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...
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trusts (CT) to determine beneficial interests, resulting trusts (RT) have not been superseded as they are still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 It will then question whether RT have been superseded before engaging with the dichotomy between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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