Resulting Trusts

Question 1

What are Resulting Trusts?

Answer 1

They are a informal flexible trust with “the basis of a claim to recover one’s one property” - Hanbury & Martin

Question 2

With relation to land, what formalities are required for a resulting trust?

Answer 2

s.53 (2) LPA 1925 states that the requirement of a deed (outlined in s.52 of the LPA 1925) does not affect the creation or operation of resulting trusts in relation to land.

Question 3

Can a child be a trustee of a resulting trust?

Answer 3

Yes they can per the case of Re Vinogradoff

Question 4

What are the two traditional areas where resulting trusts can apply?

Answer 4

the traditional division is between automatic resulting trusts (ARTs) and presumed intention resulting trusts (PIRTs).
Within ARTs this is where something goes wrong with an express trust and the property goes back on resulting trust to the settlor - e.g. Essery v. Cowlard (marriage trust for unmarried couple)
Within PIRTs this is when property is transferred to a volunteer or purchased in the name of another (when consideration is not given) - Re Vinogradoff

Question 5

What are the two areas of controversies in relation to resulting trusts?

Answer 5

1. the role of intention

2. the development of the beneficial interest

Question 6

Which case set out the distinction between ARTs and PIRTs?

Answer 6

In the case of Re Vandervalls Trust (no.2) [1974], Megarry, J set out the distinction between the two types of trust.

Question 7

In which case re-classified the distinction between ARTs and PIRTs?

Answer 7

Westdeutshe Landebank Girozentrade v. Islington Borough Council 1996]. In this case the council entered in a deal which they thought legal with WLG, turned out to be illegal so pulled out, after transferring a large amount of money to the council. This issue concerned if the council held the money on resulting trust for the bank. In this case Browne Wilkinson held that all trust relate to the issue of intention. if the settlor has expressly or by necessary intention abandoned any beneficial interest in the trust property; there is no resulting trust - he argues the distinction is misleading as a resulting trust may arise before the intention is asserted [this is the equities to saying all resulting trusts are PIRTs].

Question 8

Prior to the enshrinement through Westdeutshce Landesbank Girozentrade v. Islington BC, where did the position in relation to PIRTs vs. ARTs come from?

Answer 8

The idea of removing this distinction initially came from academia, with Chambers (1997) arguing that “in both situations, the resulting trust arises by operation of law because the provider of the property did not intend to benefit the recipient”, this interpretation did then receive judicial support from Lord Millett in Air Jamaica v. Charlton.

Question 9

Why is the distinction between PIRTs and ARTs stupid?

Answer 9

because if the beneficial interest has not been perfectly transferred the intention of the party is broadly irrelevant, and the court will always presume it.

Question 10

What is the current view surrounding PIRTs and ARTs?

Answer 10

Hanbury & Martin - “the most widely held view is that all resulting trusts are based on the absence of any intention by the transferer to pass a beneficial interest to the transferee”

Question 11

Who contends the current view of PIRTs and ARTs?

Answer 11

Swadling (2008) and Virgo (2012) highlight the importance of inferring intentions in resulting trusts, arguing that they can be theoretically justified and state that this is consistent with other authorities.

Question 12

What happens to the benefical interest upon creation of a resulting trust?

Answer 12

In the case of Vandervall Lord Reid held that “the beneficial interest must remain with somebody, therefore if they do not belong to the donee, or are held on trust by him for another, or remain with the doner”

however, this approach was highly criticised in the case of Westdeutche Landesbank Girozentrade v. Islington BC, where Lord Browne Wilkinson held that the legal title takes with it the equitable title, and the equitable title cannot exist in separation from the legal title.

Question 13

What is the role if the trasnferee?

Answer 13

1. the transferee must be aware that they hold the property on resulting trust in order for the resulting trust to arise- Westdeutche landesbank girozentrade v. Islington
2. however this was argued to be incorrect by the Chambers (1997) who argues that considering case law as a whole it is possible to be unaware and a transferee
3. the resulting trust arise as soon as the property is transferred but the transfeee does not become subject to fiduciary duties and liability for breach of trust until she is aware of the position - Hanbury and Martin

Question 14

A resulting trust may arise when there is a failure to form an express trust?

Answer 14

This can be seen in the case of Essery v. Cowlard when a marriage settlement failed due to the lack of marriage between the parties - it was held that the subject matter of the trust went on resulting trust back to the settlor

Question 15

a resulting trust may arise when there is an incomplete disposal of a beneficial interest?

Answer 15

This occurs when the equitable interest (the subject matter of the trust) has not been complete disposed (used up) - so this occurs when a trust has been declared as void, or when the trust fund is not completely used up.

Question 16

Cases concerning incomplete disposal of a beneficial interest that results in a resulting trust. [historical]

Answer 16

Re Cochrane - when “unskillful” draftmanship lead to a trust being declared as void, it was held that the trust fund was held on resulting trust back to the original settlors
Re Trusts of Abbot fund [1900] - a trust was created in favour of looking after two disabled sisters, however they died before all the trust fund was used up. The court held the money was held on resulting trust for those who had contributed to the fund

Question 17

Cases concerning incomplete disposal of a beneficial interest that results in a resulting trust. [contemporary]

Answer 17

The high court has taken two contemporary decisions which are contradictory on this matter. These are:

Re Gillingham Bus disaster fund [1958]:
a trust was raised for the victims of a bus disaster, however upon the insurance company paying out, the trust was redundant. The court held that the money was held on resulting trust for those who had contributed. [note this is practically unworkable!]

Re West Sussex Constabulary fund [1971]:
a fund was set up for the benefit of widows or dependent’s of a police force. This police force was dissembled. The High Court in this case held that the money was held to be bona vacantia [ownerless money] and therefore went to the crown.

Question 18

Incomplete disposal of an equitable interest through a failure to declare a valid trust.

Answer 18

This can be demonstrated through the case of Vandervall v. IRC:
in this case:
V gave shares to RCS, and required a buy back clause to be put into the agreement. it was unclear who this buy back clause was for.
IRC argued that V held the equitable interest of that buy back clause as the equitable interest could not be in the air, it must remain with the settlor

In Vandervall v. IRC (no.2):
V attempted to purchaser the shares back using another trust fund
however as he was doing this with another charitable trust fund he could not be taxed - the resulting trust can come into existence and cease to exist just as quick

Question 19

What is the general principle of voluntary transfers?

Answer 19

when A transfers property for no consideration to B so there is a rebutable presumption that B holds the property on resulting trust for A

With relation to land however:
where A purchases property in the name of B or in the names of A and B there is a rebutable presumption that B holds on resulting trust for A.

[the difference in relation to land is due to the joint names of and the presumption]

Question 20

What is stated in Cowcher v. Cowcher about the presumption of a resulting trust?

Answer 20

Bagnall J states that “a resulting trust arises where a person acquires a legal estate but has not provided the consideration of the whole consideration for its acquisition, unless a contrary intention is proved”

Question 21

What is the distinction between land and personality in relation to a voluntary transfer and the presumption of a resulting trust?

Answer 21

Personality:
Fowkes v. Pascoe and Re Vinogradoff establish that in terms of a gift of shares from a grandmother (in both cases), when evidence can be provided that the dividends were intended as a gift the presumption can be rebutted. In the case of Fowkes what was brought as evidence was - financial provision, he lived with her etc.

Land:
s.60 (3) LPA 1925 is unclear as it states that there will be no presumption of a resulting trust however it can be established through general equitable principles.

Question 22

s.60 (3) LPA 1925

Answer 22

This can be seen through the case of Hogson v. Marks [1971] - where a widower took in a lodger and he convinced her to transfer the legal title to him, the court held that despite him owning the equitable title, he held it on resulting trust for the old lady. [although the court in the case did not discuss s.60]

The case of Lohia v. Lohia court of appeal held that on plain reading the presumption of a resulting trust had been abolished

Mee (2012) states that the initial presumption was neutralised by s.60,however you can have a neutral resulting trust as a statute cannot be used for fraud.
(therefore there will be no initial presumption, only in the case where otherwise it would involve fraud)

Question 23

What is the presumption of advancement?

Answer 23

where there is a special relationship between the transferor and the transferee, the presumption of a resulting trust is/ may be reversed: the transferor will be presumed to have intended that the recipient take the property beneficially

Question 24

Husband to wife presumption of advancement.

Answer 24

The presumption of advancement from husbands to wives was initially established by the case of Re Eykyns Trusts. It was upheld recently by the case of Tinker v. Tinker and Petitt v. Petitt

Question 25

Tinker v. Tinker (1970)

Answer 25

Family move to Cornwall and start up a business, and this is risky so put the house in the name of the wife to ensure creditors do not get the house. This is quite illegal.
They then get a divorce and the wife claims that the house was for the purpose of her advancement. The court held that the house was for the advancement of the wife [this was because he was relying on his honesty to get him off the illegality charge, therefore they presumed he would honestly wish to advance his wife.

Question 26

Petitt v. Petitt [1970]

Answer 26

Mrs P owned a house, and Mr P did a lot of work on the house
they then got a divorce
Mr P argued he had an interest in the house as a result of the work done, the lawyers argued that the only reason that he did this was for in order to advance his wife.
In this case there was much judicial criticism and it was argued that the presumption of advancement is out of date and should be strained to a period where wives were reliant of their husbands.

Question 27

Does the presumption of advancement apply from man to their mistresses?

Answer 27

No matter how dependent the mistress is on the man, the presumption of advancement does not apply. - Gavin-Mack v. Gavin-Mack

Question 28

Does the presumption of advancement apply from a wife to a husband?

Answer 28

It was historically established in the case of Mercier v. Mercier that the presumption of advancement does not apply from wives to husbands.
The cases of Heseltine v. Heseltine [1971] and Abrahams v. The trustee property of Abrahams [2000] establish this in a modern context

Question 29

Heseltine v. Heseltine [1971]

Answer 29

this case establishes that when a wife transfers property to her husband it will not be with the presumption of advancing him. In this case the wife brought stocks and shares, as well as 4 houses for her husband. He then left her for another women. The court held that there was no way that the women could be presuming to benefit the man.

Question 30

Abrahams v. The trustee of the property of Abrahams [2000]

Answer 30

This is the case where the wife pays for the husbands loto-roll over, it then wins.
In this case the court held she was not intending to advance her husband - therefore the winnings were hers.
This is an extremely modern case upholding the gender bias in the presumption of advancement.

Question 31

Can there be a presumption of advancement from a father to a child?

Answer 31

This is a long held established principle that when a father passes down property to a child it is presumed to be for their advancement - this was established in the case of Crabb v. Crabb.

Question 32

A loco-parentus position?

Answer 32

The case of Bennett v. Bennett held that when someone is acting in a loco-parentus position, the presumption of advancement applies to any transfer of property - however this case states that there this does not apply for women.

Question 33

Is there a presumption of advancement from a mother to a child?

Answer 33

The case of Bennett v. Bennett establishes that a mother will not be presumed to advance her child. However in recent cases there has been a move towards a more parental presumption of advancement.

Question 34

Parental presumption of advancement?

Answer 34

An Australian case of Nelson v. Nelson - a mother was held that have a presumption of advancement , however this is not binding, but persuasive.
In the case of Re Cameron obiter comments suggested that there could be a move to a mothers presumption of advancement.
In the recent cases of Laskar v. Laskar [2008] and Antoni v Antoni [2007] a partental presumption of advancement was spoken about in gender neutral terms.
The high court case of Close Invoice Finance Ltd v. Abawa [2010] held that it was a partental presumption.

Question 35

Human Rights consideration in the presumption of advancement?

Answer 35

Article 5 protocol 7 of the ECHR argues that spouses should enjoy equality of rights and responsibilities of a private law character between them

The presumption of advancement should not be considered compatible with this protocol. This led to the enactment of the Equality Act 2010

Question 36

The Equality Act 2010

Answer 36

s. 198 states that the common law that a husband must maintain his wife is abolished
s. 199 abolishes the presumption of advancement, however does not have retrospective effect.
* HOWEVER THIS HAS NOT COME INTO EFFECT*

Question 37

G Andrews (2007) [presumption of advancement]

Answer 37

“the continued application of the presumption of advancement is arcane and outdated, it is in direct contradiction to art 14 ECHR and Art 5 protocol 7”

• however note she is writing pre-2010

Question 38

J. Glister (2010) [presumption of advancement]

Answer 38

argues that the protocol should not affect the application of the presumption of advancement, however argues that it should be abolishes, he goes further than the Equity Act, arguing for it to have retrospective effect.

Question 39

M. Mcinnes (2007)

Answer 39

echos that case of Laskar v. Laskar arguing for the deminishment of the presumption when it is made to an adult child, argues for a strict boundary of under 18s as dependent children.

Question 40

Resulting trusts and illegal purposes

Answer 40

“no court will lend its aid to a man who found his cause of action upon an immoral or illegal act” Per Lord Mansfield in Holman v. Johnson

This reflects the idea that you must come to equity with clean hands. Examples of this are the cases of Tinker v. Tinker and Gascoigne v. Gascoigine.

Question 41

Gascoigne v. Gascoigine

Answer 41

G took out a lease in his wife’s name, and provided the money for this as he was in debt.
The couple separated
The court held that the only way in which G could rebut the presumption of advancement was through relying on his own illegal purpose which he could not do through equity.

Question 42

Which case reversed the Gascoigne v. Gascoigine and Tinker v. Tinker in terms of illegal purpose resulting trusts?

Answer 42

Tinsley v. Milligan [1994]

Question 43

Tinsley v. Milligan [1994]

Answer 43

This case involved a same sex couple who brought a house together however only registered it in the name of T as M was fraudulently claiming benefits.
They split up.
Court established the reliance principle, which means that unless one has to rely on their illegal purpose in order to establish a resulting trust, the illegal transaction is irrelevant.
It also established the principle of public conscious test in determining the level of illegality (this is an uncertain test)

Question 44

Following Tinsley v. Milligan?

Answer 44

The case of Silverwood v. Silverwood highlights the arbitrary nature of this principle as the presumption of advancement meant in certain cases that the evidential burden would be reversed and the illegal purpose would need to be relied upon.

The case of Tribe v. Tribe was an example were the presumption of advancement applied as it was a father to son transaction.

Question 45

The Withdrawal exception in relation to illegal purposes.

Answer 45

This was devleoping in the law, however peeked in the case of Tribe v. Tribe.

The case of Tribe v. Tribe concerned a father who transferred some shares to his son to avoid paying the landlord for repairs, however did not need to pay for the repairs in the end. The Son then was a knob and refused to give the house back to the father, as the presumption of advancement applies. The court in this case held that as he withdrew from the illegal purpose he was allowed to reclaim the shares.

This was heavily criticised by the Law Commission in 2010 who recommended statutory reform.

Question 46

The criticism following Tribe v. Tribe

Answer 46

This was heavily criticised by the Law Commission in 2010 who recommended statutory reform, however parliament denied that they would take up this in 2013.

This cased judicial comment by Lord Neuburger in Bilta v. Nazir who stated that “the proper approach to the defence of illegality need to be addressed by this court as soon as appropriately possible, this is not the case for it to be decided in”. Also Lord Toulson spoke out against it.

Question 47

Patel v. Mirza [2016]

Answer 47

THIS CASE OVERTURNS THE RELIANCE PRINCIPLE IN TINSLEY V. MILLIGAN
P and M intended to get involved in insider trading shares, where P transferred £620,000 to M.
They had made a mistake and could no longer go through with the action
Supreme Court: P was allowed to recover his money, and the reliance principle was heavily criticised
Lord Sumpson argues that there is the arbitrary nature of the reliance principle

Question 48

Lord Toulson trio of considerations in Patel v. Mirza

Answer 48

1. Consider the underlying purpose of the prohibition
2. consider the relevant public policies that would be affected by denying the claim
3. keep in mind the need to apply the law with a sense of proportionality

Question 49

Virgo (2016) comments of Patel v. Mirza

Answer 49

“justice is dependent on a high degree of predictability which is absent from this test”
He argues that there is potential for the trio of considerations purported by Lord Toulson has the potential to collapse into mere public conscious perceptions, which would lead full circle back to Tinsley v. Milligan.
He favours the Lord Sumpson approach

Question 50

What was the judgement in the case of Patel v. Mirza?

Answer 50

There was a 6-3 in favour of a flexible and context based approach to the defence of illegality. This was supported by Lord Toulson, Hale and Neuburger.
Lord Sumpson and others argued for a stricter rule based approach.

Question 51

Lord Sumpsons judgement in Patel v. Mirza?

Answer 51

He argued that there should be a presumption that if illegality is involved then there will be no resulting trust, however he outlined exceptions for when it would be appropriate to allow the defence of illegality, such as differing levels of illegality by the defendant and claimant and public policy.

Question 52

What is the defence of illegality in Australia?

Answer 52

The availability of the defence is determined through law considerations of the reason for the purpose being illegal.

Question 53

What is stated within s.60(3) LPA 1925?

Answer 53

a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee

THIS ONLY APPLIES IN LAND

the purpose of this section is to ensure that a resulting trust doesn’t arise just because a certain word was omitted from deed (per s.52), however it can be saved by the general principle of unconscionably in equity.