Automatic resulting trust where express trusts do not exhaust the beneficial interest
In 2019 Lucas Varga transferred £200,000 to two trustees by a deed which directed them 'to pay the income to my partner Nadia for the rest of her life'. The deed said nothing about who was to take the capital after Nadia's death, and there is no evidence that Lucas intended to give up any remaining interest in the fund. Nadia has just died. Lucas is alive.
Who is beneficially entitled to the £200,000 capital?
Choose one answer to see the reasoning.
Worked answer
Correct answer D: Lucas, on resulting trust, because the express trusts did not exhaust the whole beneficial interest.
THE RULE TO REMEMBER
Where property is transferred on express trusts that do not exhaust the whole beneficial interest, the undisposed-of interest is held on resulting trust for the transferor (Westdeutsche).
Automatic resulting trust where express trusts do not exhaust the beneficial interest
In Westdeutsche Landesbank v Islington LBC Lord Browne-Wilkinson identified two situations in which a resulting trust arises. One is where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest. That is this case. Lucas declared a trust of income for Nadia's life but made no provision for the capital after her death, so the beneficial interest in remainder was never disposed of. The trustees cannot keep it for themselves, because they took the property as trustees, not as donees. The undisposed-of interest therefore results to Lucas, the settlor. Lord Browne-Wilkinson noted that if a settlor has expressly or by necessary implication abandoned any beneficial interest, there is no resulting trust and the property goes to the Crown as bona vacantia. Here there is no evidence of abandonment, so that exception does not apply. Nadia's estate is not entitled, because her interest ended on her death.
Why A is wrong: Nadia had only a life interest, which ended on her death; her estate has no claim to capital.
Why B is wrong: Trustees hold for others, not for themselves; a gap in the trusts benefits the settlor, not the trustees.
Why C is wrong: Bona vacantia arises only where the settlor has abandoned his beneficial interest, and there is no evidence of that.
Why E is wrong: Cy-près applies to charitable trusts, and this was a private trust.
A little more practice done.
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