Resulting Trusts Flashcards
Resulting trusts arise?
By operation of law, in response to the settlor’s intention
Drake v Whipp 1995
An RT “operates as a presumed intention of the contributing party in the absence of rebutting evidence of actual intention” - Gibson LJ
What’s the easiest way to think about a resulting trust?
To think about it as a legal mechanism that operates where ownership is not clear
Categories of resulting trust
- Presumed
- Automatic
- Quistclose
- Other?
What presumptions do presumed resulting trusts operate on?
- Presumption against gifts
- Presumption in favour of the provider of purchase money
Hodgson v Marks 1971
F: A manipulative lodger convinced an elderly house owner to convey the house to him in an understanding that he would hold in on trust for her
I: Was there a presumed resulting trust even after s60(3) LPA 1925?
H: Yes, the doctrine of presumed resulting trusts still applied on a reversed burden of proof
Lohia v Lohia 2001
F Land was transferred from son to his father with no consideration, father died and the son claimed that the absence of consideration meant that the house was to be held upon trust for the donor and donee as beneficial joint tenants in equal shares, and that accordingly upon the death of the father he was entitled to his share
I: Was there presumption of RT?
H: The section was clear and that a conveyance for nil value meant what it said, a person seeking to establish a resulting trust had to prove it
Ali v Khan 2002
F: Father sought to transfer his home to his two daughters, the daughters gave £20,000 for consideration, but the house was worth more, the daughters then financed their wedding
I: Was there a presumption of RT?
H: Yes, held to be a trust, however, no reference to Lohia
Re Vinagradoff 1935
F: Grandmother conveyed shares into the joint names of herself and her 4yo granddaughter, then died
I: Was there a presumption of RT?
H: The gratuitous nature of the initial conveyance give rise to a RT and granddaughter now held the shares on trust for grandmother’s estate
Midland Bank v Cooke 1995
F: The house purchased in the sole name of the husband, but some of it came from the gift from his parents to the couple jointly
I: Presumption of RT?
H: Yes, she was entitled to a share of the house
Fowkes v Pascoe 1975
F: Testatrix had one son who left behind a widow that she treated as family (and her kids), then testatrix bought two sums of stock, one put in the names of herself and her grandson, other her and her friend
I: Presumption of RT?
H: Yes, but rebutted on the facts, plainly because there was an intention of a gift
Abrahams v Trustee in Bankruptcy of Abrahams 1999
F: Mr and Mrs Abrahams were members of the national lottery syndicate, when they separated, she continued to pay his share, he then went bankrupt and she won the lottery
I: RT?
H: Yes, but he was holding the money for her
Relationships giving rise to presumption of advancement
- Father and child
- Husband and wife
- Persons standing in loco parentis
Which section abolishes the presumption of advancement?
s199 Equality Act
Shephard v Cartwright 1955
F: Father purchased shares in the name of children, then he wanted to get money out of the account and the children allowed him to do so not knowing about this, father gave instructions as to signing of documents
I: Could the declaration rebut the presumption of the gift?
H: No
Gascoigne v Gascoigne 1918
F: H transferred property to W to hide something illegal
I: Presumption of advancement?
H: Yes, could not be rebutted because illegality
Tinsley v Milligan 1994
F: Lesbian couple purchased a house registered in the sole name of Tinsley but joint equitable ownership, Milligan pretended to be a lodger to get social benefits which contributed towards the bills, then they split up
I: Presumption of RT?
H: M was entitled to rely on the presumption of RT to claim a half share in the house because M did not need to rely on her illegal actions; she had an equitable interest under a RT because she had contributed to the purchase price
Now overruled by Patel v Mirza 2016
3 categories of automatic resulting trusts according to Virgo
- Initial failure of an inter-vivos trust
- Invalidity
- Subsequent failure
Re Ames’ Settlement 1947
F: A couple got married and H’s father transferred some money for the benefit of them and their children, then discovered marriage never consummated
I: Was the money on RT for father?
H: Yes, the trust void as the marriage void
Re Gillingham 1958
F: Money raised for victims of an accident, a fund was created for victims and their families through anonymous donations, no one claimed the money
I: Was there an RT?
H: Yes, but since no one claimed, a memorial built
Quistclose trust
A trust created where a creditor has lent money to a debtor for a particular purpose and if he uses the money for any other purpose, it is held on trust for the creditor
Barclays Bank v Quistclose 1970
F: Rolls Razor owed money to Barclays, it needed more to pay a dividend, Quistclose agreed to a loan on the condition the dividend would be paid with it, the money was paid into the account but before it was used, Rolls Razor went into voluntary liquidation, Quistclose sought to recover the money before Barclays as they retained a beneficial interest
I: Was Quistclose’s argument right
H: Yes - primary trust for the purpose of paying the dividends and if it fails, then a secondary trust in favour of the lender
What did Lord Millett say about the nature of the trust in Twinsectra?
That it’s a Quistclose trust, and he analysed Quistclose trusts like unjust enrichment
Gap theory about RTs
B not allowed to deny he holds the money on trust as inequitable but C dead so he has to hold for someone - A
Invalidity theory about RTs
A’s attempt failed, so put him back in the original position, equity can’t do this as legal title already with B, so it can put the trust on RT so Saunders v Vautier can apply and positions can be restored
Westdeutsche theory about RTs
A intended that if B couldn’t hold on trust for C, then she should hold for A - doesn’t explain Vandervell
Megarry Vandervell theory about RTs
B holds on trust for A because at the start of the story, A has a legal and beneficial interest in the money he wants to transfer, then successfully transfers the legal title but not beneficial which stays with him -> hence automatic RT
Millet Air Jamaica theory about RTs
B holds for A because the beneficial interest in the money cannot rest in C and A does not intend that it should rest in B
Birks-Chambers theory about RTs
A does not intend that B should benefit! from it, thus unjust enrichment
