Resulting Trusts Flashcards
What are the two categories of resulting trusts that may arise?
- Presumed Resulting Trust: Ones in which a declaration of trust is proved by presumption rather than evidence (a voluntary conveyance)
- Automatic Resulting Trust: Said to arise where an express trust fails initially or subsequently. Property is held by the trustee for the settlor
Swadling would argue that the first is simply a constructive trust and the latter is a form of express trust, this category should thus be redundant
How is a resulting trust said to differ from express and constructive trusts?
Express trusts arise because of an express intention of the settlor, constructive does not generally respond to intention but arises by operation of law. A resulting trust gives effect to an intention of the settlor that has not been made express
(Orthodox view: the resulting trust reflects the presumed positive intent of the settlor retain beneficial interest)
How did Megarry J emphasise the distinction between the two kinds of resulting trusts?
Re Vandervell (No. 2)
* In the first the matter is one of intention, with the rebuttable presumption of a resulting trust applying if intention is not manifest
* In the second it takes effect by operation of law, and so appears to be automatic. What a person fails to effectively dispose of stays vested in him and no question of mere presumption can arise
What is the presumption in cases of voluntary conveyance?
Equity is generally suspicious of gifts made for no consideration in return. Where property is transferred for no consideration, a rebuttable presumption arises that the transferee holds it on trust for the transferor
* Re Vinogragoff: V gratuitously transferred shares into the joint name of her and her granddaughter. On her death, it was held the granddaughter held the shares on resulting trust for the grandmother’s estate.
How is the presumption of resulting trusts governed in cases of land?
s60(3) Law of Property Act 1925
Any presumption of resulting trust shall not be implied merely because the property is not expressed to be conveyed for the use or benefit of the grantee
* Lohia v Lohia: not necessary to use any additional words to make the section effective, the section abolishes presumption of resulting trust in land
* HOWEVER, NCA v Dong: doubted whether the section and drafting had such an effect, chose to argue presumption remains
More preferable approach is to say the section removes the PRESUMPTION, but one can still arise if the grantor proves a trust was intended
How is the presumption of resulting trust dealt with in purchase-money cases?
Dyer v Dyer: The trust of a legal estate, regardless of the name or names given, results to the person who advanced the purchase money
* NOTE, now in the domestic context where one party contributes money for the purchase of a property in the sole name of another, the court will prefer analysis of a common intention constructive trust
The Venture: Presumed that where A advances money to fund the purchase of property by B, A holds a proportional beneficial share in the property and proceeds from future sale, unless a contrary intention is shown
What is the presumption of advancement?
- Bennet v Bennet: In the case of transfer from a man to his wife, children or others to whom he stands in loco parentis with, in the absence of the contrary, a purchase or investment is held to be itself evidence of a gift
- Petitt v Petitt: Lord Reid critized the assumption, said it must have either been based on an idea of husbands intending to make gifts so commonly or wives being economically dependent on husbands, and that this surely must have now diminished
How has the presumption of advancement been pushed back against?
- Argued as discriminatory, only applies to husbands making a transfer to their wifes. In the opposite, a resulting trust would arise
- S199 Equality Act 2010 sought to abolish the presumption, however this is not yet in force and looks unlikely to be so soon
In what ways can an automatic resulting trust arise?
- Transfer on trust which fails for uncertainty of objects, e.g. IRC v Broadway Cottages
- Transfer which fails for want of objects
- Transfer which fails as offending rule against private purpose trusts
How was an automatic resulting trust found in Vandervell v IRC?
FACTS- Vandervell sought to make a gift to the Royal College of Surgeons to find a chair of Pharmacology, but wanted to do so in a tax efficent way. He directed his bank to transfer shares he owned to the College and declared dividends on these shares to pay for the chair. However, the college was required to issue an option to purchase these shares to Vandervell Trustees Ltd. Did this mean the college was acting as a trustee, i.e. it was held on resulting trust for Vandervell?
OUTCOME- Vandervell had granted the option to the trust company to be held on trust, but the objects of this were not identified therefore the express trust was void. Lord Wilberforce held the beneficial interest must have belonged to someone and could not be in the air, and by process of elimination the shares must have resulted to the settlor. There is no room for a presumption, all the evidence is present
What is the effect of Hodgson v Marks?
- Where an express trust fails due to lack of writing under s53 LPA 1925, a resulting trust will arise
- If an attempted express trust fails, there will be a resulting trust whether the failure is due to uncertainty, perpetuity or lack of form
How can the presumption of a resulting trust be rebutted?
The presumption of resulting trust (and advancement) can be displaced by sufficient evidence to the contrary
* Fowkes v Pascoe: Court must look into actual facts of the case. The fact that Mrs Baker was purchasing shares in the joint name of herself and Mr Pascoe was a gift based on the fact she was wealthy, he lived with her and she provided for him financially
* Shephard v Cartwright: In cases of a presumption of advancement, a declaration of intention contrary to the presumption will not be admissable if the parties did not know what they declared
How does illegality impact the rebuttal of the presumption?
A person should not be able to rely on evidence of their own illegal conduct, however this rule has become less strict over time
* Tinsley v Miligan: A party to illegality can recover by virtue of a legal or equitable property interest if he can establish title without relying on his own illegality. HOWEVER, in cases where the presumption of advancement applies, they cannot claim under a resulting trust until they have rebutted the presumption of a gift
* Patel v Mirza: In assessing whether a person can rely on illegality, must look at the underlying purpose of the prohibition broken, any relevant policy on which denial of the claim may have an impact and whether denial would be a proportionate response to the crime
