Resulting trusts

Question 1

According to Re Vandervell’s Trusts (No 2) (1974) what are the two categories of resulting trusts?

Answer 1

Megarry J:

1) Automatic resulting trust.
2) Presumed resulting trust.

Question 2

When will an automatic resulting trust arise?

Answer 2

Where the settlor transfers property to the intended trustee but the trust fails for some reason. The equitable ownership is retained by the settlor.

Question 3

When will a presumed resulting trust arise?

Answer 3

1) Voluntary transfer of the legal estate.
2) Contribution to the purchase price.

Here it is presumed that the settlor did not intend to make a gift of the property unless there is evidence otherwise.

Question 4

What is the presumption of advancement?

Answer 4

In certain relationships it is presumed that a gift was intended unless there is evidence that the transferor intended to retain an interest. This includes the relationship of father and child: Tribe v Tribe (1995)

Question 5

What is a factual scenario where a trust would fail and you create an automatic resulting trust?

Answer 5

If, without the settlor’s knowledge, the beneficiary died before the trust was created. There is no beneficiary. The trustee holds the property in resulting trust for the settlor.

Question 6

What does the case of Tinsley v Milligan (1993) tell us?

Answer 6

Two lovers - ran a B&B - house registered in claimant’s name only so defendant could fraudulently claim benefits. Relationship broke down and defendant argued property was held for both of them in equal shares.

Problem here was that if the defendant could only rely on fraudulent conduct (those who come to equity must do so with clean hands), she could not claim a resulting trust. But she only had to rely on her contributions and therefore there was a resulting trust.

Question 7

What was said in Gissing v Gissing?

Answer 7

A contribution to the purchase price will give rise to a presumption of resulting trust.

Question 8

How can you rebut the presumption of a resulting trust?

Answer 8

If there exists evidence that a gift was intended: Fowkes v Pascoe (1875): Given the circumstances and the relationship between the parties, there was simply no plausible explanation for the purchase except that Mrs Baker intended to make a gift of the stock to Pascoe.

Question 9

What were the issues in Tribe v Tribe (1995)?

Answer 9

Father transferred shares to son to avoid creditors.

Because it was a father-son relationship, this raised the presumption of advancement. To defeat this, father argued that the purpose of trying to defeat his creditor was evidence that he intended to retain an interest, but he could not rely on illegal conduct.

It was held that the father could rely on the illegal purpose which had not been put into effect. (locus poenitentiae)

Question 10

What did Pettitt v Pettitt (1970) say about the presumption of advancement?

Answer 10

It was criticised as having no application in modern times.

Question 11

What was one of the things Lord Browne-Wilkinson said in Westdeutsche?

Answer 11

Resulting trusts arise because of a presumption that the transferor intended them to do so.

Question 12

What does Dyer v Dyer (1788) tell us?

Answer 12

If A was the sole owner of the property transferred or provided all of the purchase money, he will be the sole beneficiary of the trust.

Question 13

What does The Venture (1908) tell us?

Answer 13

If the property was initially co-owned or he provided only some of the purchase money, his beneficial interest under the trust will be proportionate to his contribution.

Question 14

What does the Equality Act (2010) say about resulting trusts?

Answer 14

The Equality Act 2010 which will abolish the presumption, but whether or not is enforced will operate prospectively anyhow.

Question 15

What are the implications of s60(3) LPA 1925?

Answer 15

The Court of Appeal in Ali v Khan (2002) stated that the High Court in Lohia (2001) had established that the presumption of resulting trust had indeed been abolished in relation to conveyances of land by s 60(3) (although Lohia had only really expressed sympathy and said the case didn’t really concern the point).

Question 16

How does Swaddling’s (1996) view on the content of presumption differ from Birks (1992) and Chambers (1997)?

Answer 16

S: where A gratuitously transfers property to B, the presumption is that A intended B to hold that property on trust for him, unless rebutted a resulting trust arises to give effect to A’s intention.

B&C: The alternative view is that in such circumstances it is presumed that A did not intend B to take the property beneficially. Here the trust exists to prevent B obtaining a benefit A did not intend him to have.

Considerable uncertainty as to which view is correct as a matter of law - see Westdeutsche.

Question 17

What happened in Westdeutsche (1996)?

Answer 17

There the claimant bank paid significant sums of money to the defendant local authority under a contract which turned out to be void as it was beyond the powers of the local authority. When this was discovered, the bank argued, inter alia, that there was a resulting trust of money it had paid to the authority under the void contract.

The local authority’s argument, by contrast, was that the relevant presumption was of an intent to create a trust in the transferor’s favour, and hence it was rebutted as the bank clearly never intended to create a trust.

The House of Lords unanimously came down on the side of the first view we described earlier: the presumption in cases of presumed resulting trusts is that A intended that B should hold the property on trust for him. Since the bank had not intended to create a trust, the presumption was rebutted and its resulting trust argument failed.

Lord Browne-Wilkinson preferred the analysis of the cases put forward by Swadling.

Question 18

What two qualifications are there on Lord Browne-Wilkinson’s approach in Westdeutsche?

Answer 18

1) Held that it was not simply A’s intention that was important of resulting trusts but also B’s. It then follows from this that the presumption will be rebutted if either A or B can be shown to have had an intention inconsistent with this. This would mean that if B did not know he had to hold the property on trust, no trust would arise.
2) Lord Millett in the Privy Council decision in Air Jamaica Ltd v Charlton (1999) said that a resulting trust can arise even where A does not intend to retain a beneficial interest in the property transferred, and hence even where A intends no trust.

Question 19

What are the complications of Lord Millet’s view in Air Jamaica (1999)?

Answer 19

Millett wrote extra-judicially that he agreed with the approach in Westdeutsche that no resulting trust arises in the case of mistaken, coerced or conditional transfers. So, where A transfers property by mistake, this rebuts rather than – as Birks and Chambers argue – confirms the presumption of resulting trust

Question 20

What viewpoint does Webb argue for?

Answer 20

Berks and Chambers should be preferred. Although – as Millett rightly identifies – claimants who transfer property by mistake do have an intention to benefit their transferees, the mistake is significant precisely because it shows that the claimant’s intention to make the transfer was conditional on certain facts.

Question 21

What does Vandervell v IRC (1967) tell us about automatic resulting trusts and failed trusts?

Answer 21

The plan appears to have been that the shares would be held on trust by VT for Vandervell’s children. However, this was not made plain at the time the option was granted, so although it was clear that VT had legal title to the option, it was uncertain who was to be beneficially entitled to it.

The House of Lords, by a bare majority, held that VT was not intended to hold the option beneficially; instead it held it on trust. The problem, however, was that the beneficiaries of this trust had not been identified. As such, the only conclusion was that, in the absence of any certain objects, the adoption was held on resulting trust for Vandervell.

Question 22

What does Vandervell v IRC (1967) tell us about automatic resulting trusts and intention?

Answer 22

The last thing Vandervell wanted was to have beneficial interest in the option. As such, it seems clear that the sort of resulting trust recognised in Vandervell does not arise because A intends that B hold the transferred property on trust for him.

Lord Upjohn: ‘If the beneficial interest was in A and he fails to give it away effectively to another or others or on charitable trusts it must remain in him.’

So, resulting trusts which arise from the failure of an express trust do so automatically.

Question 23

How did Lord Browne-Wilkinson disagree with Megarry J’s approach in Re Vandervell’s Trusts (No 2) (1974)?

Answer 23

All resulting trusts arise for the same reason: because this is what (we presume) the parties intended.

But It is likely in the majority of cases that A will want their property back if the trust fails, but for Lord B-W’s analysis to be correct this must always be true. Big obstacle to this is Vandervell. Following B-W’s argument, if A really does not intend to retain the beneficial interest, he can abandon it.

But, as in Vandervell, it is possible to form neither the intention to abandon the property nor the intention to retain an interest in it.