What happens when a trust fails?

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Adam_Goulding
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#1
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#1
If an express trust fails due to the property not being vested in the trustees, what happens to the property? Am I correct in thinking that the property will be held under a resulting trust?

Also, if a gift (transfer of legal title) fails for not complying with legal requirements, what happens? Does it just become void?
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#2
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i) A failed attempt to transfer legal title to the trustee does not (generally) take effect as a self-declaration of trust - Milroy v Lord (Even if exceptionally does it would be a constructive, not a resulting trust). The usual result is simply that the putative settlor still owns the property outright.

ii) Usually, yes.
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Adam_Goulding
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(Original post by Forum User)
i) A failed attempt to transfer legal title to the trustee does not (generally) take effect as a self-declaration of trust - Milroy v Lord (Even if exceptionally does it would be a constructive, not a resulting trust). The usual result is simply that the putative settlor still owns the property outright.

ii) Usually, yes.
Cheers for that!

Is that comparable in respect of an attempted disposition under a subsisting trust which fails due to lack of formailites (Grey v IRC/s.53(1)(c)? For example, where A tells B, the trustee of a subsisting trust, to hold property for C, but does not convey the request in writing, does this render the property under a resulting trust? I note that In Vandervell v. IRC [1967] it was held that a resulting trust will be made where A transfers to B a right or interest, intending that B should hold that right or interest on trust, and that trust fails.
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#4
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[I assume that A is the beneficiary of the trust, otherwise it makes no difference what he tells B!]

If A fails to comply with the requirement of s 53(1)(c) then his attempt to dispose of his equitable interest fails. B therefore still holds on the same trust for A that he always did (which is usually going to be an express trust).
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Adam_Goulding
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(Original post by Forum User)
[I assume that A is the beneficiary of the trust, otherwise it makes no difference what he tells B!]

If A fails to comply with the requirement of s 53(1)(c) then his attempt to dispose of his equitable interest fails. B therefore still holds on the same trust for A that he always did (which is usually going to be an express trust).
Yes, A has an equitable interest under a subsisting trust. So the attempted formality is 'void' for lack of confrmity to s.53(1)(c) and not placed in a resulting trust to A? Would that still be the same if A has died since the attempted disposition? Would it revert to A's estate? Apologies for the questions; however, my question states what happens to the property if the attempted transfer fails? This is what's confusing me.

What's further confusing me is the judgment of Vandervell - at para 131 it states that an attempt to dispose of a beneficial interest which subsuqently fails will be placed on resulting trust back to the settlor.
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#6
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(Original post by Adam_Goulding)
Yes, A has an equitable interest under a subsisting trust. So the attempted formality is 'void' for lack of confrmity to s.53(1)(c) and not placed in a resulting trust to A? Would that still be the same if A has died since the attempted disposition? Would it revert to A's estate? Apologies for the questions; however, my question states what happens to the property if the attempted transfer fails? This is what's confusing me.

What's further confusing me is the judgment of Vandervell - at para 131 it states that an attempt to dispose of a beneficial interest which subsuqently fails will be placed on resulting trust back to the settlor.
i) If B holds on trust for A, A attempts to dispose of his equitable interest and fails, A keeps his equitable interest on the terms of the original trust (probably express). If A subsequently dies, his equitable interest forms part of his estate in the same way that all of his other property does, resulting trusts don't enter into it.

ii) I'm not sure which Vandervell you're talking about, I can't see any paragraph numbers. I suspect you are referring to this passage of Lord Upjohn:

(Original post by Lord Upjohn)
"If A intends to give away all his beneficial interest in a piece of property and thinks he has done so but, by some mistake or accident or failure to comply with the requirements of the law, he 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 of which he had failed effectually to dispose. If the beneficial interest was in A and he fails to give it away effectively to another or others or on charitable trusts it must remain in him... A the beneficial owner informs his trustees that he wants forthwith to get rid of his interest in the property and instructs him to hold the property forthwith upon such trusts as he will hereafter direct; that beneficial interest, notwithstanding the expressed intention and belief of A that he has thereby parted with his whole beneficial interest in the property, will inevitably remain in him for he has not given the property away effectively to or for the benefit of others"
If, so see the explanation of those comments at p 290 of Re Vandervell's Trusts (No. 2) [1974] Ch. 269 in the judgment of Megarry J (which was reversed by the Court of Appeal, but this paragraph of his judgment is plainly correct and was not reversed). The first part of the explanation is:

(Original post by Megarry J)
"A, the beneficial owner informs his trustees that he wants forthwith to get rid of his interest in the property and instructs him" - that must mean "them" - "to hold the property forthwith upon such trusts as he will hereafter direct" (p. 313). A thereby does nothing effective. Of course, everyone would agree that in such a case what A has failed to dispose of remains vested in him; what a man does not dispose of is still his. But what is difficult to see is how this is in any way an example of a resulting trust. The trustees held in trust for A on whatever were the original trusts; A has done nothing effectual to alter that: therefore the trustees continue to hold in trust for A. But how can those trusts be anything save the original trusts which have never been effectually displaced? To say that "there will, by operation of law, be a resulting trust for him of the beneficial interest of which he had failed effectually to dispose" (p. 313) prompts an inquiry as to the process whereby there was some operation of law which replaced the former trusts by the resulting trust. It seems to me that in setting out two categories of resulting trust, Lord Upjohn cannot have intended to distinguish between the dynamic and the static; for the static is no example of a resulting trust...
Which I think is the same as what I said previously. If A fails to comply with s 53(1)(c), the trustees hold on the original trusts, not on a new resulting trust.

p.s. What exactly the CoA decided in Vandervell (No 2) has always been a mystery to me. Denning LJ seems to think that you don't need to comply with s 53(1)(c) to dispose of an equitable interest under a resulting trust. That seems to be directly contrary to the statute. Lawton LJ seems to think it is something to do with overreaching. Stephenson LJ plainly has no idea and wants the whole thing to be over. None of it is relevant for your example, though...
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Adam_Goulding
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#7
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(Original post by Forum User)
i) If B holds on trust for A, A attempts to dispose of his equitable interest and fails, A keeps his equitable interest on the terms of the original trust (probably express). If A subsequently dies, his equitable interest forms part of his estate in the same way that all of his other property does, resulting trusts don't enter into it.

ii) I'm not sure which Vandervell you're talking about, I can't see any paragraph numbers. I suspect you are referring to this passage of Lord Upjohn:



If, so see the explanation of those comments at p 290 of Re Vandervell's Trusts (No. 2) [1974] Ch. 269 in the judgment of Megarry J (which was reversed by the Court of Appeal, but this paragraph of his judgment is plainly correct and was not reversed). The first part of the explanation is:



Which I think is the same as what I said previously. If A fails to comply with s 53(1)(c), the trustees hold on the original trusts, not on a new resulting trust.

p.s. What exactly the CoA decided in Vandervell (No 2) has always been a mystery to me. Denning LJ seems to think that you don't need to comply with s 53(1)(c) to dispose of an equitable interest under a resulting trust. That seems to be directly contrary to the statute. Lawton LJ seems to think it is something to do with overreaching. Stephenson LJ plainly has no idea and wants the whole thing to be over. None of it is relevant for your example, though...
Great! Thank you so much for that. My text book did not elaborate; your answer has cleared it up, though.

Although you state that Re Vandervell's Trusts (No. 2) [1974] was overruled, are Megarry J's comments at p.290 still effective? - I wouldn't want to include it in my assignment if it is irrelevant in the moden day...

Thank you again!
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#8
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(Original post by Adam_Goulding)
Great! Thank you so much for that. My text book did not elaborate; your answer has cleared it up, though.

Although you state that Re Vandervell's Trusts (No. 2) [1974] was overruled, are Megarry J's comments at p.290 still effective? - I wouldn't want to include it in my assignment if it is irrelevant in the moden day...

Thank you again!
He wasn't overruled on that point. I can't find any other case, (or journal article, or textbook) that suggests that a resulting trust arises upon failure to comply with s 53(1)(c). I suggest that this is because Upjohn cannot possibly have meant that it did. I don't think I can improve on Megarry J's argument!
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