Resulting Trusts Notes

Resulting trusts

Resulting trust: A transfers property to B B holds that property on trust for A.

• ‘Resulting’ means ‘jumping back’ the beneficial interest ‘jumps back’ to A.

• NB: Not all trusts that follow this pattern are resulting trusts – an express trust might create the same arrangement.

ORTHODOXY: Resulting trusts arise in two types of case (Lord B-W at 708 of Westdeutsche v Islington BC, who actually rejected the labels usually assigned to each):

1. Presumed resulting trusts

   1. “Where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer.”

2. Automatic resulting trusts

   1. “Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest.”

Presumed resulting trusts

When is a resulting trust presumed?

1. Presumed resulting trusts arise where there is a gratuitous transfer of property. Either:

   1. A transfers property to B, with B giving nothing in return, OR

   2. A pays some or all of the purchase price for property which is put into B’s name

2. In both cases, B holds the property on trust for A

   1. Transfer without consideration. If A was the sole owner of the property transferred or provided all of the purchase money, A will be the sole beneficiary of the trust (Dyer v Dyer)

   2. Monetary contribution. If the property was initially co-owned or he provided only some of the purchase money, A’s beneficial interest will be proportionate to his contribution (The Venture)

3. Resulting trusts over land. The application of resulting trusts to transfers of land is unclear by virtue of s60(3) LPA 1925: “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.”

   1. On its face, this abolishes resulting trusts which would otherwise arise where A conveys his land to B gratuitously, but it would have no impact on resulting trusts arising where A pays for land which is put in B’s name

   2. That this is the effect of s60(3) was supported by Nicholas Strauss QC in the High Court in Lohia v Lohia (but not the CoA).

      1. This was in turn supported by the CoA in Ali v Khan, where the CoA held that Lohia v Lohia had established that the presumption of resulting trust had indeed been abolished in relation to conveyances of land by s60(3).

         1. BUT: This does not prevent A from proving that a trust was in fact intended, though this would likely be an express, not resulting, trust.

      2. NOT THE CASE ANY MORE – SEE National Crime Agency V DONG, above

   3. Moreover, the presumption of resulting trust has been abandoned in cases where A and B (or indeed A alone) buy land, which is to be their home and registered in their joint names (Stack v Dowden – presumption that equity follows the law joint equitable ownership). In such cases, the courts will not presume that their equitable interests will be proportionate to their contributions – the presumption will be that they are also JTs in equity, with equal equitable interests. [presumption that equity follows the law in the cohabitation context; but PRT arises in commercial context]

There are two ways to rebut this presumption of a resulting trust:

1. Intention to make a gift. If, on the balance of probabilities, there is evidence that A positively intended to make a gift of the property to B then there is no resulting trust, and B will take the property absolutely, e.g. Fowkes v Pascoe.

2. Presumption of advancement. The presumption of advancement effectively reverses the presumption of a resulting trust – equity presumes that a gratuitous transfer from A to B takes effect as a gift to B rather than as a trust for A.

   1. The presumption of advancement applies to transfer made by husband-to-wife and by fathers-to-children, but traditionally NOT to transfers made by mothers-to-children (though see now Antoni v Antoni (where the presumption of advancement was held to apply as between parent (not only father) and child) and Close Invoice v Abaowa) nor by wife-to-husband.

   2. This presumption can also be rebutted.

   3. Is it actually a presumption? Is it an accurate presumption (in term so an inference of fact based on the most likely factual scenario)?

   4. NB: Parliament has passed legislation to abolish the presumption of advancement, but it is not yet in force and it is doubtful if it ever will be. It will only act prospectively, so the current law is still important. The relevant provision is s199(1) Equality Act 2010.

3. Note: Illegality.

   1. The case of Tinsley v Milligan (OLD LAW) held that “[a] party to an illegality can recover by virtue of a legal or equitable property interest if, but only if, he can establish his title without relying on his own illegality”. Thus, D cannot rely on his illegality to rebut the presumption of resulting trust. On the facts, T would have had to rely on the illegality of the fraudulent transaction from M to T in order to rebut the presumption.

      1. BUT: The rule could operate arbitrarily, e.g. had T and M been husband and wife, the presumption of advancement would produce the opposite result. The Tinsley rule failed to engage with the key feature of cases of illegal transfers – the fact that C was engaged in unlawful conduct – instead, relying on (unreliable) presumptions and shutting out evidence of the parties’ true intentions.

         1. NB: The later case of Tribe v Tribe held that D could rely on his illegality to rebut the presumption of...

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