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Resulting Trusts Notes

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RESULTING TRUSTS A resulting trust is where the transferee holds property on trust for the transferor. A conveys to B, who holds the trust property for A. The beneficial interest results (comes back) to the transferor (or the party who provided the purchase money). NB: the metaphor of 'springing back' associated with RTs is misleading. In truth, the RT is a new interest which is created. Two main debates:
The role of intention. When does an RT arise? While an express trust gives effect to intention and CTs respond to unjust enrichment / wrongs, RTs only tell you about the structure of the trust, not the reasons.
 Whether the beneficial interest remains with the transferor, or is returned to him. Two views here: o View 1: the transferor starts with both legal and beneficial interest, the beneficial interest remains with him when he passes the legal interest to the transferee. Lord Reid in Vandervell: "the beneficial interest must belong to or be held by someone. So, if it is not to belong to the donee/trustee, then it must remain with the donor." o View 2: the transferor starts with absolute ownership, rather than a title consisting of legal and beneficial interest. Beneficial interest is then created when he tries to pass legal title to the transferee, and the RT returns the beneficial interest to him (i.e. he gains a new interest). Lord B-W in Wesdeutche and Birks take this view. Presumed and Automatic RTs When do RTs arise? The traditional approach (taken in Re Vandervell (No. 2) is that RTs fall into two categories:

1. Presumed RT: arises where the transfer is not made on any trust, but there is a rebuttable presumption of trust (i.e. when a person voluntarily transfers property for no consideration). These are dependent on the intention of the transferor.

2. Automatic RT: arises on a failure to dispose of the beneficial interest (i.e. where an express trust fails). These are imposed by operation of law, without regard to intention. The division is false for two reasons (Swadling)

1. Presumed and automatic are not opposing terms: they are each answering questions. 'presumed' tells us how the fact triggering the trust is proved in litigation (procedure), while 'automatic' tells us that the fact triggering the trust is not a declaration of trust (substance). As a matter of logic, therefore, a RT can be both presumed and automatic.

2. RTs do not fit into the overall taxonomy of trusts: if a declaration of trust is proved, then presumptive trusts are express, if not they are constrictive. Automatic RTs are constructive.

PRESUMED RTS

What is a presumption: it is a method of proof. Saying there is a presumption only tells us how the fact is proved, not what it is. Yet, it is the substance (what is presumed) that is important. An evidential presumption is the most likely inference we can draw from the evidence of the primary fact. There are two main situations in which a presumed RT arises: (i) voluntary conveyance of property to another; (ii) the purchase of property in the name of another. Voluntary conveyance of property Where property is transferred for no consideration, a rebuttable presumption arises that the transferee holds the property on RT for the transferor. E.g.
 Re Vinogradoff A gratuitously transferred shares worth £800 into the joint names of herself and her granddaughter, B. Farewell J: a presumption of RT arose from this gratuitous transfer such that the shares did not belong to B in equity, B held them on RT for A. This presumed RT arises on the basis of the transferor's presumed intention not to give away her beneficial interest to a volunteer gratuitously. This presumption can be rebutted by showing that the transferor did intend to give absolute title to the property to the transferee as a gift. Voluntary conveyances of land: The presumption of resulting trust used to apply to land in the same manner as personality, but s60(3) LPA now governs the presumption of resulting trust on voluntary conveyance of land.
 60(3): "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" o Broad interpretation: Virgo: s60(3) means that a voluntary conveyance of land takes effect as expressed, unless there's evidence of contrary intention. I.e. s.60(3) abolishes the presumed RT for voluntary conveyances of land. o Narrow interpretation: Swadling: s.60(3) is merely a word saving provision that did not alter substantive law — under the Statute of Uses 1536 it had been necessary to use the words 'unto and for the use of', but this section is simply a reminder to conveyancers that such words are no longer needed. s.60(3) does not prevent a presumed RT arising in cases of gratuitous transfer of land, it just means an RT will not arise merely because the words are absent.
 Lohia v Lohia: first instance judge adopted the broad interpretation, but Mummery LJ in the CA seemed to adopt the narrow interpretation — he did not, however, come to a clear conclusion as to which was correct. o Mummery LJ: from the language of s.60(3), it is clear that: (i) there can be no presumption of RT "merely from the absence of the words 'unto and the use of'"; (ii) nothing in the subsection "precludes the implication of a trust … [in] circumstances other than the omission of the words 'unto and to the use of'."
 Stack v Dowden suggests that there is no presumption of a RT in the family home context in cases of conveyance in joint names. Instead, the presumption is that the registered owner owns

the property - the non-owner is required to produce evidence that the parties intended differently, creating a constructive trust. Purchase Money Presumed Resulting Trust When a purchaser buys property in the name of a third party, it is presumed that the property is held on RT for the purchaser, proportionate to the purchaser's contribution to the purchase price. This applies to both land and personal property.
 Dyer v Dyer [1788] H&W purchased land in their joint names. The purchase money was provided entirely by H. Eyre CJ: "The trust of a legal estate…results to the man who advances the purchase money." Unless contrary evidence rebuts this presumption.
 Fowkes v Pascoe [1875]: A purchased an annuity in B's name. A presumption of RT arose on A's favour. NB: s.60(3) does not apply because the conveyance is not voluntary. The fact proved by the presumption Primary facts: (i) A conveys to B (voluntary conveyance); (ii) A pays C to covey to B (purchase money). We know that primary fact + secondary fact = B holds on trust for A. What is the secondary fact?

1. Declaration of trust by transferor in his own favour
 Used by Lord Nottingham in Cook v Fountain [1676]. He notes that there are two types of trust: (i) express; and (ii) constructive. Express trusts can either be declared by direct and manifest proof, or violent and necessary presumption." These 'presumptive trusts' arise when "the Court, upon consideration of all circumstances presumes there was a declaration, either by word or writing, though the plain and direct proof thereof be not extant."
  Thus the 'presumed secondary fact' is the transferor's declaration of trust.

2. Unexpressed intention to create a trust
 Different from the above, as the intention is unexpressed.
 Vandervell (No. 2): "In the first category, subject to any provisions in the instrument, the matter is one of intention, with the rebuttable presumption of a RT applying if the intention is not made manifest."
 However, this seems at odds with the operation of presumptions. Presumptions operate to draw the most likely inference from primary facts. This is not the most likely inference — people do not transfer rights without expressing intention to do so.

3. Transferor did not intend to benefit the transferee
 Birks and Chambers: "equity tends to be suspicious of gifts and often asks the recipient of an apparent gift to prove that it was intended as a gift. The failure to do so means that it will be held on trust for the apparent donor." In other words, equity is suspicious of gifts, so presumes

that there is no gift, leading to a presumption of non-beneficial transfer (a trust) in favour of transferor.
 Birks' theory was rejected in Westdeutsche [1996]: o Facts: Local Authority entered into an ultra-vires agreement with Westdeutche to bet on interest rate fluctuations. Under the agreement W had paid out money to the LA in the mistaken belief that the agreement was valid (i.e. that the LA had authority to enter into it). W sought resolution from the HL that money was held on RT (so LA would owe fiduciary duties as a trustee and W could claim compound interest). o HL (Lord B-W): no RT arose (LA just had to make restitution for unjust enrichment
— only simple interest). The fact presumed in presumed RT cases is the transferor's positive intention to create a trust, not the absence of intention to benefit the transferee. In reaching his decision, Lord B-W relied upon Swadling's statement that: "the presumption of resulting trust is rebutted by evidence of any intention inconsistent with such a trust, not only by evidence of an intention to make a gift. In other words, such trusts are based on intention."
 Inconsistent with Birks' theory: if the fact presumed were a lack of intention to benefit, then it could only be rebutted by evidence that the transferor intended to confer a benefit.
 However, Chambers argues that the lack of intention to benefit theory gains support from Air Jamaica v Charlton: o Millett (obiter): "a RT arises by operation of law, though unlike a CT it gives effect to intention. But it arises whether or not the transferor intended to retain a beneficial interest
— he almost always does not — since it responds to the absence of intention on his part to pass a beneficial interest to the recipient. It may arise even where the transferor positively wished to part with the beneficial interest, as in Vandervell v IRC." o Swadling: Air Jamaica does not really support Chambers' view. The case concerned an automatic (incomplete disposal) RT and involved an unremarkable application of Vandervell v IRC; it did not intend to say anything new about presumed RTs.
   Swadling's critique of this view: o Presumption has changed: Birks/Chambers acknowledge Lord Nottingham's presumption was initially correct, but can't point to a time when it changed. o Wrong to say that equity is suspicious of gifts: e.g. it is not suspicious of: (i) gifts of life estates; (ii) post-mortem gifts. In any case, the 'lack of intention to benefit B' is not a fact capable of being presumed — it confuses an inference of fact and an inference of law — the idea of 'not a gift' is a legal, not factual, conclusion. Finally, there is no reason this should be the fact presumed — it is "hardly the most likely inference of fact to be drawn in the absence of intention to the contrary." Rebutting the presumption of a RT: Proof by evidence that the transferee was intended to take the right outright. Can take the form of:

1. Value given in exchange;

2. Donative intention (such as in Fowkes v Pascoe, where the circumstances indicated an intention to make a gift — in that case, the annuities bought in the donee's name were found

to be a gift in light of the relationship of the parties: the donor was already providing for donee, he lived in her house etc. Proof by evidence that the transferee was to hold on trust for a third party or a purpose.
 Goodman v Gallant: H&W were joint legal owners. H left. A moved in. W&A purchased H's 50% interest (using 50/50 funds). W&A split; W claimed she owned 3/4 of the home. W's claim was rejected because the purchase documents clearly defined their respective beneficial interests
— there was no evidential gap in which the presumption could operate. o a presumption cannot trump evidence; the whole point of a presumption is that it is there in the absence of evidence. Counter-presumption of advancement In certain cases, the presumption of advancement applies. This presumes the settlor intended to make a gift to a third party. In such cases, there will not be an RT. Where does the presumption arise?
   Husband transfers to wife (but not wife to husband). Lack of reciprocity is clearly faulted
   Father and legitimate child (but not mother and child). o Shephard v Cartwright: Father put property into children's names for tax reasons. The presumption of advancement not rebutted, since F could not prove he did not intend a gift. Is it actually a presumption?
 Swadling argues there is no presumption here — there has been no change in the burden of proof. A son would not win because of the benefit of the presumption, but because the father fails to discharge the burden of proof to prove there was no gift. I.e. it's just a disapplication of the RT presumption.
 Martin v Martin: (Australia) - "it is called a presumption of advancement but it is rather the absence of any reasons for assuming that a trust arose."
 s.199 Equality Act 2010: abolishes the presumption of advancement (but will not apply to any "obligation incurred before the commencement of this section"). Note, the effect of abolishing a non-existent presumption could be to expand application of the presumption that triggers an RT. Rebutting the presumption:
The presumption can be rebutted by showing an intention that the donor did not intend to make a gift to the wife/child.
 Can the presumption of advancement be rebutted where there is evidence of illegal conduct?
o The fact that the purpose was illegal cannot usually be used as evidence that the presumption of advancement should be rebutted: Tinker v Tinker. o But, where the party has withdrawn from the transaction before the illegal purpose has taken effect, then he may rely on it as evidence that the presumption should be rebutted (Tribe v Tribe). AUTOMATIC RESULTING TRUSTS

A RT may arise on the failure of an express trust. The intended trustee of the express trust holds the property for the transferor on an express trust. This is justified on the basis that: (i) the intended Bs cannot have the benefit because the express trust has failed; (ii) the trustees were not intended to take the property absolutely. Beneficial interest is held by the settlor as a process of elimination. Hodgson is authority for the proposition that the incomplete disposal RT arises regardless of the intention of the transferor: Hodgson v Marks
 Facts: H gratuitously offered to transfer the freehold title of her house to her lodger, under an oral agreement that H would retain a beneficial interest in the property. The lodger was registered as a sole owner and sold it to M.
 CA (Russell LJ): the express trust could not take effect as intended due to the operation of s.53(1)(b) LPA (trusts of land must be made in writing). However, an RT arose in favour of C. Although s.60(3) means a presumed RT could not operate, an automatic RT could. o M argued that a RT is based on implied intention, and so where an express trust for the transferor was intended and declared, albeit ineffectively, there is no room for implication of the intention of the intention needed for a resulting trust. This is incorrect: "If an attempted express trust fails, that seems to be just the occasion for implication of a resulting trust, whether the failure be due to uncertainty, or perpetuity, or lack of form." The most notorious example of an automatic RT arose from the Vandervell litigation: Vandervell v IRC.
 Facts: V instructed his trustee (VTC) to transfer shares to the RCS, with VTC gaining the benefit of a 'buy back' option under the agreement. One issue was whether this option to repurchase the shares was held on RT for V.
 HL (Lord Wilberforce): V had granted the option to VTC to be held on trust, but the objects of that trust had not been adequately identified, so the express trust failed and V held the beneficial interest in the option under a RT. Distinguished between the presumed RT and the automatic RT:
 Presumed RT: Where A gratuitously transfers property to B, the key question is whether A intended B to take the property absolutely or on trust. If the conveyance is clear on A's intentions, the court will follow those intentions. If it is silent, there is a presumption that A did not intend to transfer the property absolutely and B holds for A on RT. This RT is rebuttable by evidence and all the facts / circumstances can be taken into account.
 Automatic RT: If A intends to give away all of his beneficial interest, but, by mistake/accident, fails to do so, either wholly/partially, then "there will, by operation of law, be a RT for him of the beneficial interest of which he has failed effectively to dispose. If the beneficial interest was in A and he fails to give it away effectively… It must remain in him".
 Here: there is "no need, or room…to invoke a presumption," rather, on the facts, the option was vested in the trustee company on trusts not defined at the time. But the court can't simply leave a beneficial interest "in the air" like this: "the consequence in law must be that it remains in the settlor."

Wilberforce's pragmatic approach: someone has to have the beneficial interest, and, given that trustees were clearly not supposed to take the shares beneficially, and V didn't make clear any intention to benefit the children's trusts, the interest must have resulted to settlor under an RT. NB: the ratio of Re Vandervell (No. 1) is unclear, but Megarry J found concluded in Vandervell (No. 2) that, in the first case, the HL decided VTC held the option on automatic RT for V. On automatic RTs, he said: o Where the transfer to B is made on trusts that "leave some or all of the beneficial interest undisposed-of," B "automatically holds on a resulting trust for A to the extent that the beneficial interest has not been carried to him or others". An RT here doesn't depend on intentions or presumptions. THE BIRKS/SWADLING DEBATE ON WHEN A RESULTING TRUST ARISES: Intention to create a trust (Swading and Lord Browne-Wilkinson): Swadling.
Presumed RTs o Argues that the presumption of a resulting trust derives from the intention to create a trust. This is an active intention to benefit, rather than the unjust enrichment view of 'no intention to benefit' (the inverse). o See above for his opposition to Birks/Chambers - considers the only reasonable conclusion is that the secondary fact is an intention to benefit (from Lord Nottingham). However, overall thinks the RT should be abolished.
Considers automatic resulting trusts as anomalous to his theory. o Lord Browne-Wilkinson considered these explainable by the operation of a presumption of intent to create a trust.
 However, this is wrong, as there is no secondary fact (presumption) at all - these are merely automatic. o Argues that Vandervell v IRC explanation of why automatic RTs arise is wrong.
 Here, the equitable and legal interest is separated, because the equitable title remains in the transferor, the transferee becomes a trustee.
 This does not have logical support and was overruled in Westdeutsche. o He attacks Birks/Chambers conclusion that such trusts could arise from unjust enrichment, particularly in relation to proprietary overkill.
 If the desired result is to remove unjust enrichment, then a personal right is sufficient
- no need to award a proprietary right.
 In fact, the result may be unfair, giving priority over other creditors. o Chase Manhattan can be considered support of this, where a CT was awarded (rather than an RT), where there was no intention to benefit.
 Under the Birks/Chambers view, an RT would have arisen.
 However, many believe that an RT should have arisen. Lord Browne-Wilkinson.

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