1. Resulting trusts

Virgo ch.8

General Considerations

• Nature of resulting trusts

  • Definition: property transferred to D and a recognized trigger occurs at time of transfer or subsequently, so the property is then held by D for C

  • Beneficial interest returns to person who transferred the property

  • Significant because beneficiary can claim even if trustee wasn’t aware of existence of the trust and passed property onto third party, and if insolvent beneficiary’s claim is greater than creditors’

• Categories

  • Presumed resulting trust – where C transfers property to D and doesn’t receive any consideration for the transfer, a presumption of resulting trust for C arises

  • Automatic resulting trust – where property transferred to D to be held on express trust that fails

  • Others – more controversially courts have recognized resulting trusts in property transferred pursuant to rescinded contracts, and for a failed purpose

Significance of Intention

• Westdeutsche: founded distinction between presumed and automatic RTs, and Lord Browne-Wilkinson said that both types re trusts giving effect to the common intention of the parties and the presumed intention of the trustee

• Transferer’s intention that trustee hold property on trust for transferer established in five ways:

  • Express intention

  • Inferred intention: inferred with regards to all the circumstances of the case and can be deduced from evidence

    • Re Vandervell’s Trusts (II): Megarry J – existence of some unexpressed intention is not enough; there must be some expression of that intention

  • Imputed intention: what transferer would have intended had he thought about the consequences of the transfer (eg. that it might fail). No need for this to be actual intention.

    • Jones v Kernott: there is a conceptual difference between inference and imputation but practical difference is slight

  • Presumed Intention: like an imputed intention but rebuttable, presumed because it reflects common experience and judicial consensus. Proof of a particular type of transfer (eg. voluntary transfer) sufficient for presumed intention.

    • NB probably the best theory

  • Absence of intention that the recipient benefit from receipt

    • Air Jamaica v Charlton: Lord Millett – Resulting trusts arise whether or not transferer intended to retain a beneficial interest; it “responds to the absence of any intention on his part to pass a beneficial interest to the recipient”

    • Twinsectra v Yardley: Per Potter LJ – express trusts are fundamentally dependent on intention of parties, but role of intention in resulting trusts is negative (lack of intention to benefit recipient)

      • NB absence of intention theory inconsistent with Lord Browne-Wilkinson and Goff’s analysis in Westdeutsche and Air Jamaica is a PC case while Potter LJ’s dictum is in the CoA (Millett in HL in same case referred to absence of intent theory but no other Lord did)

Presumed Resulting Trusts

• Justification: equity presumes that people don’t act altruistically

  • Easily rebutted by Te proving that he was intended to benefit (eg. proving intention of absolute gift), an intention that is automatically assumed where the relationship between Tr and Te is such that Tr bears responsibility over Te (presumption of advancement)

  • Tr can rebut this by proving that no gift was intended

  • Effect: allocation of proof

• Effect of voluntary transfer of property depends on type of property

  • Land: no presumption of resulting trust per S60(3) LPA 1925 depending on the interpretation (some interpret it as a reminder to conveyancers but doesn’t apply to transfers from Tr to Te

  • Personalty (shares, money): can lead to a resulting trust – three principles

1. C asserts intention that D take property beneficially: no trust and presumption is not engaged

2. C doesn’t assert: presumed resulting trust unless relationship triggers presumption of advancement

3. Where presumption is engaged, D can rebut by adducing evidence that C intended D to take property beneficially

   1. Arcos v Coutts and Co: applied the three principles and acknowledged that presumption is easily rebutted. A father had allowed his children to withdraw money from his bank account but following argument withdrew all the money and put it in a joint account with his nephew. When father died children argued that the money had been on presumed resulting trust because nephew didn’t provide consideration but nephew was able to rebut it relying on the mandate form expressing an intention to confer beneficial interest

   2. Re Vinogradoff: Grandmother who transferred money into her own name and that of her granddaughter (4yo) held not to have rebutted presumption. Case difficult to defend because even if presumption applied she should be able to defend it on her youth (grandmother couldn’t have intended granddaughter to hold property on trust for her)

• Purchases in the name of C raises presumption of resulting trust for C; where C contributed to purchase in D’s name property presumed to be held on resulting trust for C in shares proportional to contribution

  • Sometimes difficult to rebut (eg. investing in name of solicitor) but sometimes relationships insufficient to establish presumption of advancement will be enough to suggest gift more likely intended

    • Fowkes v Pascoe: Mother purchased annuities in joint name of herself and daughter-in-law’s son. Presumption rebutted by fact that she was wealthy, he lived in her house and she provided for him financially

• Presumption of advancement: if Tr is husband, fiancé, father or person standing in loco parentis of recipient, a gift is presumed (but not when wife purchases for husband or mother for child)

  • Increasingly difficult to justify in general application and gender discrimination

  • Abolished by S199 Equality Act 2010 (provision not yet in force)

  • Can only be rebutted by declarations before, during or immediately after transfer, or acts (declarations after transfer can still be used but only against interests of the person making the...

Buy the full version of these notes or essay plans and more in our Trusts and Equity Notes.