Resulting trusts Flashcards
Types of resulting trusts
Westdeutsche
a) Presumed (apparent gift)
b) Automatic (failing trust)
Definition of resulting trusts
Does not arise because of a successful exercise of power to set up a trust, so not express trust
Intention may be relevant - debate
Beneficiaries of resulting trusts
a) Presumed - beneficiary previously the unencumbered holder of either the eventual trust property or of money used to purchase the eventual trust property
b) Automatic - beneficiary was the initial unencumbered holder of the eventual trust property
Presumed / apparent gift resulting trusts
Re Vinogradoff (grandmother war bonds) - no evidence to rebut it
Vandervell v IRC: where A transfers or directs a trustee for him to transfer, the legal estate in property to B otherwise than for valuable considerable it is a question of the intention of A in making the transfer whether B was to take beneficialy or on trust and if the latter, on what trusts
- Objective constructiion
- If can discern intentions, just follow that
- If cannot, presumption of resulting trusts
Vandervell v IRC No. 2 - no presumption of advancement applied to facts
Prest v Petrodel Resources Ltd (3 flats from offshore companies) - gratuitous transfer
Presumption 1: voluntary conveyances of land/gratuitous transfers of land
In the absence of evidence of intention to the contrary, equity presumes that property is held on trust for the claimant
Effect of S.60(1) and S.60(3) of LPA 1925: ‘a resulting trust shall not be implied merely by reason that the property is not expressed to be conveyed for the use of benefit of the grantee’
Abolished?
Lohia v Lohia (father son) - yes
National Crime Agency v Dong (transfer of house to associate, unpaid taxes) - no
Mee: impossible to have full understanding without detailed historical examination
Public policy - yes
- Multiple reasons to buy property in another’s name without intending outright transfer
- Special formality rules apply to land conveyances already, increasing likelihood of transferor thinking carefully
- Part of bigger effort to eliminate resulting trusts
Presumption 2: shared homes
Status: Diminished relevance due to CICT
Stack v Dowden: CICT as default way to go for family homes
Laskar v Laskar: resulting trust analysis appropriate for investment context
Jones v Kernott: narrower restrictrions
Marr v Collie: followed Laskar, applied resulting trust but later overturned at Court of Appeal
Presumption of advancement (works the other way)
Presumption that there was no resulting trust for the claimant, gift intended – status based
Father-child - yes (Shephard v Cartwright)
Elderly parent-adult child - yes (Antoni v Antoni)
Husband-wife - yes (Tinker v Tinker)
Mother-child - probably (Pecore v Pecore)(Canada)
Wife-husband - no
Cohabitant-cohabitant - no (Stack v Dowden)
Principles of identifying beneficial interest from gratuitous transfer of property
Uncertainty about burden of proof: equity follows the law under CICT (Gany Holdings v Khan)
a) Written/oral declaration - decisive
b) No declaration: court looks for evidence of common intention
c) If no evidence, presumption of advancement or presumed resulting trust
Automatic / failing trusts
a) Express trust fails entirely or partially
Re Shaw
Vandervell v IRC
b) Trust objective achieved, leaving surplus
- Depends on if there is express provision
- If no express provision, resulting trust applies
(Air Jamaica Ltd v Charlton - on facts, surplus was not from overfunding but from failure of trusts, so members did not get what they bargained for and RT in accordance w contributions)
Justifications for resulting trusts - 1 v 2 explanations
2 explanation
- Megarry J in Re Vandervell’s Trusts No.2
- Presumed: respond to presumed intention
- Automatic: default rule that unallocated beneficial interest should return to settlor
- Swadling, Mee
1 explanation
- LBW in Westdeutsche
- Both respond to presumed intention to creation trust for herself
- Chambers, Burr (but both disagree with Westdeutsche explanation that RT arise to reverse unjust enrichment)
Underlying debate: intention-based versus unjust enrichment-based
Intention
- Westdeutsche (LBW)
- Swadling
- But not really borne out by the cases
Unjust enrichment
- Air Jamaica v Charlton (Millett)
- Chambers
- But proprietary overkill, does not fit with historical cases and current approach
Alternative rationale
Mee: retention based
- Based on history
- Transferor retains beneficial interest in the property, rather than intended to keep it for herself
- Sees little relevance of RT in future
Role of resulting trusts in illegality
May temper harshness of illegality defence
Tinsley v Milligan rule
Reliance based – if relied on illegality to attain interest in the property
Tribe v Tribe
Locus poenitentiae applied, illegality defence does not work
Criticism of the role of illegality resulting trust
- Public policy, not justice
- Impact based on the location of burden of proof than merits
- No value judgment involved regarding the significance of illegality
- Arbitrary results based on nature of relationship between parties
Patel v Mirza
Rejection of Tinsley reliance test, in favour of general ‘range of factors’ approach (Lord Toulson)
a) Effect on underlying purpose of prohibition if C’s claim is denied
b) Any other relevant public policy
c) Proportionality
Minority: reliance test (Lord Sumption)
- Illegality about consistency between civil and criminal law
Implications of Patel v Mirza
- Increased uncertainty about role of illegality
- Reduced practical significance of presumption rules, in favour of broad approach
- Davies: need to have certainty for property rights so (bad), but maintains coherence in private law (good)
Background of Patel v Mirza
a) Presumption of advancement, presumed resulting trust
- Anachronistic, discriminatory e.g. presumption of advancement doesn’t apply for wife-husband, wife-wife
- Future reform: abolish presumption of advancement OR extend beyond patriarchal roots
- Not totally redundant
b) Law Commission (Lord Toulson as chair)
- Illegality defence may apply where beneficiary has taken steps to conceal equitable interest to commit criminal offence
- Illegality will rarely affect the result, unless very serious
c) Third parties
- More flexible approach –> claims of innocent parties should trump the tainted defendant
d) Consequences of illegality not resolved
- If trust fails for illegality, settlor should be able to claim return of property
- Confiscating property would be punitive
e) Deciding cases differently - inconsistency in outcome for ‘hard’ cases unlike Tribe v Tribe
