Norton - Resulting trusts - Resulting trusts Dr Jane Norton Lectures semester one History of Equity and the Nature of Trusts Three Certainties

Norton - Resulting trusts - Resulting trusts Dr Jane Norton...

This preview shows page 1 out of 104 pages.

You've reached the end of your free preview.

Want to read all 104 pages?

Unformatted text preview: Resulting trusts Dr Jane Norton Lectures – semester one History of Equity and the Nature of Trusts Three Certainties Formalities Constitution Purpose Trusts Resulting Trusts Constructive Trusts Express trusts Implied trusts Resulting trusts Constructive trusts Outline What are resulting trusts? Gratuitous transfer cases (“Type A” resulting trusts) Voluntary transfers of property Contributions to the purchase price The presumptions: raising and rebutting Illegality/”unclean hands” Incomplete express trust cases (“Type B” resulting trusts) failure to declare the beneficial interest failure of the trust failure of a specific purpose unexhausted beneficial interest/surplus funds What is the theoretical basis of resulting trusts? Keeping it simple… A B The essential characteristic of the resulting trust is that the settlor is also its beneficiary. When do resulting trusts arise? A. ‘Gratuitous transfer’ cases (also known as ‘Type A’ resulting trusts or ‘presumed’ resulting trusts) B. ‘Incomplete express trust’ cases (also known as ‘Type B’ resulting trusts or ‘automatic’ resulting trusts) Westdeutsche Landesbank v Islington LBC [1996] AC 699 Lord Browne-Wilkinson (at 708): ‘Under existing law a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B; the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter presumption of advancement or by direct evidence of A’s intention to make an outright transfer… (B) Where A transfers property to B on express trust, but the trusts declared do not exhaust the whole beneficial interest.’ A. Gratuitous transfer cases (‘Type A’ resulting trusts) Also know as apparent gift cases. Give rise to a presumption of a resulting trust. Two situations: i) voluntary transfers of property; and ii) contribution to the purchase price of property. Westdeutsche Landesbank v Islington LBC [1996] AC 699 Lord Browne-Wilkinson (at 708): ‘… where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property … there is a presumption that A did not intend to make a gift to B...’ Presumption of resulting trust A B gratuitously transfers money to Outside certain situations, and without more information, the law presumes that the gratuitous transfer gives rises to a trust, so that B will hold the money on trust for A: A B resulting trust Westdeutsche Landesbank v Islington LBC [1996] AC 699 Lord Browne-Wilkinson (at 708): ‘… It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter presumption of advancement or by direct evidence of A’s intention to make an outright transfer…’ Vandervell v IRC [1967] 2 AC 291, 313 Lord Upjohn: ‘These presumptions are no more than a longstop to provide the answer when the relevant facts and circumstances fail to yield a solution.’ Two countervailing presumptions Presumption of resulting trust Presumption of advancement (i) Voluntary transfers of property: presumption of resulting trust. Equity is suspicious of gifts made for no consideration and will presume a resulting trust eg: Re Vinogradoff [1935] WN 68 Grandmother transferred bond into joint name of herself and granddaughter. Resulting trust presumed. Odd outcome? 4-year old girl presumed to be resulting trustee not recipient of outright gift from grandmother! Voluntary transfers of 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.’ Lohia v Lohia [2001] WTLR 101 Nicholas Strauss QC ‘… 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.’ confirmed in: Khan v Ali (2002) 5 ITELR 232 Morritt VC: ‘[Lohia v Lohia] establishes that the presumption of a resulting trust on a voluntary conveyance of land has been abolished by s.60(3) LPA 1925. It was not suggested that this proposition precludes a party to the conveyance from relying on evidence from which a (ii) Contribution to purchase price Where property is purchased in the name of a person, but that person has provided only part (if any) of the purchase price, it is presumed that that person holds the property (or part thereof) on resulting trust for the contributor. Dyer v Dyer (1788) 2 Cox Eq Cas 92, 93 ‘where a feoffment is made without consideration, the use results to the feoffer.’ The Venture [1908] P 218 ‘when it is once proved that Percy Stone advanced 550l. of the 1050l. purchase-money for this yacht he thereupon became entitled to fifty-five 105ths.’ Pettitt v Pettitt [1970] AC 777 ‘in the absence of evidence to the contrary effect, a contributor to the purchase price will acquire a beneficial interest in the property. Beneficial ownership will be proportionate to contribution A £5,000 B £3,000 B C £2,000 B holds car on trust for A, himself, and C with a 5:3:2 split. What counts as contribution? Springette v Defoe (1992) 65 P & CR 1 Contribution – sitting tenant’s discount from market price Carlton v Goodman [2002] 2 FLR 259 No contribution - ‘circumscribed and temporary.’ Curley v Parkes [2004] EWCA 1515 No contribution. Subsequent payment of mortgage. BUT with family home cases: Stack v Dowden [2007] 2 AC 432 ‘there is no presumption of a resulting trust arising from their having contributed to the [purchase] in unequal shares.’ Carlton v Goodman [2002] 2 FLR 259 Mummery LJ: ‘… the role in fact played by Anita was a different and lesser one than that of a contributor to the purchase price. She facilitated the purchase of the House by lending her name in order to secure the advance from the Alliance & Leicester. … Her involvement in the purchase was so circumscribed and temporary that it cannot fairly be described as a contribution to the purchase price, entitling her to an enduring beneficial interest in the House.’ Curley v Parkes [2004] EWCA Civ 1515 Peter Gibson LJ: ‘…the resulting trust of a property purchased in the name of another, in the absence of contrary intention, arises once and for all at the date on which the property is acquired. Because of the liability assumed by the mortgagor in a case where monies are borrowed by the mortgagor to be used on the purchase, the mortgagor is treated as having provided the proportion of the purchase price attributable to the monies so borrowed. Subsequent payments of the mortgage instalments are not part of the purchase price already paid to the vendor, but are sums paid for discharging the mortgagor's obligations under the mortgage … By reason of that principle and the modern reliance upon mortgage finance the importance of the resulting trust has diminished, and instead reliance is generally placed on a constructive trust where an agreement or common intention can be found or inferred from the circumstances …”. The effect of Stack v Dowden (2007) • Covered in greater detail in Constructive Trusts. • Prima facie case that legal and beneficial interests in joint names domestic property = equal. • Laskar v Laskar (2008): Borderline domestic and commercial cases = presumed resulting trust. • Jones v Kernott (2011): Confirms inapplicability of presumed resulting trust to joint names cases involving domestic property. Jones v Kernot [2011] UKSC 53 ‘in the case of the purchase of a house or flat in joint names for joint occupation by a married or unmarried couple, where both are responsible for any mortgage, there is no presumption of a resulting trust arising from their having contributed to the deposit (or indeed the rest of the purchase) in unequal shares.’ Laskar v Laskar [2008] EWCA Civ 347 • ‘The daughter hardly lived there at the time it was purchased, and did not live there much if at all afterwards, and the mother did not live there for long. The property was purchased primarily as an investment…’ • ‘In this case, the primary purpose of the purchase of the property was as an investment, not as a home. In other words this was a purchase which, at least primarily, was not in “the domestic consumer context” but in a commercial context.’ Lord Neuberger Laskar v Laskar [2008] EWCA Civ 347 ‘To my mind it would not be right to apply the reasoning in Stack v Dowden to such a case as this, where the parties primarily purchased the property as an investment for rental income and capital appreciation, even where their relationship is a familial one.’ Beneficial interest in Laskar v Laskar • Assessment of contribution to purchase price Discount based on number of years occupancy Joint mortgage Contribution • The beneficial interest was held between the mother and daughter in a ratio of 2:1. • Lord Neuberger: ‘… In my view, the appointment of 2:1 does reflect the overall justice of the case.’ The presumption of advancement A B gratuitously transfers money to Without more information, the law will presume that the gratuitous transfer is a gift if A is B’s father, or in loco parentis or A is B’s husband Re Roberts [1946] Ch 1 (father to child) Evershed J: It is well established that a father making payments on behalf of his son prima facie, and in the absence of contrary evidence, is to be taken to be making and intending an advance in favour of the son and for his benefit. Bennet v Bennet (1879) 10 Ch D 474 (person in loco parentis to child) Jessell MR: The presumption of gift arises from the moral obligation to give. … and it is well established that a person, not the father of a child, may put himself in loco parentis, and so incur the obligation as if he was the father. Re Eskyn’s Trusts (1877) 6 Ch D 115 (husband to wife) Malins VC: I am now called upon to decide the effect of the transactions per se, there being no evidence of anything said or done which can prove anything one way or the other. The law of this Court is perfectly settled that when a husband transfers money or other property into the name of his wife only, then the presumption is, that it is intended as a gift or advancement to the wife absolutely at once, subject to such marital control as he may exercise. A B gratuitously transfers money to Presumption of resulting trust = burden on B to prove otherwise Presumption of advancement = burden on A to prove otherwise Antoni v Antoni [2007] UKPC 10 ‘This appeal to the Privy Council...has resulted from the failure of the trial judge... to apply the presumption of advancement. … [The judge] treated Kirk Antoni and Melanie Malone as having to discharge the evidential onus of proving that Dr Antoni had intended them to become beneficial owners of the shares that he had caused to be placed in their names. The reverse was the case … … The presumption of advancement was plainly applicable and required evidence to be adduced by Mrs Lena Antoni establishing that Dr Antoni had not intended them to become beneficial owners of the shares but had intended them to hold on a resulting trust for himself. It would, as the judge recognised, have been very difficult for her to do so.’ Lord Scott of Foscote Nelson v Nelson (1995) 184 CLR 538 (Aus) ‘[The presumption arises] where the relationship between the parties falls into a class where dependency … commonly existed in the nineteenth century.’ McHugh J, at 600 Pettit v Pettit [1970] AC 777 ‘It would, in my view, be an abuse of the legal technique for ascertaining or imputing intention to apply to transactions between the post-war generation of married couples "presumptions" which are based upon inferences of fact which an earlier generation of judges drew as to the most likely intentions of earlier generations of spouses belonging to the propertied classes of a different social era.’ Lord Diplock Pettit v Pettit [1970] AC 777 ‘If there is no such available evidence then what are called the presumptions come into play. They have been criticised as being out of touch with the realities of today but when properly understood and properly applied to the circumstances of today I remain of opinion that they remain as useful as ever in solving questions of title.’ Lord Upjohn Pettit v Pettit [1970] AC 777 ‘These considerations [of economic dependency ] have largely lost their force under present conditions, and, unless the law has lost all flexibility so that the Courts can no longer adapt to changing conditions, the strength of the presumption must have much diminished. I do not think it would be proper to apply it in the present case.’ Lord Reid ‘It is based on the absurd notion that a mother, unlike a father, has no moral obligation to advance her child. Even in the context of Victorian custom and morality such a distinction between a mother and a father seems curious, but it is completely inappropriate in the conditions of a modern family.’ Kodilinye DPP v B [2009] IEHC 196 (Ireland) • Feeney J noted ‘the line of authorities that the doctrine of presumption of advancement in relation to husband and wife and the onesided presumption that a husband who transfers property into the name of his wife, intends to make a gift in her favour is an anachronistic concept which no longer applies except in particular and limited circumstances.’ • The presumption has ‘an anachronistic and weakened status’. Equality Act 2010, s 199 (1) The presumption of advancement (by which, for example, a husband is presumed to be making a gift to his wife if he transfers property to her, or purchases property in her name) is abolished. *NOTE: This section is not yet in force.* See J Glister, ‘Section 199 of the Equality Act 2010: How Not to Abolish the Presumption of Advancement’ (2010) 73 Modern Law Review 807. Stack v Dowden [2007] UKHL 17 ‘… the presumption of advancement, as between man and wife, which was so important in the 18th and 19th centuries, have now become much weakened, although not quite to the point of disappearance.’ Lord Neuberger But see: Nelson v Nelson (1995) (Australia) Antoni v Antoni (2007) Pecore v Pecore (2007) (SC of Canada) Harwood v Harwood [1991] 2 FLR 274 ‘[the presumption of advancement] must be applied with caution in modern social conditions.’ Slade LJ (at 294) Remember they are presumptions Presumption are just that: presumptions. They are concerned with where the onus of proof lies. They can be (and often are) rebutted. Will determine a case only if there is no other evidence on which the court can rely. Dyer v Dyer (1788) 2 Cox Eq Cas 92 ‘It is the established doctrine of a Court of equity, that this resulting trust may be rebutted by circumstances in evidence.’ Eyre CB Westdeutsche Landesbank v Islington LBC [1996] AC 699 ‘… It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter presumption of advancement or by direct evidence of A’s intention to make an outright transfer…’ Lord Browne-Wilkinson (at 708) Vandervell v IRC [1967] 2 AC 291, 313 ‘These presumptions are no more than a longstop to provide the answer when the relevant facts and circumstances fail to yield a solution.’ Lord Upjohn Fowkes v Pascoe (1875) 10 Ch App 343 ‘There can be no doubt that the question in this case is a question of fact. It cannot be decided simply on the ground of the legal presumption, because, whatever effect is given to the evidence of Mr Pascoe and his wife, beyond all question the evidence of Mr Pascoe and his wife is evidence to rebut the presumption, and, therefore, the court must consider whether the presumption is rebutted or not. … In my opinion, where there is once evidence to rebut the presumption, the court is put in the same position as a jury would be, and we cannot give such influence to the presumption in point of law ... if it does come to a satisfactory conclusion in point of fact, viz, that the investment was made for the purpose of making a gift.’ Mellish LJ Fowkes v Pascoe (1875) 10 Ch App 343 ‘Now, the presumption must, beyond all question, be of very different weight in different cases. In some cases it would be very strong indeed. If, for instance, a man invested a sum of stock in the name of himself and his solicitor, the inference would be very strong indeed that it was intended solely for the purpose of a trust, and the Court would require very strong evidence on the part of the solicitor to prove that it was intended as a gift; and certainly his own evidence would not be sufficient….if we are to go into the actual facts, and look at the circumstances of this investment, it appears to me utterly impossible, as the Lord Justice has said, to come to any other conclusion than that the first investment was made for the purpose of gift and not for the purpose of trust.’ Mellish LJ Bennet v Bennet (1879) 10 Ch D 474 ‘…in the case of a mother…it is easier to prove a gift than in the case of a stranger: in the case of a mother very little evidence beyond the relationship is wanted, there being very little additional motive required to induce a mother to make a gift to her child.’ Lord Jessel MR Warren v Gurney [1944] 2 All ER 472 ‘ample evidence [to rebut presumption of advancement] … the father retained the title deeds from the time of purchase to the time of his death. I think that is a very significant fact …. One would have expected the father to have handed them over … if he had intended the gift. …’ Lavelle v Lavelle [2004] 2 FCR 418 ‘The core issue was, however, whether the considerable evidence demonstrated that, in 1997, George had intended to give away his flat. The evidence left no room for the application of the presumption of advancement. After a two-day trial in which he heard the witnesses, the judge concluded that George had had no such intention.’ Evidence subsequent to the transfer ‘The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration …. But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour.’ (Snell’s Equity, 24th Ed, endorsed in Shephard v Cartwright [1955] AC 431, 445 (HL) by Viscount Simonds) Illegality 1. A transfers property to B as part of an illegal scheme. 2. A does not intend B to have the property outright. 3. B refuses to give the property back to A. 4. Can A rely on the illegal purpose to show that he did not intend for B to keep the property? ‘He who comes to equity must come with clean hands.’ Tinker v Tinker [1970] 1 WLR 1609 ‘I am quite clear that the husband cannot have it both ways …. He cannot say that the house is his own and, at one and the same time, say that it is his wife’s. As against his wife, he wants to say that it belongs to him. As against his creditors, that it belongs to her. That simply will not do. Either it was conveyed to her for her own use absolutely: or it was conveyed to her as trustee for her husband. It must be one or other. The presumption is that it was conveyed to her for her own use: and he does not rebut that presumption by saying that he only did it to defeat his creditors. I think it belongs to her. Denning MR The “reliance principle” If the proprietary interest can be established without relying on evidence of illegality, the “clean hands” principle will not apply. Tinsley v Milligan A couple purchased a house with funds from their joint business. By mutual agreement, the house was registered in ...
View Full Document

  • Fall '15
  • Wills and trusts, Trust law

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture