Resulting Trusts

Resulting Trusts: Vandervell v IRC: Vandervell wished to make a gift to royal college of surgeons. Vandervall had only transferred the legal title of the trust but not the beneficial title. Resulting trusts were divided into 2 types: Automatic Resulting Trusts - Do not depend on the intention of parties but arise as an automatic consequence of the transferor’s failure to dispose of the entirety of the beneficial interest Presumed Resulting Trusts- Arises because there is a rebuttable presumption of trust based on inferred intention. Westdeutsche Landesbank v Islinglton: It is necessary that there would be an "intention" that the money be held on resulting trust, this can be rebutted by showing A only intended to make an outright transfer. There are two types of  resulting trust:A) Gratuitous transfer trusts OR Presumed Resulting Trusts- A voluntarily pays B for the purchase of property to B which is vested in either B alone or both A and B. There is a presumption that A did not make a gift to B, but rather that B holds the money on resulting trust for A. Voluntary resulting trusts:  A voluntarily transfers property to B ∴ B holds property on resulting trust for A Purchase Contribution resulting trusts: in informal situations e.g. families, there is usually no written formalities concerning trusts on land therefore, the only evidence needed to prove a resulting trust in this case is some contribution to the purchase price.  B) Incomplete express trusts OR Automatic Resulting Trusts- A transfers property to B on express trust, but the trusts declared do not exhaust the whole beneficial interest.S53(2) LPA 1925: This section does not affect the creation or operation of resulting, implied or constructive trusts. 

A) Gratuitous Transfer Trusts/ Presumed Resulting Trusts: 1. Voluntary Presumed Resulting Trusts: S60(3) LPA 1925: 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 or the grantee.Lohia v Lohia: the purpose of section 60(3) was to do away with the presumption of a resulting trust in the cases of voluntary conveyance [of land] to make necessary for the person seeking to establish a resulting trust to prove it.2. Contribution to purchase price:The Venture: Two brothers who had jointly purchased a yacht which was put in the name of one of them. Held, where A has made a monetary contribution to the purchase of property for B a presumed resulting trust arises. It is for the other to displace the presumption upon evidence. Pettitt v Pettitt: The traditional approach accepts that, if there is not contravening evidence, the contributor to the purchase price acquires a beneficial interest in the property. Fowkes v Pascoe: Each case is a question of face, there cannot be a legal presumption made beyond all question of any rebutting evidence. Where there is evidence to rebut the presumption, the court must act as jury.Carlton v Goodman: Carlton had assisted in entering into a joint mortgage with Goodman but had made no re-payments under the mortgage nor had made a contribution to the purchase price of the house. Held, her involvement in the purchase price was too temporary to be considered as a contribution to the purchase price.Curley v Parkes: Direct or indirect contribution to the mortgage after the date of purchase cannot give rise to a resulting trust;  subsequent mortgage repayments after the time of acquisition are not part of the purchase price but rather sums paid to discharge the mortgagor's obligations. Direct contributions to the purchase price e.g.. deposit are relevant.  Stack v Dowden: Dowden and Stack had purchased a house in their joint names funded by the sale of their previous property, which had been in Dowden's sole name and a mortgage held in both names. Mr Stack paid the mortgage interest and endowment policy premiums, while together they paid off the capital, with Dowden contributing a greater proportion. Held, Where domestic property is conveyed to the joint names of cohabitants without any declaration of trust, it is assumed that both legal and beneficial interests in the property are joint and equal. The dividends were spilt 65% / 35%.Laskar v Laskar: mother and daughter had purchased the property using a mortgage and joint contributions to a deposit.The mother paid all repairs, handled the rents and the mortgage was paid out of the income received. Held, daughter only 4.28% interest purely on the basis of the sum she contributed to the deposit and that no account of rent should be made.Jones v Kernott: Jones contributed a small sum to purchase a house mortgage, from this point on they shared payment of the household bills and the mortgage. The couple later separated, and Kernott stopped paying his share of the bills and children's maintenance. Held, while the interests of the parties at the outset might well have been that the property should be split jointly, those intentions had altered significantly over the years and the interest was split 90:10 in favour of Ms Jones.

Presumption of Advancement:The circumstances surrounding a gratuitous gift rebuts the presumption of a resulting trust. Re Roberts: father making payments on behalf of his son is to be taken to be making an advance in favour of the son for his benefit.Bennett v Bennett: The presumption of gift arises from the moral obligation to give and a person other than the father of a child may incur the obligation as if he were the father as loco parentis. S199 Equality Act 2010: (1) the presumption of advancement is abolished(2) the abolition by subsection (1) does not have effect in relation to: (a) anything done before the commencement of the the section(b) anything done pursuant to any obligation incurred before the commencement. Nelson v Nelson: In modern society there is no reason to suppose that the probability of a parent intending to transfer beneficial interest in property to a child is any the more or less in the case of a mother than in the case of a father. Re Eskyn's Trusts: a gratuitous gift given from husband to wife is presumed to be an intended gift or advancement to the wife. Pettitt v Pettitt: Former husband claimed to have a share in the family home based upon improvement she had made upon the home. The presumption between husband and wife had reduced in significance and so should not be immediately presumedDPP: One-sided presumption that husband intends to make gift no longer applies except in particular and limited circumstances. 

Rebutting Presumptions: Dyer v Dyer: Resulting trusts can only be rebutted by circumstances of evidence. Fowkes v Pascoe: Baker bought two sums of stock. One was put in the names of herself and Pascoe her lodger. It was argued by the executor, Fowkes, that when Mrs Baker died Pascoe held the stock on resulting trust. Held, although a presumption of a resulting trust applied, it was rebutted on the facts, because plainly Baker intended to make a gift to Pascoe.Bennet v Bennet: There is very little evidence or motive required for a mother to make a gift to her child.Warren v Gurney: a father purchased a house in the name of his daughter prior to her wedding. He retained the title deeds until his death. The Court of Appeal held that the presumption of advancement was rebutted by evidence that at the time of the transaction the father had intended her husband to repay the money as ‘one would have expected the father to have handed them over either to [his daughter] or her husband, if he had intended the gift.’Lavelle v Lavelle: Property had been purchased in the name of of the appellant by her father although the presumption of advancement applied between any people in a close relationship, it was rebutted: the subjective intention of the transferor showed evidence that the property was not intended to be a gift. Antoni v Antoni: A father was the beneficial owner of properties which he transferred  to  each of his children. After his remarriage, he revoked a will leaving his property to his children and made a new one leaving everything to his new wife. He died not long afterwards. The wife claimed that the children held the shares on resulting trust for the father. Held, there was nothing to rebut the presumption of advancement (or, one might say, no evidence to show that anything other than a gift was intended). 

"Clean Hands" and Illegality: Ex turpi causa non oritur action/ Clean Hands:Muckleston v Brown: He who came to equity must come with clean hands. The court does not confiscate the property because of the illegality – it has no power to do so they "Let the estate lie where it falls", the principle being that equity will not aid a plaintiff who has transferred property to another for an illegal purpose. Illegality:Tinker v Tinker: the family home was conveyed into the wife’s name so that if his business was in trouble, his creditors could not take the home. The  effect of the clean hands rule is that someone cannot rely on evidence of their own illegal purpose as support for their claim to property. So when the couple separated, Tinker was not able to claim the house was his. This was a transfer from husband to wife, the presumption of advancement applied, and he could not rebut it by saying he was actually trying to defraud his creditors.Tinsley v Milligan: Tinsley sought possession of a house that was solely in her name to which her and Milligan had bought in Tinsley’s name alone as a way of claiming more in social security. Milligan could invoke the presumption of a resulting trust without relying on the illegal purpose and Tinsley would have to rely on her intention to defraud the social security system to rebut the presumption of a resulting trust and get the property in her own name. The court must weigh the consequences of granting relief v the consequences of withholding relief. Silverwood v Silverwood: Elderly woman had transferred money to grandchildren in order to claim income support. The plaintiff was entitled to the money under a resulting trust as the grandmother could not use her illegality as a defence. Locus Poenitentiae (Opportunity to withdraw from an ongoing process of committing oneself to an obligation, before such commitment is finalised): Tribe v Tribe: In order to avoid liability for repairs under a company he owned shares in, he attempted to deceive the landlord by selling the shares to him son, which was never paid although this was not necessary in the end. The son claimed he was entitled to the shares under the presumption of advancement. The Court held that the father had not carried out his illegal purpose and so was able to rebut the presumption. Illegality can be used as evidence if it allows him to show he has withdrawn from the transaction. Nelson v Nelson: Mother transferred house into children's name to become eligible in a low-interest loan. The presumption of advancement was rejected because there was no real intention to benefit her children, she had no intention to withdraw from the transaction. 

B) Incomplete Express Trusts/ Automatic Resulting Trusts:1. Failure to declare beneficial interest: Re Boyes: a testator instructed his solicitor to draft a will leaving all his property to the solicitor absolutely, but to be held by him and distributed according to instructions that were to be subsequently given to him. No further instructions were given to the solicitor during the testator's lifetime. After the testator's death, a paper was found indicating the testator's wish that the property be given to X and Y, however, the Court held that the terms of the trust were not communicated during the testator's lifetime; there was a failure to completely declare beneficial interest therefore the trust could not be binding.Vandervell v IRC: The beneficial interest cannot "remain in the air", therefore it remains in the settlor. 2. Failure of an express trust:Re Ames Settlement: Property was settled expressly on trusts as part of a marriage settlement, which gave the husband an income for life and the remainder to his wife for life or until her remarriage. However, although the parties went through a ceremony of marriage, and lived together as if married, a court later declared the marriage void ab initio (null). It was as if there had never been a valid marriage. Held, the property should be held resulting trust for the settlor (or his estate). An automatic resulting trust can arise where there is 'failure of a contingency'.3. Disclaiming any interest:Hillridge: An operator had made financial provision for its licence obligations via a trust fund. When the operator went into liquidation, the liquidators disclaimed the licence and the court was concerned with the fate of the trust fund. Held, a disclaimer does not terminate a trust nor does it make the fund repayable to the liquidators. It merely serves to divest Hillridge of any interest in the fund, thus making their share property of the Crown as there is no one else who can assert claim to it. 

Surplus Funds: Re Abbott Fund Trusts: Trust fund was made for maintenance of two old ladies. After they died a surplus of money was left over. Held, the surplus went back to the original contributors of the fund.Re Andrew's Trust: Friends of dead clergyman contributed to a fund for the education of his children. This was held to be a gift with the hope it would be used for the education.Re Osoba: Osoba left property in Nigeria to his wife for her maintenance and for the training of daughter up to university and for the maintenance of his mother. Held, the money was a gift on the hope of education for his daughter. Cunnack v Edwards: Fund set up for widows of deceased members of the front. After the last widow died there was a surplus of money, a resulting trust was problematic as the contributors had formed a contract for the purpose of helping the widows which left no equitable or legal rights in the money.  Re Gillingham Bus Disaster Fund: People made contributions to fund this which consequently failed. The express trust money went back to the contributors on a resulting trust. However, the money amounts were so small that the decision was not very practical. Re West Sussex Constabulary's Trusts: trust fund for constable's widows and children was moved to a fund for the police collected from (1) the members themselves (2) from raffles, sweepstakes (3) collecting boxes (4) donations and legacies. Held, all the money except from the donations and legacies were bona vacantia (ownerless goods), anything left over would be a resulting trust to be distributed between the members ( if group existed for the benefit of the members).Re Bucks Constabulary Widows' and Orphan's Fund Friendly Society: an unincorporated association registered under the Friendly Societies Act 1896 to give relief to widows and orphans of deceased members.It was disputed whether surplus assets should go to the Crown as bona vacantia. Held, the present members of the association shared in the surplus property equally, past members had no rights in the group's assets. David v Richards and Wallington: a pension fund was wound up after the company ran into financial difficulty, the surplus of the fund had been included in the trust deed which contained instructions on how to deal with the surplus. The trust deed in this case stipulated that the trustees had the authority to increase pensions and pay any remaining money back to the company.Air Jamaica v Charlton: Air Jamaica Ltd was privatised, the employee pension discontinued, and a surplus was left over. The pension trust deed clause said ‘any balance of the Fund shall be applied to provide additional benefits for Members and after their death for their widows or their designated beneficiaries’ and that ‘No moneys contributed shall in any circumstances be repayable to the Company’. Air Jamaica Ltd wished to remove clause 4, and change clause 13.3 to say that surpluses would be held on trust for the company. Held, the first clause went  against the rule against perpetuity, and so the surplus passed on trust as bona vacantia to the Crown, otherwise the surplus would be held on trust by the company. 

Quistclose Trusts: Barclays Bank Ltd v Quistclose Investements: Rolls Razor owed money to barclays bank; it needed more money and so Quistclose agreed to loan money on the condition that the dividend would be paid with it. However before this Rolls Razor fell into liquidation and Quistclose sought to recover the money. Held, the money was held on resulting trust for Quistclose which meant the Bank could not claim payment from this money. Quistclose Trust= a trust made for a specific purpose which fails. The asset is therefore held on resulting trust and "jumps back" tot he original creditor. Re Krayford: The directors of Kayfords Ltdwere concerned about insolvency. They got advice from their solicitors who said that they should open another account and deposit money from customers into that account. Krayford later went into liquidation and the creditors claimed that the money in the accounts was part of the company’s assets.It fulfilled all the requirements for creation of a trust, including certainty of intention, beneficiaries and subject matter and so the money was held on resulting trust for Kayfords’ customers.Re EVTR: the Court of Appeal held that if part of the money advanced has been used for the specific purpose, it does not prevent a Quistclose trust arising in respect of whatever is left, enabling the payer to recover that amount when the purpose failed.

Analysis:Twinsectra v Yardley: 2 solicitors failed to pay £1m loan to Twinsectra whom had lent the loan on the basis that Yardley's solicitor would provide a guarantee to buy a property. However, Yardley used the money for his own purposes, the 'middleman' solicitor "closed his eyes" to the risk of the loan money being misapplied but was not dishonest enough for accessory liability unlike Yardley's own solicitor whom had actually held the money on trust. Twinsectra test: must have acted dishonestly by the standards of a reasonable and honest person  he had to be aware of the standards himself.  "transgressing ordinary standards of honest behaviour" Cooper: The applicant applied for a declaration that moneys paid by him to the respondent company in liquidation were held on trust for the purpose of paying a third party. Held, whether or not money had been paid subject to a purpose trust was a question of fact. It must have been made clear that the moneys provided to the recipient was not to their free disposal. Pearson v Lehman Brothers: Lord Millett believed that if A transfers money to B for a specific purpose, then B obtains no beneficial interest in the property but holds it as a fiduciary for the purpose and then on resulting trust.S340 Insolvency Act 1986: (1) where an individual is adjudged bankrupt and he has given a preference to any person, the trustee of the bankrupt’s estate may apply to the court for an order under this section.(2)The court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if that individual had not given that preference.(3)For the purposes of this and the next two sections, an individual gives a preference to a person if—(a)that person is one of the individual’s creditors or a surety or guarantor for any of his debts or other liabilities, and(b)the individual does anything or suffers anything to be done which (in either case) has the effect of putting that person into a position which, in the event of the individual’s bankruptcy, will be better than the position he would have been in if that thing had not been done.

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