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Summary Resulting Trusts
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A detailed analysis of the case law concerning resulting trusts.
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EQUITY SUPERVISION VIIIRESULTING TRUSTS
1. TRADITIONAL ANALYSIS
- Definition: A resulting trust arises where property has been transferred to the defendant and a recognised
trigger for the trust occurs, which might arise at the time of transfer or subsequently, so that property is
then held by the defendant on trust for the claimant.
- It is an essential feature of a resulting trust that an interest has been transferred to the defendant or
created for the defendant.
- The recognition of a resulting trust can be significant for the beneficiary because it means that the trustee
will be personally liable to the beneficiary for breach of trust e.g. where trust property is transferred to a
third party.
- The orthodox view of resulting trusts is that they are of limited significance and operate only within two
recognised categories.
a. Presumed resulting trusts
- Where the claimant transfers property to the defendant or purchases property that is vested in the
defendant’s name alone or in joint names, and the claimant does not receive any consideration for this
transaction from the defendant (who is consequently a volunteer), it will be presumed that the defendant
holds the property on resulting trust for the claimant.
Vandervell v IRC [1967]
Per Lord Upjohn: Where A transfers, or directs a trustee to transfer, the legal estate in property
to B otherwise than for valuable consideration it is a question of the intention of A in making the
transfer whether B is to take beneficially or on trust and, if the latter, on what trusts. If, as a
matter of construction of the document transferring the legal estate, it is possible to discern A's
intentions, that is the end of the matter. If, however, the document is silent, then there is said to
arise a resulting trust in favour of A; but this is only a presumption and is easily rebutted.
Re Vandervell (no.2) [1974]
Per Megarry J: The distinction between the two categories of resulting trusts is important
because they operate in different ways. Putting it shortly, in the first category, subject to any
provisions in the instrument, the matter is one of intention, with the rebuttable presumption of a
resulting trust applying if the intention is not made manifest.
b. Automatic resulting trusts
- Where property has been transferred to the defendant to be held on an express trust that fails (either
initially or subsequently) that property will be held on resulting trust for the settlor or those entitled to a
testator’s residuary estate.
Vandervell v IRC [1967]
The doctrine of resulting trust plays another very important part in our law. If A intends to give
away all his beneficial interest in a piece of property and thinks that he has done so, but, by some
mistake or accident or failure to comply with the requirements of the law, has failed to do so,
either wholly or partially, there will, by operation of law, be a resulting trust for him of the
beneficial interest which he has failed effectively to dispose of.
1
, Re Vandervell (no.2) [1974]
For the second category, there is no mention of any expression of intention in any instrument, or
of any presumption of a resulting trust: the resulting trust takes effect by operation of law, and so
appears to be automatic. What a man fails effectively to dispose of remains vested in him, and no
question of any mere presumption can arise.
2. PRESUMED RESULTING TRUSTS (PRTS)
- Where the claimant has transferred property to the defendant or paid the purchase price of property that
has been acquired by the defendant, it will be presumed that the claimant intended the defendant to hold
that property on trust for him.
- The justification for this presumption is that Equity assumes that people do not act altruistically, but
rather with some degree of self-interest and an expectation of some return: they would wish to obtain a
beneficial interest in the property received by the defendant.
- This presumption of an intention to declare a trust can be easily rebutted by the transferee showing a
contrary intention e.g. that the transferee was intended to receive the property absolutely as a gift.
2.1. Voluntary transfer of property
- Here we are talking about the gratuitous transfer of property from A to B.
- The property is presumed to be held by B on PRT for A, but the presumption can be rebutted by contrary
evidence e.g. of a loan, gift or otherwise.
a. Land
Law of Property Act 1925, s.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.
- This provision of the LPA does not apply to personalty.
- Does it prevent a PRT of land from arising? Where the claimant voluntarily transfers land to the
defendant, it has been assumed that there is no presumption of resulting trust.
Lohia v Lohia [2001]
On a plain reading of section 60, the presumption has been abolished. It is likely that by 1925 the
suspicion with which gifts of land were formerly viewed, which was at least one of the
underlying reasons for the presumption, would no longer have been regarded as material, and
that the purpose of section 60(3) was accordingly to do away with the presumption of a resulting
trust in the cases of voluntary conveyance and to make it necessary for the person seeking to
establish a resulting trust to prove it.
As against all this, the countervailing consideration that section 60(3) on this view would change
the law with regard to real property alone and therefore would lead to different conclusions in
relation to real and personal property in the same situation, does not seem to me to be a factor of
sufficient potency to displace the natural construction of the section.
Khan v Ali (2002) 5 ITELR 232
Lohia v Lohia establishes that the presumption of a resulting trust on a voluntary conveyance of
land has been abolished by s.60(3).
2
, It was not suggested that this proposition precludes a party to the conveyance from relying on
evidence from which a resulting trust may be inferred. Accordingly there is nothing in this case
to inhibit the father from relying on the extrinsic evidence the judge accepted.
- Swadling (2000): These cases suggest that the effect of the provision is to disapply a presumption of
resulting trust (where land is conveyed to the defendant for no consideration) simply because the
conveyance did not state that property was conveyed for the defendant’s use or benefit.
- The effect of the provision is not to prevent PRTs from arising in cases concerning the transfer of land.
c. Personalty
- A resulting trust can certainly be presumed where personality (e.g. shares) is voluntarily transferred to the
defendant.
If the claimant asserts that he intended the defendant to take the property beneficially, that is the end of
the matter. There can be no trust.
If the claimant does not assert that he intended the defendant to receive the property beneficially, there
will be a presumed resulting trust in favour of the claimant, unless the relationship between the claimant
and defendant is such that the presumption of advancement is engaged.
Where the presumption of an intention to declare a trust is engaged, the defendant can seek to rebut it by
adducing evidence of relevant facts and circumstances to conclude that the claimant did not intend the
property to be held on trust for him.
- When property is transferred under a contract that turns out to be void, the intention at the time of transfer
is to transfer absolute ownership to the recipient. This means that:
There is no room for a presumption of resulting trust; and
There is no uncertainty or gap in the beneficial ownership upon which an ART can operate.
2.2. Contribution to the purchase price
- Here we are talking about a situation where B purchases something with the money of A, or of A and B.
- The property is presumed to be held on trust by B for A and B in proportion to their respective financial
contributions.
- Again, the presumption can be rebutted by evidence of an inconsistent intention such as to loan or gift the
money.
In some cases, the presumption of resulting trust will be strong and difficult to rebut – e.g. where the
claimant has invested his money in shares that are registered in the name of his solicitor.
In other circumstances, the relationship between the parties, whilst not sufficient to establish a
presumption of advancement, will suggest that a gift is more likely to be intended.
Fowkes v Pascoe,
A mother purchased annuities in the joint names of herself and her grandson. Although it was
presumed that he held the annuities on resulting trust, this presumption was easily rebutted in the
light of the circumstances of the case.
- The contribution must be financial, i.e. the types of non-financial contribution that may be taken into
account for Stack v Dowden or Jones v Kernott do not suffice.
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