3.1 Precedents Cited
Menzies, Trustees (2nd Edition, 1913)
The court treated Menzies as the primary statement of the Scots doctrine that the provider of trust funds retains a “radical beneficial interest” which can revive as a resulting trust when trust purposes do not exhaust the estate. At paragraph 1044, quoted by the court, Menzies explains that when “execution of all the practicable purposes of the trust fails to exhaust the estate,” a resulting trust in favour of the provider “emerges.” The court also relied on Menzies (para 1046) for the proposition that resulting trusts arise not only where purposes are fulfilled with a surplus, but also where purposes fail.
abrdn (SLSPS) Pension Trustee Co Ltd, Petitioner [2023] CSIH 31; 2023 SLT 791
This authority was used as a contemporary illustration of the “surplus on fulfilment” paradigm: where trust purposes are achieved and funds remain, the surplus is held on resulting trust. The Inner House then used it as a springboard to emphasise that the same doctrinal mechanism applies on “failure of purpose,” even though the factual trigger differs.
Connell v Ferguson (1857) 19D 482
Connell v Ferguson supplied a conceptual analogue: subscriptions raised for a specific objective create a trust-like arrangement for an alternative—either to carry out the object, or, if that cannot be done, to repay. Lord Deas’ passage (at 487) was quoted to support the court’s conclusion that where money is paid for a purpose that cannot be carried out, repayment to contributors follows as a matter of principle.
Importantly, the Inner House distinguished the need for procedural mechanisms (like multiplepoinding) often associated with subscription funds: in Connell there may be a need to “fix entitlement” if there is competition or uncertainty, but here the escrow records allowed identification of each investor’s paid-in amount, eliminating a true competition of claims.
Murray's Trs v Murray (1901) 3F 820
This case was cited as another doctrinal example (albeit in “an obsolescent social context”): when marriage-contract purposes are satisfied or fail, property conveyed to secure those purposes returns to the disponer/provider. The point was not to import marriage-contract rules, but to demonstrate the breadth of the “provider’s radical beneficial interest” idea across trust contexts.
3.2 Legal Reasoning
(a) Express trust silent on failure: resulting trust fills the gap
The Declaration of Trust regulated holding and release of deposits (e.g., release only upon receipt of a “Project Manager’s Notice”) but said nothing about what should happen if the development never proceeded. The court treated that silence as doctrinally significant: an express trust can be complete as to its operational mechanics while still leaving a residual question about ultimate beneficial entitlement on failure. In Scots law, that residual entitlement is supplied by the provider’s radical beneficial interest, crystallising into a resulting trust when the purpose cannot be carried out.
(b) Who benefits: the “providers of the funds,” not the failed developer
Although a resulting trust “normally” benefits the truster, the court framed the more general rule: it benefits the provider of the funds. Here, the investors were the relevant providers of the monies paid into the escrow account (being 50% of their deposits). The court was also assisted by the practical reality that neither the developer nor connected entities had a proprietary claim to the escrow funds, and administrators indicated no claim.
(c) What investors have: radical beneficial interest; legal title remains with the escrow agent
The court drew a clear distinction between (i) vesting/ownership of trust property in the trustee and (ii) beneficial entitlement. Even after the resulting trust emerges, the escrow agent continues to hold the assets as trustee; investors’ “radical beneficial interest” gives them the right to have their shares made over. This is an important clarification for practice: the court did not characterise the investors as holding immediate legal title in segregated fractions of the bank account; rather, they hold the beneficial claim enforceable against the trustee.
(d) When the resulting trust arises: the point of “failure of purpose”
The Inner House anchored timing to the moment the trust purpose became impossible to fulfil. That moment was identified as the administrators’ disponing of the property to a third party under missives containing no obligation to implement the development scheme. From that point, the contractual and practical foundation for ever obtaining “Project Manager’s Notices” for the scheme was gone; the court therefore treated the trust purpose as having failed and the resulting trust as arising then—without requiring further formality such as (i) disclaimers by administrators, (ii) completion of winding up, or (iii) exhaustion of insolvency processes.
(e) Multiplepoinding not required absent competing claims
The Northern Irish order had envisaged an Action of Multiplepoinding (Chapter 51, Rules of the Court of Session) because it was thought contributors could not be identified. The court accepted the petitioner’s position that investor-by-investor contributions were ascertainable and intact, so there was no “competition of claims” requiring multiplepoinding. The practical implication is that directions/administration can be preferable where entitlement is arithmetically determinable and uncontested.
(f) Expenses payable out of the fund
The court awarded the petitioner expenses out of the escrow assets. That aligns with the view that the petition was a proper and protective step for a stakeholder/trustee faced with cross-jurisdictional restraint history and potential exposure if distributions were later challenged.