thus, equity is
not actually suspicious of gifts.
3.
Equity presumes that apparent gifts are “not gifts” [ie they are RTs]

Swadling says this confuses inferences of fact from inferences of law. Only inferences of fact are “true” presumptions
whereas inferences of law are “false” presumptions (see intro above). The idea of “not gift” is a legal conclusion not a fact.
4.
The presumption of not gift is a presumption of a “non-beneficial transfer” [ie no intent to benefit]

Swadling says a “beneficial” interest can be used in two different senses. Firstly, to describe how a right is held; or secondly
to describe what type of right is held. He says that the beneficial interest can only actually be used in the first sense but
Birks/Chambers makes the mistake of using it in the second sense to say what type of right is held.
5.
The presumption of non-beneficial transfer triggers a RT

Swadling says there is no satisfactory explanation why the law should give rise to a RT where no benefit to transfer is proved
_________________________________________________________________________________
_______________________B. WE CAN NOT EXPLAIN AUTOMATIC RT’S
_____________________
1. Argues that Lord B-W is wrong to think that failed trust RTs can be explained by the
operation of a presumption of intent to create a trust

Lord B-W in Westdeutsche says that a failed trust causes a RT because we can presume the intention to create a trust.

However, Swadling says this is untrue. A failed trust RT is not a presumed RT at all but actually an
automatic RT.
It is not a true presumption as no additional facts are proved in the failed trust RTs cases.
Indeed, Harman J in Re Gillingham Bus Disaster rejected presumed intent as the reason for such RTs
-
And in Vandervell v IRC, the majority judges of House of Lords (Ld Upjohn & Ld Wilberforce) rightly said we are
not dealing with a presumption in such cases. Cases of failed trust RTs are automatic RT’s.
2. Argues the Vandervell v IRC explanation of why automatic RT’s arise is wrong


Ld Upjohn and Ld Wilberforce said the RT arose because the beneficial interest remained in the settlor.
Swadling says this notion of “retaining” a beneficial interest is wrong because you start with absolute title not
separate legal and beneficial interests.
3. Argues the Chambers explanation of auto RTs arising from no intent to benefit is wrong


Chambers says we can explain all (ie, presumed and automatic) RT’s by “no intention to benefit”
Swadling says this is wrong
-
There is no binding authority in English law to suggest that a RT can arise just because of no intention to benefit.
The idea of a “transfer with no intention to benefit” does not describe a fact and is therefore not susceptible to
proof. IT is just a legal conclusion from proved facts.
Proprietary overkill:
 If the desire of Birks&Chambers is just to strip out the unjust enrichment then a personal claim
serves just as well – there is no need for a proprietary trusts right as well.

Indeed, granting a RT and thus a proprietary right rather than just a personal claim is
unfair. It means that the settlor will take before creditors (because they just have a
personal claim) but surely this is unfair.
_________________________________________________________________________________
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___________________________________CONCLUSION __________________________________
We can explain presumed RT’s as arising from intention to create a trust.
The automatic RT can not be explained.
1.
2.
Chase Manhattan v Israel Bank [1981]: (note: not a main case and Swadling (2008) does not mention it)
 Mistaken payment to Israel Bank where Chase Manhattan mistakenly transferred the money twice to the Bank
Chase Manhattan wants to say it is a RT as Isreal Bank have now gone insolvent. If it’s a RT then the beneficial interest springs
back to Chase Manhattan but if not, they will have to wait in line with everyone else trying to claim from the insolvent bank


Goulding J held: this was a CT not a resulting trust
This can perhaps be used as support for the Swadling view. Clearly the intent to benefit the
recipient had been vitiated so according to Birks/Chambers this presumably should be a RT as
there is no intent to benefit (thus the decision goes against the Birks/Chambers view)
But note: this case has been heavily criticised. It could be argued that the Goulding J was wrong
and should actually have found a resulting trust.
 LORD BROWNE-WILKINSON’S VARIATION

Lord B-W’s variation of Swadling in Westdeutsche [1996]:
- He believes the conscience of the transferee has to be affected by realising he has
received property not intended for his benefit. Swadling disagrees.
- He thinks the beneficial interest must simply go bona vacantia in cases where there is no
intention to create a trust (eg, the auto RT cases). Swadling does not subscribe to this approach.
-
He thinks that failed trust RTs can be explained by the presumption of intent to create a
trust. Swadling disagrees and says that actually there is no presumption at play in such
cases – it is just an automatic RT and Swadling can’t explain auto RTs
-
Lord B-W says there can not be automatic RT’s because they do not necessarily require the
conscience of the transferee to be affected. Swadling just sees automatic RT’s as an anomaly
to his theory.
*Westdeutsche [1996]:
 Interest rate swap agreement. Contract void as it was ultra vires.
 Westdeutsche loses out as they want compound interest. Thus they argue for a RT.
 Q is whether under a void agreement a RT arises.
Held (HoL with Lord B-W giving the leading judgement and overturning CoA): We can
not impose such obligations on the LA as they did not intend to create a trust = no RT.

This is contrary to Birks/Chambers view. They would argue the case is wrong as unjust
enrichment (no intent to benefit) leads to a RT so there should be a RT here as LA would be
unjustly enriched otherwise.

Disagreeing with Lord B-W in Westdeutsche
A. He thinks the RT will only arise when the conscience of the transferee has been affected by his
becoming aware that he has received property which was not intended for his benefit.
 Lord B-W said this theory was “uncontroversial” but it has been widely criticised. Eg, by Birks, Chambers and Swadling.
 Chambers:
-
A better view seems to be that the RT arises as soon as the property is transferred rather than requiring the conscience of
the transferee to be affected.

But although there will be a RT straight away, the transferee will not become subject to any fiduciary duties and will not
be liable for breach until he is aware that the property was not intended for him.
Birks:
-
Conscience would be a “fifth wheel on the coach”
B. He thinks there should not be auto RTs. Thinks cases are wrong and instead should have gone BV.
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> Conclusion (disagreeing w/ Lord B-W’s view):
-
Lord B-W’s theory is not borne out by the cases on presumed RT’s (especially Re Vinogrodoff where a young child
was held to be a resulting trustee). Thus his “conscience” point must be wrong
Lord B-W’s bona vacantia point must also be wrong as to go BV requires abandonment (Roman law) but there is
clearly no abandonment in some of the cases.
-
 PROBLEMS WITH THE LORD BROWNE-WILKINSON / SWADLING THEORY THAT
A
RT WILL ONLY BE PRESUMED WHERE YOU INTEND TO CREATE A TRUST
Re Vinogradoff [1935]:

Held that granddaughter held shares on RT for grandmother’s estate
This seems to support Birks/Chambers view as it is very unlikely that the grandmother intended the 3year
old to hold on trust for her!
Indeed, in this case, the transfer was into joint names (granddaughter and herself). Even more doubt would
be cast onto the Swadling/Lord B-W theory of intent to create a RT where the gift was to the donee alone.
*Hodgson v Marks [1971]:
 Failure to satisfy formality requirements of s53(1)(b) as agreement that she would hold the beneficial interest was just made orally
(not in writing)

Case seemingly supports Birks/Chambers as the Court uphold a RT. Russell LJ said the
RT arose as there was no intention to benefit.
Swadling (2000) makes a counter-argument saying that Hodgson is very weak authority for
those who use it to support a “no intention to benefit” theory for two reasons:
a)
The ratio of Hodgson v Marks: Hodgson v Marks relied on the rule in Rochefoucauld which said that the statute
can not be used as an instrument of fraud. The trust is therefore (according to the ratio of Rochefoucauld itself) an
express trust. Thus, the finding in Hodgson that there was a RT in her favour does not form part of the ratio of the
case as the rule of precedent requires us to follow Rochefoucauld that it is an express trust.
b)
The validity of the dictum of Russell LJ : Russell LJ said a trust would fail for lack of form but Swadling says this
is simply not true. There will either be an express trust using the rule in Rochefoucauld that the statute can not be
used for fraud, or (if it will cause no fraud) then the transferee takes beneficially.
His Conclusion: his main argument is that Hodgson should have been an ET case not a RT case
-
If we take a hard look at Hodgson v Marks, we see that it rests on an unsupported and logically false obiter
dictum of Russell LJ.
Since the CofA relied on the principle in Rochefoucauld, Hodgson should either have been decided as an
express trust case (like Rochefoucauld) or even perhaps a CT (as in Bannister) but definitely not a RT.
-
My view:
- Despite Swadling’s arguments that Hodgson v Marks should actually be seen as an ET case not a
RT case, it does still provide some support for Birks/Chambers.
- Maybe Swadling’s counter-argument is actually not that strong as just as in Bannister v Bannister
(where it was held to be a CT) , perhaps we can use the principle in Rochefoucauld without having to
come to the conclusion that it is an ET. Thus, the Ct would have been able to find a RT in Hodgson.
*Vandervell v IRC [1967]:

Option held on RT for Vandervell by Vandervell Trustee’s Ltd because he had not disposed of it.
This decision clearly seems to undermine Swadling’s theory as Vandervell definitely did not intend a
trust. (The whole reason V did what he did was to get rid of the beneficial interest so he did not have to pay tax)
Swadling makes the counter-argument that actually Vandervell can not be authority for anything
as 2 out of the 3 judges in the majority (Wilberforce and Upjohn) are working on a false assumption.
-
They both believed the beneficial interest must remain in V but surely this is wrong as at the start, V
should just be seen as having absolute ownership not separate equitable and legal interests [he says an
equitable right is the consequence of there being a trust not the reason why a trust arises].
Air Jamaica [1999]:
 Pension fund to benefit employees.

Surplus held on RT for (1) employees and (2) the company despite Clause 4.
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Clause 4 of the pension fund had stated that no money should be repayable to the company but yet, the
Court gave it to them under a RT
Shows support for Birks/Chambers and undermining of Swadling as in this case, there was an explicit
intention not to create a trust (Clause 4) yet the Court held that a RT arose.
Swadling counter-argues that actually, Air Jamaica just followed the reasoning of the judges in Vandervell
v IRC and does not stand alone for the proposition of “no intent to benefit”. He says that as the reasoning of
the judges in Vandervell was wrong (Wilberforce and Upjohn work on a false assumption), then Air Jamaica can
not be authority for anything either as it just follows Vandervell
_____________B. THE BIRKS/CHAMBERS THEORY____________

BIRKS/CHAMBERS:
PRESUMPTION OF RT ARISES WHERE THERE
IS NO INTENT TO BENEFIT THE RECIPIENT

The Birks/Chambers theory is therefore about RTs preventing unjust enrichment
Birks:
 Puts forward the novel suggestion that the RT should be used as a route to
restitution of unjust enrichment.
-
Thus, for him the RT arises due to no intention to benefit.
Birks (1992)
 The usual vehicle of proprietary restitution is the constructive trust.

Birks makes the novel suggestion the RT should be used as a route to restitution as well.

The RT would allow equity to effect restitution via the RT in most, though not all, of those situations in which the
common law of restitution presently gives relief. Indeed, equity could go further than the common law of restitution
does at present and effect restitution in situations in which it is presently doubtful or denied under the common law.

His argument is directed specifically to (1) mistaken gifts and (2) failures of consideration but it can equally apply to
mistaken liability payments [eg, where you pay a gas bill twice]

Birks would say the person has two claims: firstly a restitutionary claim for unjust enrichment at common law but also
that whatever has been transferred is held on RT for the transferor.


The RT arises due to the presumption of no intention to benefit.
Birks last paragraph says his paper adopts an “experimental position” thus suggesting he might be mistaken.
Birks (1996)
 Some of the arguments he makes why RTs should be to effect unjust enrichment are:
1.
He says if we don’t use RT’s to effect restitution, there is a “danger of constructing two tunnels through the
same hill” as both CTs and RTs would sometimes effect restitution. He says only RTs should.
2.
The presumptions have changed from historically when it was about intention to create a trust. Now,
the cases such as Re Vinogradaff show that the presumption of RT is about no intention to benefit.

3.
He says we should not pretend that RTs arise by consent (ie intent) as that is simply not the case. In truth, the cases show they
arise by no intention to benefit.
Lord B-W’s idea that the conscience of the transferee must be affected is false. He says this is a “fifth wheel”
and that actually RTs do not require the conscience of the transferee to be affected.
Notes:

Birks says the line between a CT and RT should have very little importance. A new classification
of “unjust enrichment trusts” would be a better new category to have.
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
Birks says that Lord B-W’s attempt in Westdeutsche to reduce the significance of resulting trusts
does not mean that RT’s can not be about unjust enrichment.
Chambers (2006):
 Agrees with Birks that the RT should be used as a route to restitution of unjust
enrichment. (“We should label as a RT every trust that effect restitution of unjust enrichment”)
-

Thus, for him the RT arises due to no intention to benefit.
Argues RT’s always arise to effect restitution of unjust enrichment [always arise due to no intent to benefit]
-
-

Says that the traditional interpretation of RTs has changed from what it was in the past where it was about
intention to create a trust. He says it is now about restitution which is no intent to benefit. For example,
Hodgson v Marks [Note: Swadling 2008 disagrees that there has been any change and continues to think the
RT is about intent to create a trust]
He says RTs do not arise from consent (intent to create a trust) and neither do they arise from wrongs. Thus,
they must arise from unjust enrichment (no intent to benefit)
Conclusion: We should label as a RT every trust that effects restitution of unjust enrichment
-
Currently, we have two different labels for these trusts which cause unjust enrichment. Sometimes we
label them under the CT and sometimes under the RT. Chambers argues they should all be labelled
under RTs because:
o
o
-
To label them as being either CTs or RTs suggests falsely that there is a meaningful difference between
RTs and those CTs arising from unjust enrichment.
CTs also arise for other reasons apart from unjust enrichment (such as to perfect intentions to benefit
others and to effect restitution for wrongs).
Birks would go further to label all CTs and RTs under the heading of unjust enrichment trusts.
Cases in support of the Birks/Chambers view:
Gillingham Bus Disaster [1958]:

Held there was a RT for the contributors as the purpose of the trust had failed now that
the cadets did not need the money from the contributions (there was too much money)
Agrees with Birks/Chambers view that there was no intent to benefit the recipient (ie, the
trustee). In this case, the recipient was the mayor and there was no intent to benefit him.
This case would not fit the Lord Millet view. In this case, the contributors did intend to benefit
the cadets but the intention to benefit them was vitiated. Thus, according to Lord Millet’s test, this
should not be a RT.
Vandervell v IRC [1967]:

Option held on RT for Vandervell by Vandervell Trustee’s Ltd because he had not
disposed of it.
Agrees with Birks/Chambers view as V did not intend to benefit the recipient. Undermines
Swadling as V did not intend to create a trust.
Nelson v Nelson [1995]: Australian case supporting Birks/Chambers view
 Mother provided the purchase price for a freehold title to land.
 The conveyance was made to the children so she could make fraudulent claims to the benefits

Held in the High Court of Australia that there was a RT. Deane and Gummow JJ said this
was because she had “no intention to confer any beneficial interest” (ie, no intent to
benefit) to the children.
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Swadling counter-argues that actually too much should not be made of this case as the precise nature
of the fact proved by the presumption was not in issue – the question in the case was more about
whether the presumption of advancement applied between mother-child not about when a RT arose.
Air Jamaica [1999]: (see below)

Surpluses were held on RT for contributors despite Clause 4 (that no money should be
repayable to the company). Thus shows no intent to benefit approach.
 LORD MILLETT’S VARIATION

Lord Millett’s variation of Birks/Chambers in Air Jamaica + Twinsectra:
- In Air Jamaica and Twinsectra, he takes the narrow view of no intent to benefit.
Whereas Birks/Chambers take the broad view that a RT will also arise where the
intent to benefit the recipient has been vitiated (eg, mistaken intent to benefit
counts as no intent to benefit)
Air Jamaica [1999]:

Surplus held on RT for (1) employees and (2) the company.
Clause 4 of the pension fund had stated that no money should be repayable to the company but
yet, the Court gave it to them under a RT
Shows support for Birks/Chambers and undermining of Swadling as in this case, there was an
explicit intention not to create a trust (Clause 4) yet the Court held that a RT arose.
This seems to move us back (after Ld B-W in Westdeutsche rejected the view of Megarry J in
Vandervell No2) to the position of Megarry J in Re Vandervell Trusts (No2) that the RT arises even if
there is no intent to create a trust.
- Lord B-W would argue the case is wrongly decided as there was no intent to create a trust and thus
we should not presume a RT. He says the beneficial interest should therefore go bona vacantia.
- Swadling says the RT arose for some unknown reason and therefore concedes that auto RTs are
anomalies to his theory.
Twinsectra v Yardley [2002]: [House of Lords]
 Finance company (Twinsectra) release money to solicitors (Sims+Roper).


They tell Sims+Roper that they should only release the
money from the account to purchase the land when the mortgage document s are received.
Sims + Roper release the money too early to the 2 nd solicitors.
Lord Millett: He says it is a RT as there is no intent to benefit the second solicitors.
-
We can see it as a type of Quistclose RT (ie, where lender loans to borrower (Sims) and stipulates that the
money must be used for a specific purpose. If purpose becomes impossible then RT in favour of lender arises)
-
Seemingly agrees with the opinion of Potter LJ in the Court of Appeal that a RT arises where there
is no intent to benefit the recipient.
Swadling would view this as a RT arising by intent to create a trust (an express RT).
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[problems with Birks/Chambers/Millett on next page]
 PROBLEMS WITH BIRKS/CHAMBERS/MILLETT

Swadling (1996) says we should not effect restitution of unjust enrichment using equity
but rather should continue to confine it to the common law of restitution. There are 3
practical reasons why:

Proprietary overkill:
- To make the RT effect restitution would mean that we elevate many restitutionary
claims from their present status as common law claims in personam (personal rights) to
equitable claims in rem (proprietary rights)
- This therefore gives a settlor priority over creditors as he has a proprietary right
whereas they only have personal rights. Swadling says that we should not privilege
someone who has made a mistaken payment in this way – why should the wrong done
by the transferee’s improper receipt be treated differently to the wrong done by not
paying the creditors who have not received payment for the credit given?
-
-
-
Counter-argument 1: Creditors run the risk of the defendant becoming insolvent. But
Swadling says this argument fails as not all creditors have the choice of who to give
credit to – for example, the victim of the D’s negligent driving is a creditor who can not
be said to have trusted the creditworthiness of the defendant.
Counter-argument 2: Birks makes the point that someone must suffer and it is the law’s
job to decide who that person is. However, this counter-argument is rubbish because it
does not tell us why the courts should decide that the creditor should suffer.
My view: Swadling is right – There are huge policy concerns involved in deciding whether
we should privilege the transferor rather than the creditor. Such policy concerns are not to
be decided by the Courts and thus an argument that the test for when a RT arises is now a
question of no intent to benefit (restitution of unjust enrichment) is surely wrong.

Fine tuning
- The common law of restitution has been fine-tuned over time to find the appropriate
fine line. It has been concerned with guarding against too much restitution and
protecting the transferee’s legitimate interest in the security of his receipt.
- An adoption of the Birks’ analysis would completely destroy these fine lines that the
common law of restitution has drawn by allowing restitution in equity in more cases
than the common law would want.
- Moreover, an adoption of the Birks’ thesis would be incapable of fine tuning – for
example it can draw no distinction between the types of pressure and mistake

No consideration would become a new ground of restitution
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-

The Birks thesis would introduce a completely new ground of restitution – the ground
that the transfer was made for “no consideration”
The Birks idea would therefore give a plaintiff a right to restitution in cases of a
‘completed swap’ under a void agreement such as in Westdeutsche. Birks himself says
that the common law of restitution should not help the plaintiff here and Swadling asks
why therefore should the law of equity help the undeserving plaintiff either?
Swadling (1996) conclusion: The rules on presumed RTs have nothing to do with unjust
enrichment  rather, they are just about intention to create a trust.
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Controversial issues from week 5
1.
When do RT’s arise

Intro: “resalire” = to result or spring back. The labels do not really tell us why this happens. This is the question we will try to
answer here by looking at the Birks/Swadling debate and how the cases fit.
Swadling (1996)
Swadling
 Argues
Birks(consent)
analysis on no intention to benefit (ie, unjust enrichment) is wrong
- Lord B-W says the automatic RT cases are wrong as a RT can not result by operation of law.
1.

[Note:
Lord B-W’s
bona vacantia
mustshould
be wrongbe
because
needed
for BV
law)
Swadling objects
to Birks’
argument
thatpoint
there
a RTabandonment
for mistaken
gifts
as (Roman
there is
noand in the
cases, it is clear there was no intent to abandon interest]
intention to benefit.
- Swadling simply says he can’t explain auto RTs. Like B-W he says all RTs should be by consent (intent) not operation of law.
 Swadling objects by saying that we should not impose a RT just because there is no intention to benefit
Birks/Chambers (unjust enrichment)
because this would mean the only thing that could rebut the presumption of RT would be evidence of a
- Lord Millet variation
positive intention
totogive.
- The prevailing
view seems
be no intent to benefit [eg, Lord Millet in Air Jamaica]

Swadling says this is wrong as the presumed RT is about an actual intention to create a trust and thus
showingcases
there in
wasexam
no such
intent
should
rebut
the presumption
of RT.Hodgson? Air Jamaica etc]
[Needanything
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to see
whose
view
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– Vandervell?
Swadling objects to Birks’ second argument that there should be a RT for failures of
 2. Conclusion:
-consideration
The real debate
is justisif no
theyintent
can arise
by operation
of law (ie,
can you have
auto
RTs?) – Birks/Chambers
as there
to benefit.
Swadling
counters
Birks’
justifications
for this: would agree
that
create a RTbased
would
to atrusts
RT. which later failed were shown by Swadling to be weak authority.
 intent
Birks’tojustification
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 Birks
his approach
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but
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notbankruptcy.
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to justify
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RTs really
arise. in the House of Lords and not raised in
thewe
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below.
Maybe
should
just call automatic RT’s constructive trusts (They arise from unjust enrichment after all) so the debate
would then just be how presumed RTs arise.
3.

2.
The question might be specifically about why there is a presumption of RTs




3.
“resalire” = to result or spring back. The labels do not really tell us why this happens.
Chambers: The categories are flawed.
Birks: It is the unity of the causative event that matters not the labels used during a time when that causative event could not be
named. That causative events can now be named as unjust enrichment and “unjust enrichment trust” says what needs saying.
Do you “retain” the beneficial interest or is it created?

5.
Intro: The question is what fact does the presumption presume? Does it presume intention to create a trust or no intent to benefit?
The Birks/Swadling debate again applies to this question. Is the presumption of RTs due to presumed intent to create RT
(Swadling) or is it due to presumption of no intent to benefit (Birks/Chambers)
Note: This question is very similar to “why do RTs arise” but cut out the discussion of auto RTs as its not needed here.
Conclusion: With regard to presumption of RT’s there is a false dichotomy between the views: whether we take the
Birks/Swadling viewpoint, the presumption of RT can be explained by either. The real debate is whether no intent to benefit also
creates a presumption of RT or is it just intent to create RT that is the “fact” presumed.
Flawed categories/labels.



4.
Swadling lists three reasons why Birks’ thesis must be treated w/ caution (eg, proprietary
Myoverkill
view: – see above)
If the q was what the law should be on when RTs arise then I think Swadling is right – they should only arise where there
is intent to create RT. They should not be given an RT in auto RTs as it is enough for them to have a personal claim proprietary overkill otherwise.
But if the q is what the law is the authorities seem to favour the Birks/Chambers view.
The best view seems to be that the beneficial interest is created not retained.
Should we get rid of the presumptions of RT?
 The presumption of RTs seems to be in decline – there has been a weakening over time:
-
Pettitt v Pettitt
It no longer applies to land [s60(3)
It no longer applies to purchase money where the family home is conveyed into joint names [B Hale in Stack].
 However, I don’t think we should abolish the presumption of RT altogether.
-
-
B Hale said the changes in social & economic conditions is why the presumption no longer applies to the family home as we
should no longer presume the parties did not intend to take 50:50. However, even if this is true of the family home, I do not
think it would apply to personalty where obviously the presumption of RT should continue.
Indeed, I prefer Lord Neuberger’s view in Stack and think actually B Hale was wrong to get rid of the presumption in the family
home cases.
 Note: If we don’t find a RT we are likely to find a CT instead. In family homes cases the difference is that in an RT the woman just gets
back what she contributed whereas under a CT she is likely to get more of an equal shares (esp due to Stack presumption of 50:50).
Whether RT/CT approach should be favoured depends on family law debates of policy – does the woman ‘deserve’ the higher share
17
because of what she has sacrificed (I think yes).
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