Presumed Resulting Trusts and the Presumption of Advancement Flashcards
(9 cards)
what are presumed resulting trusts
‘Resulting’ Trust: when trust property ‘results’ – ie jumps back, or jumps up – to the settlor - never acc left settlor
Occur when property is transferred without evidence of an intention to make a gift. - settlor doesn’t intend to take beneficially they intend to remain beneficial title themselves
maxims:
Equity abhors a vacuum – Beneficial ownership cannot remain uncertain; courts will presume a trust where ownership is ambiguous
Equity looks to intent rather than form
He who seeks equity must do equity – A claimant who seeks equitable relief must themselves act equitably and fulfil their own obligations - must come into equity with clean hands , if committed some kind of unconscionable act then cannot rely on remedy
When Do They Arise?
Voluntary Transfers: When A transfers property to B with no express declaration of trust or consideration, and the court presumes that a gift was not intended e.g. lending object but decides to keep it - on surface looks like valid gift but no consideration, no contract no written agreement only remedy = resulting trust if evidence didnt intend to gift object
Purchase Money Trusts: When A provides purchase funds for property held in B’s name without the intention of making a gift, giving rise to a presumed trust in A’s favour - e.g. A buys new car and registered in their name but puts car in B’s name so he can use it (legal title transferred) but B cannto claim it absolutely as A still holds beneficial title
Prevents unintended loss of beneficial ownership.
Ensures that formal legal title does not override presumed beneficial ownership intentions.
Recognised by courts as a mechanism to resolve ambiguities in property ownership.
Protects contributors who have made financial contributions towards property but do not hold legal title.
Avoids situations where legal title holders might seek to claim absolute ownership unconscionably/unjustly.
Presumed Resulting Trusts and the Presumption of Advancement
Presumed Resulting Trusts and their Operation
When a person transfers property to another without consideration and without clear evidence of a gift, Equity presumes that the transferee holds the property on trust for the transferor.
This presumption is particularly relevant in situations where a person pays for property but registers it in another’s name – e.g. A buys a house but registers it in B’s name. The transferee must provide evidence to rebut the presumption by demonstrating that a gift was intended.
presumption of advancement exception
applies where equity assumed transferor intended to make a gift rather than beneficial ownership- e.g. father to child/husband to wife - now not just men
Westdeutsche Landesbank case
West Deutsche Landesbank (the Bank) entered into an interest rate swap agreement with Islington London Borough Council. The agreement was later declared void as the council did not have the authority to enter into such an agreement. (Hazell case) The Bank sought to recover the money it had paid to the council under the agreement
House of Lords held that the Bank could recover the money as it was held on a constructive trust for the Bank by the council. The council had received the money in good faith, but once the agreement was declared void, it was unjust for the council to retain the money
council were not aware their contract would be declared void retrospectively so in keeping the compound interest how could they have been deemed to commit an unconscionable act - council themselves did not commit an unconscionable act so havent unjustly enriched themselves so remedy of restitution can return compound interest to WD bank
No resulting trust arose because at the time of payment, the council did not have knowledge that the contract was void.
For a resulting trust to arise, conscience must be affected — i.e., the recipient must know that they are not entitled to the benefit.
One person voluntarily transfers property to another, or contributes to the purchase price, without an intention to gift — so the law presumes a trust unless there’s evidence to the contrary.
The Bank made payments to Islington Council under an interest rate swap agreement.
Later, in the Hazell case, it was ruled that local councils had no legal power to make such agreements — so the contract was void from the beginning.
The Bank wanted its money back.
What the House of Lords Decided:
The council received the money in good faith, not knowing the deal was invalid.
Because of that, no resulting trust arose — the council didn’t know they weren’t entitled to the money, so their conscience wasn’t affected.
A trust only arises when the recipient knows they’re not meant to keep the money.
Even though the council didn’t act wrongly or unfairly, it would still be unjust to let them keep the Bank’s money after the contract was ruled void.
So, the Bank could recover the money through restitution (a legal way of getting back money paid by mistake or under a void contract).
The Bank was also entitled to compound interest as part of its financial loss.
In short:
No trust arose because the council didn’t know the contract was void when they received the money.
But restitution was allowed — the council had to repay the money (plus interest), even if they hadn’t done anything wrong.
S 60(3) Law of Property Act 1925, PRTs in land and Prest v Petrodel Resources
S 60(3) LPA 1925 - when transferring land conveyance must be in writing, properties transferred to second person and no express declaration made then second person will take land absolutely, no auto presumption that land held on trust by A for B
Prest case:
Mr and Mrs had began divorce proceedings - mr = wealthy oil trader and sole owner of number of companies, transferred most his wealth inc 7 residential properties to various companies inc petrodel
Mrs sought divorce settlement and high court wanted to pierce corporate veil and have full disclosure of companies financial position (he refused) and made a transfer order for them to be inc in Mrs ancillary relief
CoA - overturned - high court acted beyond jurisdiction - shouldnt pierce corporate veil unless there was evasion or fraud
SC - CoA correct but the circumstance 7 properties had been vested in companies (so he didnt need to inc them in relief) combined with his refusal to comply, presumed properties were held on resulting trust for benefit of Mr
beneficial title remained with Mr not companies so deemed part of personal estate and included in divorce settlement
Rebutting the Presumption of a Resulting Trust
The presumption of resulting trust can be displaced by clear evidence that a gift was intended
Fowkes v Pascoe - wealthy woman purchased annuities in her name and son of her daughter in law - court found sufficient ev she intended a gift rather than a trust - she was richer, already living with her and providing for him financially
Presumption of Advancement: - lack of clear ev - courts rely on presumptions - Applies to transfers in specific familial relationships and serves as a counter-presumption against resulting trusts
Can be rebutted by evidence that the transferor intended to retain an interest in the property
The Presumption of Advancement
A legal presumption that in specific relationships a transfer is intended as a gift.
Historically applied to fathers and husbands as they were primary financial providers and property owners
Bennett v Bennett - Established that fathers are presumed to be making a gift when transferring property to their children - father passed and wife and son left to pay his debts, son inhereted estate and wife took a loan and transferred to son to help pay debts off - was loan money once debt paid off intended as a gift for son to use money and then if there was some left to keep it or on PRT - no overwhelming ev so court had to presume whether prop will be transferred and excess will bounce back to mothers estate or outright gift - if father then it would have been seen as a gift - but since it was his mother presumption of advancement = rejected and money on PRT
Re Eykyn’s Trusts [1877]: Held that a husband’s transfer to his wife is presumed to be a gift. The law assumed financial dependency of wives on their husbands.
does not apply to mother to child (bennett v bennett) and wife to husband (Abrahams case)
Relationships where the Presumption of Advancement has not applied and recent case law
grandmother to granddaughter - Re Vinogradoff - does not apply
Antoni v Antoni [2007] (Lord Scott):
‘when a parent places assets in the name of a child and assumes that the parent intends to make a gift to the child.’ - more gender neutral language
Close Invoice Finance Ltd v Abaowa - both mothers and fathers = presumed equally to want to provide financial provision for children
Legislative Reform – s 199 Equality Act 2010
Section 199:
* Proposes abolition of the presumption of advancement.
* Aims to remove alleged gender biases in historic property law doctrine, and to reflect modern financial independence between spouses.
- Not yet in force:
- The provision has not yet been implemented. - can still rely on presumption of advancement
- Potential Impact:
- If enacted, courts would rely more on actual evidence rather than legal presumptions.
- It would provide arguably greater legal clarity for financial disputes between family members, but at what cost?
- If enacted, s 199 would abolish the presumption altogether. Might it be better to legislate for the expansion of the presumption across both sexes, so that the ongoing developments in the case law are written into statute?
