RESULTING TRUSTS

Question 1

AUTOMATIC RESULTING TRUSTS

Answer 1

Trusts that arise in response to a failure to create a trust (the intention did not work as the settlor intended)

Question 2

PRESUMED RESULTING TRUST

Answer 2

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

Question 3

RESULTING TRUST

Answer 3

• 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

Question 4

RETENTION THEORY

Answer 4

• 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

Question 5

VOLUNTARY TRANSFER REULTING TRUST

Answer 5

• 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

Question 6

VOLUNTARY TRANSFER OF RIGHTS IN LAND

Answer 6

• 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

Question 7

Presumed resulting trust as a way of allowing a more just allocation of property

Answer 7

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

Question 8

Presumed resulting trusts and women

Answer 8

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

Question 9

Hodgson v Marks

FACTS

Answer 9

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

Question 10

Hodgson v Marks

LEGAL BACKGROUND

Answer 10

• 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
  *

Question 11

Hodgson v Marks

HELD

Answer 11

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

Question 12

PURCHASE CONTRIBUTION RESULTING TRUST

Answer 12

A pays a third party to transfer property to B

The presumption is that B holds the property for A on RT

Question 13

Content of the presumption

Answer 13

• 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

Question 14

Swadling’s opinion on the content of the presumption

Answer 14

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

Question 15

Penner / Mee on the content of the presumption

Answer 15

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

Question 16

Chambers on the content of the presumption

Answer 16

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

Question 17

The presumption of advancement

Answer 17

• 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
• 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

Question 18

Illegal transfers

Answer 18

• 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

Question 19

Tinsley v Milligan

FACTS

Answer 19

• 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

Question 20

Tinsley v Milligan

HELD

Answer 20

• 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

Question 21

Tinsley v Milligan

PROBLEM

Answer 21

If the presumption of advancement applies the transferor will lose as in that case she has to explain and rely on her purpose

Question 22

Tribe v Tribe

FACTS

Answer 22

A father transferred company shares to his son (presumption of advancement) to preserve them for the family’s benefit because he could be soon liable for dilapidations under commercial leases. It turned out he was not liable. The son refused to re-transfer shares.

Question 23

Tribe v Tribe

HELD

Answer 23

The Court of Appeal held that the father could demand return of the shares, because his illegal scheme had not in fact been carried into effect. Millett LJ said it was true that an illegal purpose cannot rebut the presumption of advancement, but because the illegal purpose had not been carried out, the father was not precluded of pleading the purpose to claim a resulting trust.

They held that he repented and did not cheat (even though it was just that he could not carry out the illegality)

Question 24

Quistclose trusts

Answer 24

Operates within circumstances in bankruptcy

Can be understood as a resulting trust

Question 25

Automatic Resulting Trust

Answer 25

• There is a transfer, but the beneficiary interest remains with the transferor and does not go to the transferee
• Arise when there is a failure to create an express trust
  
  • There is no question that the intention of the settlor was to create a trust, only that they failed in materialising the intention
  • The failure to be clear about the intention leads to the beneficiary interest staying with the settlor
• In Re Vandervell (No 2): “the resulting trust … is the automatic consequence of A’s failure to dispose of what is vested in him”
  
  • We know that B is a trustee, only the identity of the beneficiary needs to be proved
  • The beneficiary interest was retained in the settlor

Question 26

Westdeutsche

FACTS

Answer 26

The bank sued the local authority for the return of over £1million that it had paid under an interest swap agreement with the council. Such agreements had been declared by the HoL to be ultra vires and void

The bank had a deal with Islington LBC. The terms of the agreement were void because local authorities could not be involved in these kinds of agreements

This means that the legal basis of the transaction collapses

Question 27

Westdeutsche

DISPUTE

Answer 27

what sort of interest is to be paid, simple (common law) or compounded (equity

Question 28

Westdeutsche

MAJORITY RULING

Answer 28

There is no automatic resulting trust because the transferor intended the transferee to become the absolute owner. The bank could only recover its money with simple interest as it only had a personal claim

This was an ordinary unjust enrichment claim because the bank intended the local authority to become owner of the money, that was the point of the deal. The fact that it became known that the deal had no legal basis was beside the point

Question 29

Is the settlor’s intention relevant to ARTs?

Answer 29

• Megarry J in Vandervell No 2: no
• Lord Browne-Wilkinson in Westdeutsche: yes. “If the settlor has expressly, or by necessary implication, abandoned any beneficial interest … the undisposed of equitable interest vests in the crown as bona vacantia”
  
  • In most cases of failure to establish express trust the court asks whether a trust was intended, and finds that it was indeed intended
  • In some, rare, cases the settlor intends to abandon the equitable interest even when she did not express this intention in the trust. The court will nevertheless respect it and no RT will arise

Question 30

Vandervell v IRC 1

FACTS

Answer 30

V directs T to convey shares to RCS, with an option for VT to buy the shares back. Has V divested himself of beneficial interest?

Question 31

Vandervell v IRC 1

HELD

Answer 31

V retained the beneficial interests in the shares

An oral direction to a bare trustee to transfer the trust property to a third party absolutely is valid

Possible rationale: the trustees must be involved in the transaction so no risk arises for which you need writing. And, the transaction also brought the trust to an end, so, again, no risk for which you need writing

Question 32

Vandervell 2

Answer 32

CA: the RT for V terminated one the option was exercised. The trust for the children (created by V following the ART for him) is valid. As it is not a disposition of V’s subsisting equitable interest. Hence, no RT for V

Rationale: it was inevitable that T will be involved in transaction – no risk of being confused as to who duties are owed

Question 33

Traditional Justification for ARTs

Answer 33

What the settlor fails to give away, she gets to keep

Problem: this does not really represent what is going on. At the start A has legal title, at the end, A has equitable title, so what do they ‘keep’?

Possible answer: this is overly technical. The retention explanation captures the centuries long perception

Question 34

Other justification for ARTs

Answer 34

ARTs reverse unjust enrichment

Problem: the explanation is circular. If A gets a different interest, this is not restitution. If it is different, we are back with the traditional explanation

Question 35

William Swadling
Explaining resulting trusts

Answer 35

The presumption of law, where proof by evidence of one fact generates a proof of a second fact without the need for evidence is the only true presumption

Voluntary conveyance and purchase money resulting trusts arise because of the operation of a true presumption (the fact proved by presumption being that the transferor declared a trust in their own favour)

Question 36

Swadling

Misunderstandings of Birk and Chambers on the fact that presumed means that the transfror did not intend to benefit the transferee

Answer 36

Gratuitous transfers outside the relationships of advancement are not ‘apparent gifts,’ only ambiguous transfers

Suspicions are not the same thing as presumptions

Equity is not suspicious of gifts

It is not possible for equity to presume that apparent gifts are not gifts, for not-gift is at best a legal conclusion from proved fats, not a fact itself

A presumption of not-gift cannot be a presumption of non-beneficial transfer or the law does not recognise a notion of non-beneficial transfer distinct from transfers on declared trusts or as security

No satisfactory explanation was given as to why, assuming there is such a thing as a non-beneficial transfer, the law should respond to its proof by the raising of a trust for the transferor

Question 37

Swadling

Vandervell

Answer 37

Though Lord Browne-Wilkinson said the resulting trust arose because of the operation of a presumption, Lord Upjohn and Wilberforce in Vandervell showed that this was not so

There is no room for a presumption where all the facts have been proved by evidence, and in the case of a failed trust resulting trust there is no fact left outstanding

Question 38

Swadling

Categories of resulting trusts

Answer 38

Voluntary conveyance resulting trust – where a presumption arises which, unless rebutted, causes B to hold the rights conveyed on trust for A

Purchase money resulting trust – where a presumption arises which, unless rebutted, causes B to hold the rights so conveyed on trust for A, either in whole or in part

Failed trust resulting trust – where A conveyed rights to B either inter vivos or post mortem to hold on declared trusts which are void because they lack objects, offend the rule against perpetuities or both

Question 39

Swadling

False presumptions

Answer 39

Presumptions which involve no issue or proof, or, when they do, no question relating to proof of a secondary fact on proof by evidence of a primary fact

• Presumptions indicating the location of the burden of proof
• Presumptions describing rules of substantive law
• Presumptions of fact
  
  • Describe a rule providing that upon proof by evidence of one fact, a tribunal of fact ay find a second fact proved in the absence of sufficient evidence to the contrary
• Presumptions as rules of construction

Question 40

Swadling

Presumptions dispositive of the result

Answer 40

Mellish LJ in Fowkes v Pascoe: where the presumption is described as a rule of law which must prevail even though “the court might not believe that the fact was in accordance with the presumption”

Question 41

Swadling

Presumption ebutted by contrary evidence

Answer 41

Eyre C.B in Dyer v Dyer: “it is the established doctrine of a court of equity that this resulting trust may be rebutted by circumstances in evidence”

If there is evidence to rebut the presumption, the Court must go into the actual facts [Mellish LJ in Fowkes v Pascoe]

Question 42

Swadling

Presumption cannot be resorted to where there is no gap in the evidence

Answer 42

There is no room to invoke a presumption where the words accompanying the transfer were proved by evidence [Goodman v Gallant]

Question 43

Swadling

What is the fact proved by presumption in a presumed resulting trust?

Answer 43

There must be at least some expression of that intention to create a trust before it can affect any result [Megarry J in Re Vandervell’s Trust (No2)]

Question 44

Swadling

Has the presumption changed?

Answer 44

• “Resulting trusts are grounded in the settlor’s intent as are express trusts … the intent is inferred, or is presumed as a matter of law from the circumstances of the case” [Dickson J in Rathwell v Rathwell]
• The content of the presumption is the declaration of a trust
• The presumption of a resulting trust “is rebutted by evidence of any intention inconsistent with such a trust, not only be evidence of an intention to make a gift” [Lord Browne-Wilkinson in Westdeutsche v Islington LBC]
• A failed trust resulting trust arises by operation of law. Proof by evidence of a contrary intention is irrelevant

Question 45

Swadling

False propositions

Answer 45

Gratuitous transfers outside the range of advancement are ‘apparent gifts’

Equity is suspicious of gifts

Equity presumes that apparent gifts are not gifts

The presumption of a not-gift is a presumption of a non-beneficial transfer

A presumption of a non-beneficial transfer triggers a trust in favour of the transferor

Question 46

Swadling

Gratuitous transfers outside the range of advancement are ‘apparent gifts’

Answer 46

In cases where the presumption applies, the facts proved by evidence are equivocal

It is not correct to describe gratuitous transfers outside the range of advancement as ‘apparent gifts’ because the evidential gap is closed by the court finding that the transferor declared a trust in his own favour

Question 47

Swadling

Equity is suspicious of gifts

Answer 47

• It is wrong to couch the presumption in terms of a suspicion because doing so makes us leave the realm of presumptions
• The presumption of undue influence only arises where there is proof by evidence that the donor reposed trust and confidence in the donee
• The presumption is not confined to gifts
• The presumption applies to the grant of lesser interests, which is never the case with presumed resulting trusts
• It is not restricted to transfers outside the relationship of advancement
• Proof by evidence of words of gift does not prevent the presumption arising

Question 48

Swadling

Equity presumes that apparent gifts are not gifts

Answer 48

Even if it could be said of the respective claimants that they had no intention to benefit the defendants, this is a legal inference from the facts proved by evidence, not the proof of an additional fact through the operation of a presumption

Question 49

Swadling

The presumption of a not-gift is a presumption of a non-beneficial transfer

Answer 49

• Beneficial cannot be contrasted with legal or equitable because those terms describe two different jurisdictions which make up the common law
• An equitable interest under a trust is not the same thing as a beneficial interest; the phrase beneficial interest can cover both legal and equitable interests
• No resulting trust arises in the case of a transfer proved by evidence to have been made for valuable consideration. Benefit cannot be equated with a gift
• An intention not to benefit a person is equated with an intention to vest in them rights not to be held outright. It is however difficult to see how the typical unjust enrichment scenario can be said to involve a non-beneficial transfer where non-beneficial means not outright
• Even if the law recognised the notion of a non-beneficial transfer distinctly from a transfer on trust, it is difficult to see how the fact of such transfer can form the subject of the presumption triggered by proof of evidence of a gratuitous transfer

Question 50

Swadling

A presumption of a non-beneficial transfer triggers a trust in favour of the transferor

Answer 50

“Because the beneficial interest has not been completely disposed of and the trustees were not intended to enjoy the benefit of the legal ownership for themselves, the resulting trust arises”

The above explanation only works if a beneficial interest was a thing separate from a legal interest, which it is not. If there is no interest, its disposal cannot be considered incomplete

Question 51

Swadling

Lord Browne-Wilkinson on failed trust resulting trusts

Answer 51

• A transfer accompanied by a declaration of trust which fails to declare effective trusts generates a resulting trust in favour of the transferor
• Lord Browne Wilkinson said that “a resulting trust is not imposed by law against the intentions of the trustee but gives effect to his presumed intention”
  
  • While it is true that the language of presumption can be found in some of the failed trust resulting trust cases, it is not a true presumption at all
• There can be no facts capable of rebutting the presumption, and an irrebuttable presumption is not a presumption at all

Question 52

Swadling

Vandervell v IRC

Answer 52

• Because no words of trust were expressed in the grant to the trustee company, it was not immediately obvious how it took the option, especially when it was known that its objects went beyond merely acting as a trustee
• An explanation of the failed trust resulting trust in terms of a presumption of intent does not work
  
  • Despite Lord Browne-Wilkinson’s obiter comments in Westdeutsche, the failed trust resulting trust, both as a matter of logic and of authority, arises for a reason having nothing to do with proof by presumption
• The failed trust resulting trust does not arise of its own volition, but because courts say it does

Question 53

Swadling

Chambers + Why do failed trusts resulting trusts arise?

Answer 53

• Presumptions, like evidence, are methods of proof
• It is impossible to say that the trust arises because of proof of transfer with ‘no intention to benefit’ for such a transfer is something unknown to English law. There are transfers which cause transferees to hold outright, on trust, or by way of security
• The phrase ‘transfer with no intention to benefit’ does not describe a fact and is therefore not susceptible of proof, by evidence or presumption
  
  • Transfer with no intention to benefit, like legitimacy and resulting trust, is a legal conclusion from proved facts
• Even if transfer with no intention to benefit was a fact susceptible to proof, there is no compelling reason why the law should respond to its proof by raising a trust