Implied Trusts Flashcards
what are the types of implied trust?
resulting and constructive
re: resulting trusts
how do these arise?
- Arise by operation of law without any formality
- RTs are can be either presumed or automatic
re: resulting trusts
what is the effect?
If there is a RT, this will give beneficial ownership back to the transferor
re: resulting trusts
what is loco parentis?
someone/organisation who has a duty to take care of the child (i.e. a guardian, a school)
re: resulting trusts
what are the presumptions?
presumption of advancement
presumption of resulting trust
re: resulting trusts
what is the presumption of advancement?
In the absence of other evidence, some transfers are presumed to be a gift:
o Father to child (inc. adults and minors)
o Person in loco parentis to a child
o Husband to wife
o Fiancé (male) to fiancée (wife) so long as they subsequently marry
NB: POA will not arise in the reverse (i.e. child to parent)
re: resulting trusts
what happens if the presumption of advancement does not apply?
- If POA does not apply, then the presumption of resulting trust might apply
re: resulting trusts
when will the presumption of advancement not apply?
if there is evidence to the contrary
re: resulting trusts
in what type of transactions might the presumption of resulting trust apply?
voluntary transfer of property
voluntary transfer of realty
purchase money cases
re: resulting trusts
what is meant by ‘voluntary’?
- Voluntary = other party receives no consideration for the transfer
re: resulting trusts
what is personalty?
cash/assets other than realty
re: resulting trusts
explain the presumption of RT and voluntary transfer of realty
there will be a presumption of resulting trust in this transfer unless there is evidence to the contrary
P1 transfers the property to P2. An RT for the benefit of P1 arises.
P2 holds the legal title and P1 has beneficial interest.
re: resulting trusts
what is realty?
land or property
re: resulting trusts
explain the presumption of RT and voluntary transfer of realty
There is not a PORT, unless there is evidence to the contrary
i.e. P1 transfers land to P2. This will be a gift to P2 unless there is evidence it was expected P1 would retain the beneficial interest
re: resulting trusts
what evidence might suggest a voluntary transfer of land was intended to create a resulting trust?
P1 receives rental income or P1 and P2 are strangers
re: resulting trusts
what does ‘purchase money cases’ apply to?
Applies to purchases of personalty and realty
re: resulting trusts
when will a PORT arise in a purchase money case?
A PORT will arise if:
o The contribution is contemporaneous with the purchase i.e. it will not count if the contribution was afterwards
o The contribution is towards the asset/land itself i.e. ancillary costs i.e. legal fees do not count
re: resulting trusts
give two examples of purchase money cases
1) P1 purchases a property, it is in P2’s name so P2 has legal title. PORT that P2 is holding the property on RT for P1.
2) P1 and P2 purchase a property, it is registered in P2’s name only so they have legal title. There will be a PORT P2 is holding it on RT for the benefit of P1 and P2. Their beneficial interest % will match their contributions.
re: resulting trusts
what are examples of evidence to rebut POA and PORT before / at the time?
o ‘here is your birthday gift’ or money in a card suggests a gift
o Anecdotal evidence from another party
o Transferor retained title deeds
re: resulting trusts
explain the position regarding evidence to rebut
contrary evidence before or at the time of the transfer can support , but evidence after the transfer can only be used against
re: resulting trusts
what is an example of intention evidence after the transfer?
o i.e. a will signed after the purchase cannot support the transferor’s actual intentions.
re: resulting trusts
who has the burden of proof?
give an example
The burden of proof is on the transferee
i.e. P1 bought shares in P2’s name. P2 has legal title. There is a PORT P2 is holding the shares on trust for P1. P2 dies and leaves the shares to P3. P3 claims they have the equitable interest in the shares. The BOP is on P2 to provide evidence of intention to rebut PORT (i.e. that P1 gifted her the shares)
re: resulting trusts
when will an automatic resulting trust arise?
An ART arises where S intends to create an ET, but the trust does not dispose of all or part of the equitable interest, i.e.:
o B had a contingent interest which never vested and there was no alternative provision in the trust
o The trust is void i.e. the three certainties weren’t satisfied or the trust offends the rules on perpetuity or beneficiary principle
re: resulting trust
where a resulting trust arises automatically, what happens if S is alive?
Ts will then hold the TP on bare trust for S.
re: resulting trust
where a resulting trust arises automatically, what happens if S has died testate?
TP will form part of S residuary estate.
re: resulting trust
where a resulting trust arises automatically, what happens if S has died intestate?
TP will pass under intestacy rules.
re: constructive trust
when will this arise?
- CTs arise where it would be unconscionable for a party to deny another party an equitable interest in the property
re: constructive trust
who is this relevant to?
- Relevant to unmarried cohabiting people (separate rules for married people)
‘Common law marriage’ is a myth.
re: constructive trust
what is a common intention constructive trust?
what is the position as to ownership?
the partners hold the beneficial interest equally
o Joint ownership = CICT presumed
o Sole ownership = CICT must be established
re: constructive trust (joint ownership)
how will equitable title be recorded?
- There may be an express trust confirming the equitable title (i.e. TR1)
re: constructive trust (joint ownership)
how is legal title held?
Always JT
re: constructive trust (joint ownership)
how is equitable title held?
JT or tenants in common (TIC)
re: constructive trust (joint ownership)
what happens if there is no express trust confirming equitable title?
If not, an RT or CT may arise.
If CT presumed they both hold the property on CICT
re: constructive trust (joint ownership)
when can a common intention constructive trust be rebutted?
This can be rebutted if the claiming partner can evidence:
o An agreement or common intention that the beneficial interest would not be shared equally (this can arise at any time i.e. one partner finances work to the property, it may be intended they would have a greater share); and
o They relied on this to their detriment (i.e. need not be financial or monetary but must be substantial)
re: constructive trust (joint ownership)
if there is no clear agreement, what will the court do?
the court will fairly quantify the shares by looking at the whole course of dealing between the partners, i.e.:
o Advice or discussions at the time of purchase;
o (if applicable) reasons why the property was transferred to joint names
o Nature of relationship
o Whether they had children
o How purchase was financed (initially and subsequently)
o How they arranged their finances (i.e. outgoings and other expenses)
re: constructive trust (sole ownership)
who has legal title?
the registered proprietor (RP)
re: constructive trust (sole ownership)
what happens if there is no express trust confirming the beneficial interests?
- If there is no ET stating how the beneficial interest is held, the non-owning partner can claim the RP holds the property on CICT if they can prove:
1) There was a common express or inferred intention that they would both have an interest; and
2) They relied on this to their detriment
re: constructive trust (sole ownership)
if the non-owning party proves the elements, what happens?
- If this is proven, the beneficial interests will need to be quantified
re: constructive trust (sole ownership)
how will the interest be quantified?
o If partners reach an agreement, the court will respect this.
o If not, the court will quantify the interests considering the same factors as for joint ownership
re: constructive trust (sole ownership)
if they cannot prove CICT, what remedy might be available instead?
proprietary estoppel
re: constructive trust (sole ownership)
explain express intention + detrimental reliance
- Intention written or oral agreement that beneficial interest would be shared
- Detrimental reliance financial contributions i.e. mortgage payments, home improvements, housekeeping expenses
o Non-monetary contributions (i.e. giving up work to look after the children) may suffice but the position is less clear
re: constructive trust (sole ownership)
give some examples of express intention
I want you to think of this house as much yours as it is mine > Yes
Sam was going to put the house into joint names with his new partner, but was advised not to as this might prejudice the divorce. > Yes – but for divorce the new partner would have an interest
re: constructive trust (sole ownership)
give some examples where there is not express intention
I do not want you to be homeless, why don’t you move into mine > No
I will lend you £10k / I will pay you back > No – indicative of loan and not sharing ownership
re: constructive trust (sole ownership)
explain inferred common intention + detrimental reliance
Intention can only be inferred by financial contributions i.e.:
o Direct contribution to the purchase price (not ancillary costs i.e. legal fees, stamp duty)
o Significant mortgage payments
o Payment of household expenses if this enabled the other partner to pay the mortgage
As this is a monetary contribution, it generally evidences detrimental reliance
re: proprietary estoppel
what is the purpose of this?
- This prevents someone from going back on their word when it would be unfair to do so
re: proprietary estoppel
what is the key question?
‘would it be unconscionable [unfair] for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to his detriment?’
o If yes, then the claiming party should be afforded relief.
re: proprietary estoppel
when is this commonly relied on?
where someone has said ‘this will be yours when I die’ but then the property is left to someone else in the will
re: proprietary estoppel
what are the stages?
o Stage 1 the estoppel must be established
o Stage 2 the estoppel must be satisfied
re: proprietary estoppel
what are the elements to ‘establish the estoppel’?
o Assurance
o Detriment
o Reliance
re: proprietary estoppel - establish the estoppel
explain assurance
The legal owner must have made a representation, created or encouraged an expectation that the claiming party would receive an interest in land
This can either be:
o Active the legal owner tells the claiming party
o Passive the conduct of the claiming party suggests they think they have a right to the property and the legal owner knows of this but doesn’t do/say anything contrary to this
re: proprietary estoppel - establish the estoppel
explain detriment
The claiming party must have acted to their detriment in reliance upon the assurance made
* This need not be monetary but must be substantial
* The detriment must outweigh any benefit obtained i.e.
re: proprietary estoppel - establish the estoppel
give examples of a non-monetary substantial detriment
o Spending money improving the property
o Working without adequate renumeration
o Giving up a job and moving to a new area
o Looking after someone who is gravely ill
re: proprietary estoppel - establish the estoppel
give an example of ‘the detriment must outweigh the benefit obtained’
o C is assured a future interest in a property. They quit their tenancy, move to a new area and live rent free in the property. It may be that they have not suffered a detriment on balance.
re: proprietary estoppel - establish the estoppel
explain reliance
- The assurance and detriment must be connected i.e. the assurance must cause the claiming party to act to their detriment
- If it can be shown that the party’s conduct was for a reason other than the assurance, the claim will fail.
re: proprietary estoppel
what might someone argue to try and defeat a claim?
in an example where someone is caring for an elderly person and thought they would inherit the property, the new legal owner might argue the claiming party’s conduct arose out of ‘natural love and affection’ for the elderly relative, rather than proprietary self-interest, and that any claim in proprietary estoppel should fail.
re: proprietary estoppel
what remedy can the court award?
- The court has discretion over whether to award a remedy and if so, what type:
o Transfer of legal ownership in land;
o Grant of a lease
o Some right of occupancy (i.e. the right to live there rent free);
o Financial compensation
o Beneficial share in the home
re: proprietary estoppel
explain the ‘satisfying the equity’ stage
the court’s usually have a 5 stage approach:
- Assessment of Repudiation
- Enforcement of Assurance
- Proportionality Test
- Timing of Property Transfer
- Justice and Injustice Consideration
re: proprietary estoppel - satisfying equity
explain assessment of repudiation
the court will ask ‘is the legal owner’s repudiation of the breach unconscionable, given the claiming party’s detrimental reliance on it?’
if the answer is yes, this step is satisfied
re: proprietary estoppel - satisfying equity
explain enforcment of assurance
if stage 1 is satisfied, the court will usually hold the legal owner to their assurance
If the legal owner promised to transfer the property, the court will ordinarily enforce this and transfer the property to the claiming party
re: proprietary estoppel - satisfying equity
explain proportionality test
The burden is then on the legal owner to prove that enforcing the assurance would be out of proportion to the detriment suffered by the claiming party.
If established, the court may be constrained on the remedy they can grant
It will be easier for the legal owner to persuade the court to depart from full enforcement if the full nature of the assurance is unclear
re: proprietary estoppel - satisfying equity
explain timing of transfer
If the assurance involved the transfer of property on the legal owner’s death, the court might be able to transfer the property whilst they are alive but there should be a discount for accelerated receipt
re: proprietary estoppel - satisfying equity
explain justice and injustice consideration
The court should ask itself whether the remedy would do justice between the parties and whether it would cause injustice to third parties
re: proprietary estoppel - satisfying equity
why might the claiming party be denied a remedy?
o Their conduct has been inequitable or unconscionable; or
o There has been unreasonable delay
