Resulting trusts

Question 1

Types of resulting trusts

Answer 1

Westdeutsche

a) Presumed (apparent gift)
b) Automatic (failing trust)

Question 2

Definition of resulting trusts

Answer 2

Does not arise because of a successful exercise of power to set up a trust, so not express trust

Intention may be relevant - debate

Question 3

Beneficiaries of resulting trusts

Answer 3

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

Question 4

Presumed / apparent gift resulting trusts

Answer 4

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

Question 5

Presumption 1: voluntary conveyances of land/gratuitous transfers of land

Answer 5

In the absence of evidence of intention to the contrary, equity presumes that property is held on trust for the claimant

Question 6

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’

Answer 6

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

Question 7

Presumption 2: shared homes

Answer 7

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

Question 8

Presumption of advancement (works the other way)

Answer 8

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)

Question 9

Principles of identifying beneficial interest from gratuitous transfer of property

Answer 9

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

Question 10

Automatic / failing trusts

Answer 10

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)

Question 11

Justifications for resulting trusts - 1 v 2 explanations

Answer 11

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)

Question 12

Underlying debate: intention-based versus unjust enrichment-based

Answer 12

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

Question 13

Alternative rationale

Answer 13

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

Question 14

Role of resulting trusts in illegality

Answer 14

May temper harshness of illegality defence

Question 15

Tinsley v Milligan rule

Answer 15

Reliance based – if relied on illegality to attain interest in the property

Question 16

Tribe v Tribe

Answer 16

Locus poenitentiae applied, illegality defence does not work

Question 17

Criticism of the role of illegality resulting trust

Answer 17

• 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

Question 18

Patel v Mirza

Answer 18

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

Question 19

Implications of Patel v Mirza

Answer 19

• 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)

Question 20

Background of Patel v Mirza

Answer 20

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