Resulting Trusts Flashcards
(18 cards)
What are the two categories of resulting trusts that may arise?
- Presumed Resulting Trust: When a transfer is made to another for no consideration, it is presumed (as evidence) that they intended for the other person to hold this on trust for them
- Automatic Resulting Trust: Said to arise where an express trust fails initially or subsequently. Property is held by the trustee for the settlor
Swadling would argue that the first is simply an express trust and the latter is a form of constructive trust, this category should thus be redundant
How is a resulting trust said to differ from express and constructive trusts?
Express trusts arise because of an express intention of the settlor, constructive does not generally respond to intention but arises by operation of law. A resulting trust gives effect to an intention of the settlor that has not been made express
(Orthodox View: the resulting trust reflects the presumed positive intent of the settlor retain beneficial interest)
How did Megarry J emphasise the distinction between the two kinds of resulting trusts?
Re Vandervell (No. 2)
* In the first the matter is one of intention, with the rebuttable presumption of a resulting trust applying if intention is not manifest
* In the second it takes effect by operation of law, and so appears to be automatic. What a person fails to effectively dispose of stays vested in him and no question of mere presumption can arise
What is the presumption in cases of voluntary conveyance?
Where property is transferred for no consideration, a rebuttable presumption arises that the transferee holds it on trust for the transferor
* Re Vinogradoff: V gratuitously transferred shares into the joint name of her and her granddaughter. On her death, it was held the granddaughter held the shares on resulting trust for the grandmother’s estate.
How is the presumption of resulting trusts governed in cases of land?
s60(3) Law of Property Act 1925
Any presumption of resulting trust shall not be implied merely because the property is not expressed to be conveyed for the use or benefit of the grantee
* Lohia v Lohia: not necessary to use any additional words to make the section effective, the section abolishes presumption of resulting trust in land
* HOWEVER, NCA v Dong: doubted whether the section and drafting had such an effect, chose to argue presumption remains
More preferable approach is to say the section removes the PRESUMPTION, but one can still arise if the grantor proves a trust was intended
How is the presumption of resulting trust dealt with in purchase-money cases?
Dyer v Dyer: The trust of a legal estate, regardless of the name or names given, results to the person who advanced the purchase money
* NOTE, now in the domestic context where one party contributes money for the purchase of a property in the sole name of another, the court will prefer analysis of a common intention constructive trust
The Venture: Presumed that where A advances money to fund the purchase of property by B, A holds a proportional beneficial share in the property and proceeds from future sale, unless a contrary intention is shown
What development in the law has reduced the incidences of the purchase money resulting trust?
Common Intention Constructive Trust
* Stack v Dowden: Presumption of advancement has become much weakened in the law
* Jones v Kernott: In cases of an unmarried couple purchasing property in unequal shares there is no presumption of resulting trust
What is the presumption of advancement?
- Bennet v Bennet: In the case of transfer from a man to his wife, children or others to whom he stands in loco parentis with, in the absence of the contrary, a purchase or investment is held to be itself evidence of a gift
- Petitt v Petitt: Lord Reid critized the assumption, said it must have either been based on an idea of husbands intending to make gifts so commonly or wives being economically dependent on husbands, and that this surely must have now diminished
How has the presumption of advancement been pushed back against?
- Argued as discriminatory, only applies to husbands making a transfer to their wifes. In the opposite, a resulting trust would arise
- Is this presumption needed? Seems that in both cases burden of proof would be on A (the donor) to show that they intended a gift or trust. Should only need presumption of resulting trust
- S199 Equality Act 2010 sought to abolish the presumption, however this is not yet in force and looks unlikely to be so soon
How can the presumption of a resulting trust be rebutted?
The presumption of resulting trust (and advancement) can be displaced by sufficient evidence to the contrary
* Fowkes v Pascoe: Court must look into actual facts of the case. The fact that Mrs Baker was purchasing shares in the joint name of herself and Mr Pascoe was a gift based on the fact she was wealthy, he lived with her and she provided for him financially
* Shephard v Cartwright
How does illegality impact the rebuttal of the presumption?
A person should not be able to rely on evidence of their own illegal conduct, however this rule has become less strict over time
* Tinsley v Miligan: A party to illegality can recover by virtue of a legal or equitable property interest if he can establish title without relying on his own illegality. HOWEVER, in cases where the presumption of advancement applies, they cannot claim under a resulting trust until they have rebutted the presumption of a gift
* Patel v Mirza: In assessing whether a person can rely on illegality, must look at the underlying purpose of the prohibition broken, any relevant policy on which denial of the claim may have an impact and whether denial would be a proportionate response to the crime
What has been the basis for presumed resulting trusts in the law?
A essentially declared a trust for himself (an express trust)
* This comes from feudal times in which presumption of resulting trust was done as a way to circumvent forfeiture, the practice became so common the courts simply presumed it into declarations (Bosanac v Commissioner of Taxation)
Theories that say A did not intend to benefit B (i.e. constructive trust) have been rejected:
* Birks thinks equity approaches gifts with suspicion, there is a presumption of non-beneficial transfer
* Theory rejected in Westdeutsche: the presumption of resulting trust is rebutted by evidence of any intention inconsistent with such a trust, not only evidence to make a gift
* Does not make sense for mistaken payments, they did intend a benefit
* Inconsistent with cases like Re Vinogradoff
In what ways can an automatic resulting trust arise?
- Transfer on trust which fails for uncertainty of objects, e.g. IRC v Broadway Cottages
- Transfer which fails for want of objects, e.g. Vandervell v IRC
- Transfer which fails as offending rule against private purpose trusts
What is the effect of Hodgson v Marks?
- Where an express trust fails due to lack of writing under s53 LPA 1925, a resulting trust will arise
- If an attempted express trust fails, there will be a resulting trust whether the failure is due to uncertainty, perpetuity or lack of form
How have the courts typically found automatic resulting trusts to be found?
Idea of retaining the beneficial interest:
* Vandervell v IRC: Beneficial interest cannot remain in the air, it must remain in the settlor
* Vandervell (No2), Meggary J: It is the automatic consequence of A’s failure to dispose what is vested in him, it carries back the beneficial interest
* Air Jamaica v Charlton: RT arises by operation of law and gives effect to intention but arises whether or not transferor intended to retain beneficial interest
What are the problems with the approach of the law
Cannot speak of their being retention, how can a person have legal and equitable interest in their own property?
* Westdeutsche: Legal title carries all the rights, unless there is a separation there is no equitable title, trust would have to be created
* SWADLING: Theory based on equitable retention does not work as the settlor has no equitable interest. There is no such thing as a split, must think of it more as a grafting (obiter support in Akers v Samba)
How does Mee argue the automatic resulting trust works? What are the problems with this?
MEE: The original trust does not truly fail. If the beneficiaries are not truly specified this just gives way to a resulting trust instead, the settlor intended to make the recipient a trustee
Westdeutsche: Disagreed with Vandervell No 2 that ART does not depend on intention, suggesting an unexpressed intention. Both trusts give effect to the common intention of the parties
* Jones defeats Mee’s theory by historical analysis, treating trusts and uses as the same is not right given the latter could be retained whereas trusts have duties to prevent this
* Idea of unexpressed intention is illogical when the trust failed in the first place due to uncertainty
* An unexpressed intention is not enough to create a trust, this would have to be imputed and we cannot do this based on hindsight (Gissing v Gissing)
How do Birks and Chambers argue that automatic resulting trusts should be understood? What are the problems with this?
BIRKS / CHAMBERS: In an ART the transferor proves by evidence that he did not intend to benefit the transferee and proof of no intention generates a trust
* No intention to benefit is a conclusion, not a fact. It is not capable of proof and is simply construction of the court
* Even if it were a fact it does not explain why the law should respond by raising a trust, cases of unjust enrichment do not entail situations of no intent to benefit, could simply just use unjust enrichment
* The argument was rejected on the resulting trust side
