Introduction

• resulting trusts arise automatically in certain defined circumstances
• generally if settlor tries to create trust by transferring property to trustees (Ts) but attempted trust fails: property held on resulting trust for settlor/testator's estate
• exceptions to resulting trust rule for gifts to charities which no longer exist & trusts for charitable purposes which cannot be carried out
• resulting trust may also occur: when property is transferred for no consideration & in certain circumstances, when person provides financial assistance for another to purchase an asset
• resulting trusts over land can be created & implied

  Law of Property Act 1925

  • s.53(2): resulting trusts over land can be created without signed written evidence

Incomplete disposal of beneficial interest

• resulting trust may arise:settlor transfers property to Ts on trust but not dispose of all or part of equitable interest (declared trusts are void or do not exhaust trust fund)

Surplus funds

• question arises if purpose of trust does not exhaust funds

  Re Trusts of the Abbott Fund [1900] 2 Ch 326

  Facts:

  • fund collected from several contributors for maintenance of two ladies
  • surplus remained once both ladies died

  Issue:

  • what should happen to surplus funds?

  Held:

  • contributors never intended money to be absolute property of ladies: gave money on trust for purpose of maintaining ladies
  • purpose did not exhaust fund: partial failure of trust & resulting surplus paid back to contributors

  Re Osoba [1979] 1 WLR 247

  Facts:

  • testator left money on trust for widow's maintenance and for the training of my daughter up to university grade and for the maintenance of my aged mother...
  • surplus remained when both widow & mother died & daughter completed education

  Issue:

  • what should happen to surplus funds?

  Held:

  • no resulting trust: surplus left belonged to daughter
• trust purpose to benefit individuals now deceased: resulting trusts of surplus money (as declared trusts failed to exhaust beneficial interest)
• trust for A absolutely with motive or wish expressed for use of money: no resulting trust (as beneficial interest exhausted in gift to A)

Settlor's intention

• resulting trusts developed as protective mechanism: prevent settlors losing property in unforeseen circumstances
• issue whether resulting trust should be implied if not settlor's intention

  Re Vandervell's Trusts (No. 2) [1974] Ch 269

  • Megarry J: resulting trust arises automatically where settlor fails to dispose entire beneficial interest in trust property
  • ..the resulting trust... does not depend on any intentions or presumptions, but is the automatic consequence of A's failure to dispose of what is vested in him...

  Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669

  • Lord Browne-Wilkinson: resulting trusts do not arise automatically rather based on settlor's presumed intention & accordingly presumption can be rebutted by contrary evidence

  Air Jamaica v Charlton [1991] 1 WLR 1399

  • Lord Millet: resulting trust not based on positive intention of settlor to retain beneficial interest as rarely settlor's intention rather imposed if beneficial interest undisposed & settlor not intend to make outright gift to transferee
  • view supported obiter dicta Twinsectra v Yardley [2002] UKHL 12

Gifts: failure & cy-près

• special rules apply to save charitable gifts which appear impossible (only applicable to charities)
• circumstances may fail: gift to body ceased to exist, attempted trust fails for practical reason (such as no suitable site to carryout work)
• if non-charitable trust fails resulting trust, but not necessarily if charitable trust

Charitable institution ceased to exist

• gift to charitable company or unincorporated association which has apparently ceased:
  if institution continuing in new form gift can pass to new body with authorisation from Charity Commission (CC)
  consider whether conditions for cy-près satisfied (gift applied for purposes as near as possible to original gift)
  if not, resulting trust
• institution continuing if:
  original gift construed as trust for purposes carried on by institution & purposes have been taken over by another body
  or assets of original charity taken over by new body & still applied for original purposes
  

  Re Faraker [1912] 2 Ch 488

  Facts:

  • testator gave legacy to charity which amalgamated with another charity before testator died

  Issue:

  • what should happen to legacy?

  Held:

  • pass to amalgamated body: if took over assets & purposes of original legatee

  Re Vernon's WT [1972] Ch 300

  • unincorporated association not legal person capable of holding property
  • gift to charitable unincorporated association is construed as trust for the purposes of association
  • if association ceased to exist but purposes are carried on by another body: gift will go to new body
  • if purposes not continue: consider whether cy-près applies

  Re Finger's WT [1972] Ch 286

  Facts:

  • company is legal person capable of holding property & legacy to charitable company
  • construed as beneficial gift to the company (unless testator stated it was to be used for a purpose)
  • if company ceases to exist before testator's death: legacy will fail & held on resulting trust unless Re Faraker or cy-près applies
• if gift construed to purpose trust & purpose still possible, gift will follow the purpose

Charitable trust which cannot be carried out

• necessary to distinguish initial & subsequent failure as different rules apply
• initial failure: gift or trust is impossible from the outset (when disposition takes effect) - lifetime gifts immediately on date of disposition & for gifts by will on testator's death
  general charitable intent needed for cy-près otherwise held on resulting trust
• subsequent failure: if gift possible at outset but later becomes impossible
  legacy in will which existed at testator's death but ceased before executors could distribute
  trust for charitable purpose is partially used but surplus once purpose has been achieved
  no general charitable intent needed for cy-près
• if initial failure courts or CC try to deal with property as settlor or testator would have wished, considering wording of gift or trust

  Biscoe v Jackson (1887) 35 Ch 460

  Facts:

  • money left on trust to establish soup kitchen & cottage hospital in Shoreditch but suffered initial failure

  Issue:

  • was there general charitable intent?

  Held:

  • broader intention (benefit poor of Shoreditch): soup kitchen & cottage hospital merely suggested mode of achieving wider intention
  • trust fund applied cy-près for similar purpose benefiting poor in Shoreditch

  Re Good's WT [1950] 2 All ER 653

  • cy-près not apply: if intention was to benefit specific project or charitable body

  Re Harwood [1936] Ch 285

  Facts:

  • testatrix left bequests to Wisbech Peace Society & Peace Society of Belfast
  • Wisbech Peace Society existed when will was made but not on testatrix's death
  • Peace Society of Belfast never existed

  Issue:

  • could cy-près apply?

  Held:

  • Wisbech Peace Society legacy: cy-près not apply as testatrix had specific intent to benefit named society rather than a cause
  • Peace Society of Belfast: cy-près applied as fictitious name suggested charitable purpose (promote peace in Belfast)

  Re Satterthwaite's WT [1966] 1 WLR 277

  Facts:

  • testatrix divided residue between nine bodies concerned with animal welfare
  • one of nine bodies never existed

  Issue:

  • could cy-près apply?

  Held:

  • cy-près applicable: reside left for kindred objects & testatrix showed general charitable intent

  Re Finger's WT [1972] 1 Ch 286

  Facts:

  • testatrix left gift to National Council for Maternity and Child Welfare which existed when will made but ceased before testatrix died

  Issue:

  • could cy-près apply?

  Held:

  • cy-près applied: not impossible to find general charitable intent even if left to named body which had previously existed
  • general charitable intent indicated by circumstances:
    other gifts to charity
    testatrix believed she had no relatives
    intended recipient was general body co-ordinating other charities in that field

  Re Spence's WT [1979] Ch 483

  • apart from Re Finger's WT cases of charity by association involved gifts to bodies that had never existed
  • therefore doubt whether presence of other charitable gifts could produce general charitable intent where body had once existed

Presumptions of resulting trust & advancement

Presumption of resulting trust: voluntary transfer

• presumption of resulting trust: voluntary transfer
  X transfers money/property to Y & Y gives no consideration
  presumption X intended Y to hold property on resulting trust for X
  

  Re Vinogradoff [1935] WN 68

  Facts:

  • Mrs V (V) owned War Loan stock which she transferred into joint names of herself & her infant granddaughter (G)

  Issue:

  • does resulting trust presumption apply?

  Held:

  • presumption of resulting trust applied: V & G held legal title on resulting trust for V alone
• presumption rebuttable: by evidence that transferor intended to make gift to transferee (burden of proof on transferee)
• presumption unlikely to apply if property is realty

  Law of Property Act 1925

  • s.60(3): no presumption of resulting trust in voluntary transfer of land

  Lohia v Lohia (2000) 3 ITELR 117

  • Court of Appeal left question open as to whether presumption can apply to realty

  Ali v Khan (2002) 5 ITELR 232

  • obiter Court of Appeal suggested Lohia v Lohia had abolished presumption of resulting trust for voluntary transfers of land & court would need to consider what transferor actually intended

Presumption of resulting trust: purchase in the name of another

• presumption of resulting trust: X provides purchase money for property purchased in name of Y

  Abrahams v Trustee in Bankruptcy of Abrahams (1999) The Times, 26 July

  Facts:

  • Mr & Mrs A were members of lottery syndicate (15 members in total)
  • Mrs A paid £2 pw (£1 for herself & £1 for Mr A) & continued to do so when they separated
  • Mr A was declared bankrupt
  • syndicate won £3,632,327 & Mr A's bankruptcy trustee claimed 1/15th of the winnings

  Issue:

  • did the presumption of a resulting trust apply?

  Held:

  • Mr A held his share on resulting trust for Mrs A (provider of the purchase money) & not available to Mr A's creditors

  Thavorn v Bank of Credit & Commerce International [1985] Lloyd's Rep 259

  Facts:

  • Aunt (A) opened bank account in name of her nephew (N) who was under 18
  • A gave instructions to bank that she alone was to operate account

  Issue:

  • did the presumption of a resulting trust apply?

  Held:

  • presumption of resulting trust applied: no evidence of intention to benefit N (which would have rebutted presumption)
• Court of Appeal considered what payments give rise to presumption of resulting trust

  Curley v Parkes [2004] All ER (D) 344

  Facts:

  • payment must be part of purchase price (not legal fees or stamp duty) & made at time of initial purchase
  • payment of mortgage instalments & other outgoings after date of purchase will not give rise to resulting trust
• courts moving away from using resulting trusts to determine cohabitees rights

  Stack v Dowden [2007] UKHL 17

  • Baroness Hale: In law 'context is everything' and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties' trust intentions...
• recent cases have been based on constructive trusts which allow more flexibility to determine respective shares in property
• however resulting trusts important where property was investment rather than home

  Laskar v Laskar [2008] EWCA Civ 347

  • resulting trsut: mother & daughter bought house in joint names & let it to tenants
• Voluntary transfer of personalty from X to Y:
  presumption Y holds legal title to personalty on resulting trust for X
  rebutted by evidence X intended to make gift to Y (Y outright ownership)
• X provides purchase money for purchase of property in name of Y:
  presumption Y holds legal title on resulting trust for X
  rebutted by evidence X intended to make gift to Y (Y outright ownership)
• X & Y provide purchase money for property in name of Y:
  Presumption Y holds legal title to property on resulting trust for X & Y in proportion to their contributions
  family homes likely to be decided on basis of constructive trusts
  rebutted by evidence X intended to make gift to Y (Y outright ownership)

Presumption of advancement

• in certain cases involving relatives presumption of resulting trust may be replaced by presumption that gift was intended (presumption of advancement)
• originated in cases where moral obligation to provide financially for transferee
• presumption of advancement applies:
  father making voluntary transfer or purchasing property in name of his child
  person who is in loco parentis of a child
  husband making voluntary transfer or purchasing property in name of his wife or fiancée
• traditional view : no presumption of advancement from mother to child

  Laskar v Laskar [2008] EWCA Civ 347

  • suggested that presumption may apply to mother & child

  Sekhon v Alissa [1989] 2 FLR 94

  Facts:

  • assumed that presumption of resulting trust applied where mother provided purchase money to buy house in her daughter's name
• however, in many cases should be easy to produce evidence that mother intended a gift
• widowed mother or single parent may be regarded as in loco parentis (giving rise to presumption of advancement)
• previously courts applied presumption of advancement in cases involving adult children but less clear
• presumption of advancement in case of adult children is extremely weak & can be easily rebutted
• presumption of advancement not apply: if wife purchases in name of/transfers property to husband or to unmarried couples
• presumption of advancement between husband & wife is weak: rebutted by slight evidence that husband did not intend a gift to his wife

  Pettitt v Pettitt [1970] AC 777

  • .. presumption belongs to a bygone age when wives were financially dependent on their husbands...
• presumption also weak between father & son

  McGrath v Wallis [1995] 2 FLR 114

  • a judicial instrument of last resort: presumption of advancement only if no evidence (parties died) & can be rebutted by very weak evidence
• reform of out-dated presumption has been sought

  Equality Act 2010

  • s.199: abolishes presumption of advancement for dispositions occurring after its commencement date
• s.199 Equality Act 2010 not brought into force at present, so presumption of advancement still continues in limited cases

Rebutting the presumptions

• presumptions are used to help aid determine parties' intentions in absence of evidence of their actual intentions
• strength of evidence to rebut presumption depend on strength of presumption
• cases where presumption of advancement successfully rebutted

  McGrath v Wallis [1995] 2 FLR 114

  • father intended resulting trust because there were good reasons for putting house in son's name which had nothing to do with making a gift

  Marshal v Crutwell (1875) LR 20 Eq 328

  • husband transferred his bank account into the joint names of himself & his wife
  • evidence reason for was convenience not to make gift

  Ali v Khan (2002) 5 ITELR 232

  • father transferred house into names of daughter to raise money to pay for marriages & remained living in house
  • weak presumption: rebutted by evidence father intended retain beneficial interest & had only entered into transaction to raise cash

  Warren v Gurney [1944] 2 All ER 472

  • father purchased house in his daughter's name at the time of her wedding
  • rebutted by evidence father retained title deeds & intended his son-in-law to repay cost of house
• insufficient to regret purchasing house for another

  Loosemore v McDonnell [2007] All ER (D) 252

  Facts:

  • father helped son & daughter-in- law financially to purchase home
  • at time father confirmed he claimed no interest in the money & no wish to secure money by way of charge over property
  • son & daughter-in-law divorced & father sought to claim presumption of resulting trust

  Issue:

  • was resumption rebuttable?

  Held:

  • insufficient evidence to allow resulting trust presumption
• evidence must relate to acts & statements at time of transaction

  Shephard v Cartwright [1955] AC 431

  • Lord Simmonds: The acts and declarations of the parties before or at the time of the purchase or so immediately afterward as to constitute part of the transaction, are admissible in evidence either for or against the party who did the acts or made the declaration… But subsequent declarations are admissible only against the party who made them, and not in his favour...

Illegality

• illegality may arise:
  X put property into Y's name to conceal property belongs to X in order to further illegal purpose
  X does not intend to make gift to Y
  X intends to rely on presumption of resulting trust to recover property in future
• equitable maxim: he who comes to Equity must come with clean hands

  Tinsley v Milligan [1994] 1 AC 340

  Facts:

  • T & M (same sex couple) both contributed to purchase price of house
  • house in T's name only allowing M to claim she was a lodger & claim welfare benefits
  • after relationship ended M claimed presumption of resulting trust due to contributions to purchase price
  • T argued court should not enforce resulting trust as it shielded illegal purpose

  Issue:

  • was presumption of resulting trust applicable?

  Held:

  • House of Lords: M was entitled to rely on resulting trust to claim share of house
  • action not succeed where claimants have to produce evidence of an illegal purpose to prove their case
  • M could establish her case without referring to illegal actions & claim allowed as illegal purpose played no part in her argument (reliance principle)

  Lowson v Coombes [1999] 2 WLR 720

  Facts:

  • D & R contributed to purchase price of house which they cohabited
  • house conveyed into R's name because they did not want D's wife to have any claim over it on divorce or D's death (illegal attempt to thwart financial claims on divorce in this way)
  • D claimed a share of the beneficial interest in the house

  Issue:

  • was presumption of resulting trust applicable?

  Held:

  • D could rely upon resulting trust once shown he contributed to house purchase price, illegal purpose was not relevant to this issue

  Gascoigne v Gascoigne [1918] 1 KB 223

  • presumption of advancement cannot be rebutted by evidence of an illegal purpose
• difference in relevance of illegality to presumptions potentially creates unfair outcomes

  Tribe v Tribe [1996] Ch 107

  Facts:

  • father (F) owned majority shareholding in company
  • F advised he may be forced to sell the shares to meet claims of landlord (L) demanding F carry out expensive repairs
  • to safeguard shares F transferred shares to son (S)
  • L's claim was settled out of court & L had no knowledge of the transfer to S (need to deceive creditors never arose)
  • F reclaimed shares but S refused to return them
  • F claimed he was beneficial owner of shares under a resulting trust
  • S argued presumption of advancement applied & no rebuttable possible as F would have to bring evidence of his illegal intent to defraud creditors

  Issue:

  • who do the shares belong to?

  Held:

  • Court of Appeal: general principle presumption of advancement cannot be rebutted by evidence of an illegal purpose
  • however exception if the illegal purpose had not been carried into effect
  • therefore F could rebut presumption of advancement & establish resulting trust by producing evidence of his illegal purpose
  • issue is whether transfer/purchase in another's name has deceived third party:
    before third party deceived: transferor/purchaser can introduce evidence of their illegal intent to rebut presumption of advancement & establish a resulting trust
    after third party deceived: transferor/purchaser not succeed in reclaiming property because too late for him to rebut presumption of advancement by evidence of his illegal intent