RESULTING TRUSTS Flashcards
AUTOMATIC RESULTING TRUSTS
Trusts that arise in response to a failure to create a trust (the intention did not work as the settlor intended)
PRESUMED RESULTING TRUST
There is a presumption that a settlor has not meant to transfer the beneficiary interest to the transferee, so the interest is retained by the transferor
- Presumed RT arises where A transfers to B, or purchases for B, an interest in property in circumstances where the law presumes that A did not intend to make a gift of that interest to B
- The presumption is about the existence and the content of the trust; thus, both the existence and the content of the trust need to be proved
- A does not need to show that the transfer was gratuitous, only that a transfer occurred
- In both voluntary transfer RT and purchase contribution RT, the presumption is that both parties share the beneficial interest in proportion to their contribution regardless of the way the legal title is held
RESULTING TRUST
- Arises when a trustee holds some right or interest on trust for the person from whom they received that right or interest
- The beneficial interest goes back to the beneficiary
- Refers o the question for for whom the trust property is held on trust
RETENTION THEORY
- A retains the beneficial interest [per Lord Reid in Vandervell]
- Lord Browne-Wilkinson in Westdeutsche – no, absolute beneficial interest is not comprised of legal title and equitable interest. Rather, the equitable title only arises once a person’s conscience is affected. And so, A acquires a new interest once an RT is created
- The only time there is a split between the beneficial and legal interest is when there is a problem of unconscionability
- When the conscience of a transferee is affected, in the sense that he knows he should not be benefiting from the property, only then a split happens, and the beneficiary interest is not with the transferee
- However, the received view is that RT arises immediately upon the transfer to B, even if B is not aware of the fault and her conscience is therefore clean. B only comes under any duty to A once she learns of the fault
- What probably happens is that as soon as the transfer happens, there is a split, so all the rights the beneficiary has are with them, but the trustee does not come under duties to the beneficiary before the conscience is affected
VOLUNTARY TRANSFER REULTING TRUST
- When the transfer meant that A intended to create a trust, equity assumes the validity of what A is doing
- There is a presumption that B holds the property for A on RT
- Whenever there is a transfer, B holds on trust for A unless B can rebut the presumption
VOLUNTARY TRANSFER OF RIGHTS IN LAND
- A voluntary transfer of land may be treated differently from payment of the purchase price in England and Wales
- S60(3) LPA: “in a voluntary conveyance 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”
- Could be interpreted as saying that the presumption does not apply to land
- Since 1925, the courts have not decided on this. This shows that the presumption, in reality, does not have much effect
Presumed resulting trust as a way of allowing a more just allocation of property
Often, a house will be registered in the name of one party of the couple, and the other partner (even if they contributed to the mortgage payment, or did work around the house) would in common law get nothing because they were not registered on the title
The courts used the PRT to say that the contribution towards the home was not a gift, but the creation of a trust in the contribution. This financial contribution can get gotten back even though they are not registered on the title of the house
Presumed resulting trusts and women
Many times, the contribution of the partner is not financial, and so the PRT does not work very well for women
The mechanism of constructive trusts would work better for them
In Stack v Dowden, it was ruled that the presumed resulting trust no longer applies in the context of a family home. Ownership will be determined on the basis of Constructive Trust principles, not the PRT
Hodgson v Marks
FACTS
Elderly widow (H) was duped by a lodger (E) to transfer her house to him on oral express trust for herself (the promise meant nothing because it was not written, thus no trust was created). E sold the land to an innocent buyer (M) who mortgaged it to a building society to finance the purchase
Mrs Hodgson lived in the house, and thus she has an overriding interest
Hodgson v Marks
LEGAL BACKGROUND
- If trust for H, it has priority over M’s estate and mortgage because H remained in occupation
- Express trust of land must be manifested and proved by writing: LPA s53(1b)
- Trusts operating by law do not need evidence by writing. If you can establish a resulting trust, you cane stablish an interest and that interest will be overriding
- Statute does not prevent evidence of fraud: Rouchefoucauld v Boustead
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Hodgson v Marks
HELD
Evans could not provide evidence that she intended to give the house to Hodgson
Russell LJ: “the evidence is clear that the transfer was not intended to operate as a gift, and, in those circumstances, I do not see why there was not a resulting trust which would not, of course, be affected by s53(1)”
The fact that you could show there was a resulting trust in her favour meant that the land stayed in her name
PURCHASE CONTRIBUTION RESULTING TRUST
A pays a third party to transfer property to B
The presumption is that B holds the property for A on RT
Content of the presumption
- Swadling: A declared express trust
- Penner/Mee: A did not intend B to take the title beneficially
- A negative presumption that assumes there was no intention to transfer the beneficial interest
- Chambers: there is no legal basis to which B can point to show that A intended B to take the title beneficially
- There is no presumption: the word presumption is a mistake and does not describe what the law is doing. The law is actually telling us that the transfer between A and B had no legal basis and therefore if B takes the beneficial interest, he will be unjustly enriched at the expense of A
Swadling’s opinion on the content of the presumption
A declared express trust for A
- Pro: historically, this is how the courts have understood the presumption
- Con: many modern cases of PRT are inexplicable
- Vinogradoff: the trustee was 4 years old. It was decided that there was a resulting trust and that the granddaughter was holding the property on trust for the grandmother, but it does not make sense for a 4-year-old to declare an express trust
- Family home cases: it does not make sense to analyse the cases as assuming express declarations. E.g. Midland Bank PLC v Cooke the parties never discussed their beneficial shares, and thus an express trust could not have been declared
- Westdeutsche v Islington: HL unanimously adopted Swadling’s view that a proof of intention that is inconsistent with A’s intention that B holds the property for A would defeat the PRT
- This presumption can be rebutted easily if the transferor did not intend to declare an express trust
Penner / Mee on the content of the presumption
A had no intention that B will take beneficially
- Responding to lack of clarity as to what the positive intention was with regards to the beneficial interest
- We only know that there was no intention to transfer the beneficial interest
- Attractive in the sense that it is appealing to the facts of the cases, because normally there is some failure on the part of A to decide what they want to do with the property
- Sometimes, it can be determined what was intended not to happen
- The presumption applies to remedy a failure on the part of the transferor/contributor to ensure her intentions are sufficiently explicit
- E.g. in Dullow v Dullow, the transferor was confused as to what the transfer of property to her sons amounted to exactly
- “A resulting trust … arises whether or not the transferor intended to retain a beneficial interest – since it responds to the absence of any intention on his part to pass a beneficial interest to the recipient” [per Lord Millet in Air Jamaica]
- This presumption can be rebutted easily if the transferor did not intend to transfer the beneficial interest
Chambers on the content of the presumption
There is no legal basis to which B can point to show that A intended B to take the title beneficially; PRT, like RT, is an unjust enrichment trust
- The presumption of RT is not really a presumption, but a rule that operates in circumstances where there is no ‘legal basis’ (such as gift or sale) that justifies a transfer. Their aim is to reverse unjust enrichment
- E.g. mistaken payment of bills
- In common law, the transferor gets a personal right to be paid back, damages
- Chambers is arguing that in equity, the transferee holds the mistaken payment on a resulting trust for the transferor; she is granted a proprietary
- Equity is changing the situation of unjust enrichment in these situations
- Whenever there is transfer of property with no legal basis, a trust arises
- Millet J in Air Jamaica can be understood to support it, if by ‘beneficial interest’ he actually meant “the right to benefit from”
- In cases of insolvency, only the beneficiaries of a trust will get their money back because they become secured creditors
- Making a claim in unjust enrichment, you are an unsecured creditor and will get close to nothing
- Problem: the payer jumps the que of creditors in case the payee goes bankrupt
- This has never been rejected or accepted
- If it was accepted this would make a big difference
The presumption of advancement
- Applies to apparent gifts from fathers to sons
- If a father or a husband transfers property gratuitously to his children of wife, the presumption is that he meant to give them a gift
- Rebuts the presumption of resulting trusts – when you transfer property gratuitously, you intend to create a trust
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Grey v Grey: “Generally and prima facie, as they say, a purchase in the name of a stranger is a trust, for want of a consideration, but a purchase in the name of a son is no trust, for the consideration is apparent”
- Extended to gifts from persons standing in loco parentis – husbands
- Australia: extended to gifts from mothers [Nelson v Nelson]
- S199 Equality Act: “the presumption of advancement is abolished”
- Not in force
Illegal transfers
- He who comes to equity must come with clean hands; if the transaction is tainted with illegality, it will not come to force
- The actual result of this rule can be highly unjust
- The party who is under a duty to produce the evidence will suffer, whereas in the large majority of the cases both parties were involved in illegality
Tinsley v Milligan
FACTS
- share in the family home was transferred to partner in order to claim undeserved benefits. Upon separation the transferee sought to evict the transferor
- Ms Tinsley v Ms Milligan were a couple and lived together and could not get married, and thus even though they had a family home it was governed by property law rather than family home.
- The couple were not very well off and decided that even though they purchased the house together, they would only register the house in Milligan’s name so that Tinsley could claim benefits
- Ordinarily, the purchase price resulting trust means that it does not matter who is registers on the title, but rather who made a financial contribution to the acquisition of the property
- Because when Tinsley paid the seller for the house that would be registered in Milligan’s name, there was a presumption that a resulting trust on her share was intended from Milligan to Tinsley
- When the couple get to court, she cannot explain that the property was registered only in the name of Milligan
Tinsley v Milligan
HELD
- The claimant is not relying on the illegality but merely on the presumption
- You only need to show that a gratuitous transfer of property handed, there is no need to explain why
- The moment you show you contributed to the purchase for someone else gratuitously, the resulting trust arises
- Even though the court knows that the illegality (if it had been exercised) would have caused injustice, because both were cooperating illegally and only one would pay the price for it, the court avoids the issue by looking at the presumption in purely technical terms
Tinsley v Milligan
PROBLEM
If the presumption of advancement applies the transferor will lose as in that case she has to explain and rely on her purpose