ACQUISITION OF AN EQUITABLE INTEREST IN LAND : RESULTING TRUST, CONSTRUCTIVE TRUST, AND PROPRIETARY ESTOPPEL Flashcards
Basic Idea of Trust
The basic idea behind the trust lies in the fact that the MANAGEMENT and ENJOYMENT functions of ownership are split between different persons.
- Traditional classification of trusts has distinguished between express and implied trusts.
Express Trust
Arising from the formality rules, Section 5(1)(b) of the CPO states, subject to section 6 (which will be discussed later in the context of leases):
A declaration of trust respecting land or any interest therein shall be manifested and proved in writing and signed by the person who is able to declare such trust or by his will.
Implied trusts
Implied trusts can be created in the absence of compliance of formality rules
(Lecturer) a generic type including both resulting and constructive trust
According to Lord Denning:
“It is more a matter of words than anything else. The two run together. By whatever name it is described, it is a trust imposed by law whenever justice and good conscience require it. It is a liberal process founded upon largely principles of equity to be applied in cases where the legal owner cannot conscientiously keep the property for himself alone, but ought to allow another to have the property or the benefit of it or a share in it …”
Departure from the requirement of documentary formality.
both express and implied trust are departures from the formality rules
Resulting Trusts
Resulting Trusts are said to be implied by law. Unlike ETs, they are NOT founded on the express intentions of the person creating the trust.
The House of Lords in Westdeutsche v. Islington London Borough Council (1996) AC 699 has recently redefined the basis upon which equity implies a resulting trust.
Circumstances of Resulting Trusts
In his judgment, Lord Browne-Wilkinson explained:
“under existing law a resulting trust arises in two sets of circumstances:
Voluntary Payment (Presumed RT) where A makes a voluntary payment to B or pays (wholly or partly) for the purchase of property which is vested either in B alone or in joint names of A and B, there is a presumption that A did not intend to make a gift to B; the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions ... - A pays B voluntarily (not under contractual basis) - presumption of A’s intention: NOT a gift to B
Attempted but failed creation of Express Trust (Automatic/ Generated RT)
where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest. ”
- A intends to create an express trust BUT failed for some reason
Situations of implied resulting trusts
Situation (a)
According to traditional trust classification, these are circumstances where
- the implied resulting trust is referred to as a PRESUMED resulting trust.
Situation (b)
According to traditional trust classification, these are circumstances where
the implied resulting trust is referred as an AUTOMATIC resulting trust.
- Traditionally, an “automatic” resulting trust will arise if the settlor (owner) of property has transferred it to the intended trustee BUT:
the trust has either failed for some reason; or
e.g. terms ‘ i intend to create trust expressly by granting the life occupancy to B’
Q: what happens after B’s death? who will control/ owe the property?
declaration failed to address this
common law: must find an owner
=> the property will be returned to the settlor - automatically resulted back to
owner/ settlor
=> what if owner (settlor) deceased??????
the settlor has failed to identify the beneficiaries of the trust.
e.g. create trust for CityU Alumni - but hard to define cityu alumni (include Phd? Professor?)
e.g. create trust for Van Van’s fans - hard to define who are the beneficiaries (because all are imaginary ones → unidentifiable)
The underlying theme in BOTH trusts is the SAME –where a person does
NOT dispose of his/her property effectively (through gift or bargain), that undisposed property remains his/hers because it does NOT belong to
anyone else.
Presumption of Intention (Rebuttable) #Resulting trust
The equitable principles of a resulting trust arise on the basis of a series of rebuttable presumptions concerning the intentions of a person who contributes to the purchase price of property purchased in someone else’s name.
The presumption of a resulting trust is founded on the assumption that “people who pay money normally expect to get something in return for it.”
Spencer J expressed his view in Goodfriend v. Goodfriend (1972) 22 DLR (3d) 699 that equity “assumes bargains, and not gifts”.
The principle of a resulting trust was explained in the following classic terms by Eyre CB in the leading case of Dyer v. Dyer (1788) 2 Cox Eq Cas 92
“The clear result of all the cases, without a single exception, is that the trust of a legal estate … results to the man who advances the purchase money.?”
If a person provides the purchase money of a property bought in someone else’s name, equity presumes, in the absence of contrary evidence, that the money provider should have intended to acquire a beneficial interest in the property.
Wong Chim-ying v Cheng Kam-wing (1990)
Minibus driver case (Mr Van. the smelly Driver with unidentifiable fans)
Husband paid partially → wife is the legal owner holding on trust for herself and husband
the size of equitable shares will be in proportion to the amount of contribution made towards the purchase price of the property
e. g.If a property is bought by Tom but the whole of the purchase price has been paid by Dick, it is presumed, in the absence of contrary evidence, that
(i) Tom will merely hold the legal estate (a trustee); and
(ii) the beneficial interest will vest in Dick (a beneficiary).
If Dick has paid only a PART of the purchase price, then it will be presumed that:
Tom holds the property as the legal owner on trust for himself and Dick as beneficial owners; and
the size of their respective beneficial shares will be determined in accordance with the share of the purchase price that each has provided.
Hence, the basis of the operation of resulting trust is a rebuttable presumption that the owner of money does NOT intend to make a gift of it.
What kind of Contribution will Qualify? #resulting trust
A Direct Contribution towards the Purchase Price
The most straightforward contribution which will give rise to a resulting trust in favour of the contributor is – a direct contribution towards the purchase price of the property.e.g. Tinsley v. Milligan (1993) 3 All ER 65
Facts:
(1) A lesbian couple, T and M, purchased a house that they intended to run as
a lodging house.
(2) The house was purchased in T’s name. Hence, T was the sole registered
legal owner.
(3) The purchaser money was raised by a mortgage from a bank; and the
remainder from the sale of a car jointly owned by T and M.
(4) As HALF of the money could be considered to be M’s, she had
effectively contributed half of the purchase price.
Judgment:
M was entitled to half-share of the property by way of a RT.
Less Direct Contributions
Although a direct contribution to the purchase price will certainly give rise to a resulting trust, other LESS DIRECT CONTRIBUTIONS have also been HELD sufficient PROVIDED THAT they are referable to the purchase price of the property.
e.g. Midland Bank PLC v. Cooke (1995) 4 All ER 562
Facts:
A house was purchased in the sole name of a husband in 1971.
The purchase price came from:
a mortgage;
the husband’s savings; and
a wedding present of £1,100 given to the husband and his wife by his parents (NOT that trivial compared to the housing price at tham time)
Judgement:
The Court of Appeal HELD that since the gift of £1,100 was made to the couple JOINTLY by the husband’s parents, the wife had, therefore, contributed HALF of the amount of the gift, that is, £550, to a resulting trust
statutory provision for implied trust
Section 5(2) of the CPO : “This section does not affect the creation or operation of resulting, implied or constructive trusts.” It should be noted at the outset that it is NOT always easy to decide which of these implied trusts has arisen.
