Implied Trusts

Question 1

what are the types of implied trust?

Answer 1

resulting and constructive

Question 2

re: resulting trusts

how do these arise?

Answer 2

• Arise by operation of law without any formality
• RTs are can be either presumed or automatic

Question 3

re: resulting trusts

what is the effect?

Answer 3

If there is a RT, this will give beneficial ownership back to the transferor

Question 4

re: resulting trusts

what is loco parentis?

Answer 4

someone/organisation who has a duty to take care of the child (i.e. a guardian, a school)

Question 4

re: resulting trusts

what are the presumptions?

Answer 4

presumption of advancement
presumption of resulting trust

Question 5

re: resulting trusts

what is the presumption of advancement?

Answer 5

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)

Question 6

re: resulting trusts

what happens if the presumption of advancement does not apply?

Answer 6

• If POA does not apply, then the presumption of resulting trust might apply

Question 7

re: resulting trusts

when will the presumption of advancement not apply?

Answer 7

if there is evidence to the contrary

Question 8

re: resulting trusts

in what type of transactions might the presumption of resulting trust apply?

Answer 8

voluntary transfer of property
voluntary transfer of realty
purchase money cases

Question 9

re: resulting trusts

what is meant by ‘voluntary’?

Answer 9

• Voluntary = other party receives no consideration for the transfer

Question 10

re: resulting trusts

what is personalty?

Answer 10

cash/assets other than realty

Question 11

re: resulting trusts

explain the presumption of RT and voluntary transfer of realty

Answer 11

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.

Question 12

re: resulting trusts

what is realty?

Answer 12

land or property

Question 13

re: resulting trusts

explain the presumption of RT and voluntary transfer of realty

Answer 13

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

Question 14

re: resulting trusts

what evidence might suggest a voluntary transfer of land was intended to create a resulting trust?

Answer 14

P1 receives rental income or P1 and P2 are strangers

Question 15

re: resulting trusts

what does ‘purchase money cases’ apply to?

Answer 15

Applies to purchases of personalty and realty

Question 16

re: resulting trusts

when will a PORT arise in a purchase money case?

Answer 16

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

Question 17

re: resulting trusts

give two examples of purchase money cases

Answer 17

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.

Question 18

re: resulting trusts

what are examples of evidence to rebut POA and PORT before / at the time?

Answer 18

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

Question 19

re: resulting trusts

explain the position regarding evidence to rebut

Answer 19

contrary evidence before or at the time of the transfer can support , but evidence after the transfer can only be used against

Question 20

re: resulting trusts

what is an example of intention evidence after the transfer?

Answer 20

o i.e. a will signed after the purchase cannot support the transferor’s actual intentions.

Question 21

re: resulting trusts

who has the burden of proof?

give an example

Answer 21

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)

Question 22

re: resulting trusts

when will an automatic resulting trust arise?

Answer 22

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

Question 23

re: resulting trust

where a resulting trust arises automatically, what happens if S is alive?

Answer 23

Ts will then hold the TP on bare trust for S.

Question 24

re: resulting trust

where a resulting trust arises automatically, what happens if S has died testate?

Answer 24

TP will form part of S residuary estate.

Question 25

re: resulting trust

where a resulting trust arises automatically, what happens if S has died intestate?

Answer 25

TP will pass under intestacy rules.

Question 26

re: constructive trust

when will this arise?

Answer 26

• CTs arise where it would be unconscionable for a party to deny another party an equitable interest in the property

Question 27

re: constructive trust

who is this relevant to?

Answer 27

• Relevant to unmarried cohabiting people (separate rules for married people)

‘Common law marriage’ is a myth.

Question 28

re: constructive trust

what is a common intention constructive trust?

what is the position as to ownership?

Answer 28

the partners hold the beneficial interest equally

o Joint ownership = CICT presumed
o Sole ownership = CICT must be established

Question 29

re: constructive trust (joint ownership)

how will equitable title be recorded?

Answer 29

• There may be an express trust confirming the equitable title (i.e. TR1)

Question 30

re: constructive trust (joint ownership)

how is legal title held?

Answer 30

Always JT

Question 30

re: constructive trust (joint ownership)

how is equitable title held?

Answer 30

JT or tenants in common (TIC)

Question 31

re: constructive trust (joint ownership)

what happens if there is no express trust confirming equitable title?

Answer 31

If not, an RT or CT may arise.

If CT  presumed they both hold the property on CICT

Question 32

re: constructive trust (joint ownership)

when can a common intention constructive trust be rebutted?

Answer 32

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)

Question 33

re: constructive trust (joint ownership)

if there is no clear agreement, what will the court do?

Answer 33

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)

Question 34

re: constructive trust (sole ownership)

who has legal title?

Answer 34

the registered proprietor (RP)

Question 35

re: constructive trust (sole ownership)

what happens if there is no express trust confirming the beneficial interests?

Answer 35

• 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

Question 36

re: constructive trust (sole ownership)

if the non-owning party proves the elements, what happens?

Answer 36

• If this is proven, the beneficial interests will need to be quantified

Question 37

re: constructive trust (sole ownership)

how will the interest be quantified?

Answer 37

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

Question 38

re: constructive trust (sole ownership)

if they cannot prove CICT, what remedy might be available instead?

Answer 38

proprietary estoppel

Question 39

re: constructive trust (sole ownership)

explain express intention + detrimental reliance

Answer 39

• 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

Question 40

re: constructive trust (sole ownership)

give some examples of express intention

Answer 40

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

Question 41

re: constructive trust (sole ownership)

give some examples where there is not express intention

Answer 41

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

Question 42

re: constructive trust (sole ownership)

explain inferred common intention + detrimental reliance

Answer 42

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

Question 43

re: proprietary estoppel

what is the purpose of this?

Answer 43

• This prevents someone from going back on their word when it would be unfair to do so

Question 44

re: proprietary estoppel

what is the key question?

Answer 44

‘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.

Question 45

re: proprietary estoppel

when is this commonly relied on?

Answer 45

where someone has said ‘this will be yours when I die’ but then the property is left to someone else in the will

Question 46

re: proprietary estoppel

what are the stages?

Answer 46

o Stage 1  the estoppel must be established
o Stage 2  the estoppel must be satisfied

Question 47

re: proprietary estoppel

what are the elements to ‘establish the estoppel’?

Answer 47

o Assurance
o Detriment
o Reliance

Question 48

re: proprietary estoppel - establish the estoppel

explain assurance

Answer 48

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

Question 49

re: proprietary estoppel - establish the estoppel

explain detriment

Answer 49

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.

Question 50

re: proprietary estoppel - establish the estoppel

give examples of a non-monetary substantial detriment

Answer 50

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

Question 51

re: proprietary estoppel - establish the estoppel

give an example of ‘the detriment must outweigh the benefit obtained’

Answer 51

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.

Question 52

re: proprietary estoppel - establish the estoppel

explain reliance

Answer 52

• 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.

Question 53

re: proprietary estoppel

what might someone argue to try and defeat a claim?

Answer 53

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.

Question 54

re: proprietary estoppel

what remedy can the court award?

Answer 54

• 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

Question 55

re: proprietary estoppel

explain the ‘satisfying the equity’ stage

Answer 55

the court’s usually have a 5 stage approach:

1. Assessment of Repudiation
2. Enforcement of Assurance
3. Proportionality Test
4. Timing of Property Transfer
5. Justice and Injustice Consideration

Question 56

re: proprietary estoppel - satisfying equity

explain assessment of repudiation

Answer 56

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

Question 57

re: proprietary estoppel - satisfying equity

explain enforcment of assurance

Answer 57

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

Question 58

re: proprietary estoppel - satisfying equity

explain proportionality test

Answer 58

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

Question 59

re: proprietary estoppel - satisfying equity

explain timing of transfer

Answer 59

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

Question 60

re: proprietary estoppel - satisfying equity

explain justice and injustice consideration

Answer 60

The court should ask itself whether the remedy would do justice between the parties and whether it would cause injustice to third parties

Question 61

re: proprietary estoppel - satisfying equity

why might the claiming party be denied a remedy?

Answer 61

o Their conduct has been inequitable or unconscionable; or
o There has been unreasonable delay