Law - Resulting trusts

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Peter Gibson L.J. began his judgment in Drake v Whipp:

"Yet again this court is asked to rule on a dispute between a man and a woman, who cohabited but were not married to each other, as to their respective beneficial interests in a property which they purchased to be their home but which was put into the man's name only. The usual lengthy litany of authorities as well as more recent additions have been recited to us and, as is notorious, it is not easy to reconcile every judicial utterance in this well-travelled area of the law."

The above indicates just how frustrated the courts have become with the area of resulting trusts. The years when men did the work and women stayed home and cooked have gone but yet the law still has not changed, women now considered equal as seen in Article 5 Protocol 7 of the European Convention on Human Rights which requiring the law to treat husband and wife equally. This paper will consider the judgments made and reform offered and whether the current general law is adequate.

In Re Vandervells Trust No 21 Megarry J. described what a presumed resulting trust was:

"The first class of case is where the transfer to B is not made on any trust ... there is a rebuttable presumption that B holds on resulting trust for A. The question is not one of the automatic consequences of a dispositive failure by A, but one of presumption: the property has been carried to B, and from the absence of consideration and any presumption of advancement B is presumed not only to hold the entire interest on trust, but also to hold the beneficial interest for A absolutely. The presumption thus establishes both that B is to take on trust and also what that trust is. Such resulting trusts may be called "presumed resulting trusts"

However in Westdeutsche Landesbank Girozentrale v Islington2Lord Browne-Wilkinson said that both types of trusts were examples of trusts giving effect to the common intention of the parties. He continued saying that

'It is important to stress that this is only a presumption, which presumption is easy easily rebutted either by the counter presumption of advancement or by direct evidence of A's intention to make an outright transfer.'

This approach means that a resulting trust will only be recognised where the transferor of property can be considered to have intended that the property would be held on trust for him, on the occurrence of certain events3. The intention (of a transferor) will here be presumed.

However the settlor's intentions cannot be presumed to be intended for one thing when he or she has expressly intended another. As Lord Harman stated in Re Cochrane's Settlement Trusts:4

'A resulting trust is the last resort to which the law has recourse when the draftsman has made a blunder or failed to dispose of that which he has set out to dispose of'

More recently than the Westdutche case, Lord Millet has decided to come up with his own approach:

"Like a constructive trust, a resulting trust arises by operation of law, although unlike a constructive trust it gives effect to intention. But it arises whether or not the transferor intended to retain a beneficial interest - he almost always does not - since it responds to the absence of any intention on his part to pass a beneficial interest to the recipient".5

Already it has become clear that there is considerable dissension amongst the courts to what exactly a resulting trust is and when it occurs. Its main reasoning to being in existence is to prevent unfair enrichment and to support the maxim that 'equity abhors a beneficial vacuum.'6

Whenever someone buys either real or personal property and has it conveyed or registered into someone else's name, it is presumed that the other holds the property on trust for the person who has paid the purchase money.

As Eyre CB said in Dyer v Dyer7:

'The clear result of all the cases, without a single exception, is that the trust of a legal estate ... results to the man who advances the purchase-money. This is a general proposition, supported by all the cases, and there is nothing to contradict it. It is the established doctrine of a Court of equity, that this resulting trust may be rebutted by circumstances in evidence.

It seems clear that the presumption of resulting trusts arose from the widespread practice of transferring land to others to hold to the use of the apparent donor. Although Dyer v Dyer refers only to land, the principle has always been treated as equally applicable in pure personalty. In Shephard v Cartwright8 the House of Lords stated that 'Where a man purchases shares and they are registered in the name of a stranger, there is a resulting trust for the purchaser'.

A voluntary conveyance of freehold land means a presumption of a resulting trust to the grantor in Ireland. Establishing an intention on the part of the grantor to make a gift to the transferee may rebut the presumption.9 When looking at the presumption of a resulting trust concerning land, the Law of Property Act, 1925 s.60 (3) is the main legislation available to the courts.10 Hodgson v Marks11 shows that it is debatable whether on a voluntary transfer there is a presumption of resulting trust in England.

In relation to personalty, it seems to be settled that on a transfer into the joint names of the transferor and another, there is a presumption of a resulting trust for the transferor. In Re Vinogradoff12, the testatrix had transferred a £800 war loan into the joint names of herself and her infant granddaughter aged four. After the death of the testatrix it was held that the granddaughter held the war loan on a resulting trust for the testatrix's estate. Farwell J. held that, even though a child may not be appointed a trustee, the presumption of resulting trust applied, and the granddaughter held that property on resulting trust for the estate of the testatrix. It is doubtful that the courts decision coincided with the transferor's intention. An argument against such actions came from James Penner13:

'Regarding personalty, the presumption still technically applies. Since, however, it must surely be the case that most gratuitous transfers are intended to be gifts, the presumption should give way to the slightest contrary evidence, including evidence of the surrounding circumstances and common sense inferences to be drawn therefrom - the presumption fully applies when it is my round and I buy you a pint, but no judge in his right mind will say that you hold that pint on trust for me.'

It is also seen that there is a presumption of a resulting trust where there is a transfer into the name of another alone.14 In Seldon v Davidson15, it was also held that where A pays money to B in circumstances where there is no presumption of advancement, the transaction is presumed to be a loan. If B alleges that it is in fact a gift, the burden of proof is on him to prove his case.

This then leads on to rebutting the presumption of a resulting trust. The presumed intention of a person, who purchases property in the name of another whether jointly or alone, that that other shall be a bare trustee for him, will not prevail if evidence establishes that the true intention is otherwise. The same is true where there is a voluntary conveyance or transfer which gives rise to a presumption of a resulting trust.16 With many papers written on the subject, Lord Brown -Wilkinson who in the Westdutche case said that the presumption of a resulting trust 'is rebutted by evidence of any intention inconsistent with such a trust', agreed with the work of William Swadling who commented:

'My argument has been that the presumed intention resulting trust which arises in the case of a gratuitous transfer is a presumption of actual intent and therefore any evidence that parties intended something other than transfer on trust will suffice.'17

The onus of rebutting rests on the donee, which must prove that the real intention of the purchaser/transferor was to make a gift of the property. The authorities are clear, however, that if the donor and the donee have a close relationship at the time of the transfer, then the presumption is weakened, and only slight evidence of an intention to make a gift will be necessary to rebut the presumed Trust.18 In Standing v Bowring19, Pearson J. stated that it was quite clear that Mrs. Standing had well considered what she was doing and it was held that the transfer was originally made with the deliberate intention of benefiting the Defendant, and not with a view to the creation of a trust. Another way of rebutting the presumption is to prove that the gift was to be intended. In Fowkes v Pascoe20 it was held that in this case the evidence of the son and his wife was admissible, and could not be disregarded as rebutting the presumption of a resulting trust; and that, coupled with the circumstances under which the stock was purchased, it was sufficient to rebut the presumption.

The presumption of a resulting trust may also be rebutted by the presumption of advancement which is where voluntary conveyance is made to the wife, fiancé or child of the transferor or else where the transferor is in loco parentis (in the position of parent) to the transferee, there is a presumption that the transferor has made a gift for the advancement of the transferee. In the case Re Roberts21 a father took out an insurance policy on the life of his son. After his death the insurance company paid three further premiums, before the death of the son in 1942. His two daughters survived him and claimed a lien on the policy moneys for the thirty-three premiums paid by J. R. during his life, and the three paid after his death. It was held that the presumption of advancement prevailed. But after the father's death there was no longer a relationship between father and son so there was no payment permitted after that time.
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Certain important principles should be referred to before investigating the different situations that may arise concerning the presumption of advancement. Property rights must be ascertained at the time of the purchase or transfer, and the rights cannot be altered by subsequent events unless there has been an agreement. Lord Morris said:

'The fact of a break-down of the marriage is irrelevant in the determination of a question as to where ownership lay before: the breakdown will then merely have caused the need for a decision but will not of itself have altered whatever was the pre-existing ...

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A good essay on this knotty trusts issue. To bring it up to date, reference must be made to Stack v Dowden. 4 Stars.