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First Class Trust Law Exam with Feedback
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First Class Trust Law Exam with two essays - one on resulting and constructive trusts and another on whether principals should be able to recover the unauthorised profits of their fiduciaries - and also a problem question on the validity of a trust in the context of the wording of a will. The grad...

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Document information

  • December 20, 2023
  • 13
  • 2022/2023
  • Exam (elaborations)
  • Questions & answers

Subjects

  • law
  • llb
  • essays
  • problem question
  • trust law
  • second year law
  • constructive trust
  • resulting trust
  • fiduciary duty
  • certainties

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  • Law LLB
All documents for this subject (10)

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QUESTION 2




ANSWER


Disputes over family property, especially cases of ownership upon the relationship breakdown of unmarried

parties, remain prominent in the courts. This essay contends that while courts increasingly rely on constructive

trusts (CT) to determine beneficial interests, resulting trusts (RT) have not been superseded as they are still

relevant, particularly in commercial or quantification contexts. However, favouring CT is not always justified

due to potential lack of clarity in its contextual analysis. Striking a balance between clarity and justice is

essential.




This essay will first define and distinguish RT and CT in family disputes, tracing their legal development,

before critically examining their justifications and ultimately considering whether preferring CT is always

justified. It will then question whether RT have been superseded before engaging with the dichotomy between

certainty and justice. It concludes that both mechanisms have a role, with CT being preferred for establishing

beneficial interests and RT for quantification.




Overview and the family context




RT and CT are two forms of trusts used to determine beneficial interests in situations where legal ownership

does not reflect the equitable interests of the parties involved. RT historically quantified beneficial interests in

family trust disputes based on presumed intentions and financial contributions (Westdeutsche Landesbank

Girozentrale [1996]). It operates on the assumption that individuals do not acquire property purely out of

altruism, but rather with the expectation of obtaining a beneficial interest or some form of return (Law

Commission (LC), 2002). This has evolved into a RT which is rebutted by evidence of contrary intention. In


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, comparison, CT arise when it would be unconscionable for the lawful owner of property to disregard the rights

or interests of another party, giving effect to parties’ ‘common intention’. Recent case law has favoured CT

because in contemporary society, individuals are unlikely to pay a property’s purchase price with cash upfront.

Instead, “the modern reliance on mortgage finance has led to a corresponding diminution in the importance” of

RT (LC). Disputes now arise over contributions to mortgage payments or payments for the family home, as

they may confer equitable property interests under CT.




The development of law




Beginning the shift from RT to CT, the House of Lords in Lloyds Bank v Rosset [1991], placed weight on the

significance of the context of contributions made by non-legal owners to the acquisition or improvements of the

property, emphasising the role of financial contributions in giving right to beneficial interests. However, since

Rosset, doubt has surrounded Lord Bridge’s requirement for the bargain to take place on acquisition,

especially as it wasn’t stipulated by earlier case law (Gissing). Stack v Dowden [2007] established that the

starting point in cohabiting couples' cases is joint beneficial ownership, rather than RT principles. This decision

recognises the importance of parties’ intentions and conduct, as well as their varying contributions to the

property. This approach was solidified by Jones v Kernott [2011], ultimately ruling that, regarding family

homes, a ‘holistic’ common intention CT should be applied to consider the parties' whole course of dealing to

determine their respective beneficial interests including the “agreement, arrangement and understanding

subsequent to the acquisition of title” (LC). This case even held that beneficial interests were subject to

change overtime. Therefore, the CT approach is more just and inclusive of varying familial circumstances. For

example, in Le Foe v Le Foe [2001], the wife has not made direct contributions to the purchase price or

mortgage payments. Whilst a RT application would find her to have no beneficial interest, the court instead

found her to have interests on the basis that “the family economy depended for its function on [her] earnings”

in paying for “domestic expenditure”. It was recognised that this was merely an “arbitrary allocation of

responsibility” or no more than a convenience and therefore shouldn’t impact her rights to the property.

Therefore, CT’s flexibility enables a just application to modern disputes.




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