Resulting Trusts

Question 1

Resulting trusts arise?

Answer 1

By operation of law, in response to the settlor’s intention

Question 2

Drake v Whipp 1995

Answer 2

An RT “operates as a presumed intention of the contributing party in the absence of rebutting evidence of actual intention” - Gibson LJ

Question 3

What’s the easiest way to think about a resulting trust?

Answer 3

To think about it as a legal mechanism that operates where ownership is not clear

Question 4

Categories of resulting trust

Answer 4

• Presumed
• Automatic
• Quistclose
• Other?

Question 5

What presumptions do presumed resulting trusts operate on?

Answer 5

• Presumption against gifts

- Presumption in favour of the provider of purchase money

Question 6

Hodgson v Marks 1971

Answer 6

F: A manipulative lodger convinced an elderly house owner to convey the house to him in an understanding that he would hold in on trust for her
I: Was there a presumed resulting trust even after s60(3) LPA 1925?
H: Yes, the doctrine of presumed resulting trusts still applied on a reversed burden of proof

Question 7

Lohia v Lohia 2001

Answer 7

F Land was transferred from son to his father with no consideration, father died and the son claimed that the absence of consideration meant that the house was to be held upon trust for the donor and donee as beneficial joint tenants in equal shares, and that accordingly upon the death of the father he was entitled to his share
I: Was there presumption of RT?
H: The section was clear and that a conveyance for nil value meant what it said, a person seeking to establish a resulting trust had to prove it

Question 8

Ali v Khan 2002

Answer 8

F: Father sought to transfer his home to his two daughters, the daughters gave £20,000 for consideration, but the house was worth more, the daughters then financed their wedding
I: Was there a presumption of RT?
H: Yes, held to be a trust, however, no reference to Lohia

Question 9

Re Vinagradoff 1935

Answer 9

F: Grandmother conveyed shares into the joint names of herself and her 4yo granddaughter, then died
I: Was there a presumption of RT?
H: The gratuitous nature of the initial conveyance give rise to a RT and granddaughter now held the shares on trust for grandmother’s estate

Question 10

Midland Bank v Cooke 1995

Answer 10

F: The house purchased in the sole name of the husband, but some of it came from the gift from his parents to the couple jointly
I: Presumption of RT?
H: Yes, she was entitled to a share of the house

Question 11

Fowkes v Pascoe 1975

Answer 11

F: Testatrix had one son who left behind a widow that she treated as family (and her kids), then testatrix bought two sums of stock, one put in the names of herself and her grandson, other her and her friend
I: Presumption of RT?
H: Yes, but rebutted on the facts, plainly because there was an intention of a gift

Question 12

Abrahams v Trustee in Bankruptcy of Abrahams 1999

Answer 12

F: Mr and Mrs Abrahams were members of the national lottery syndicate, when they separated, she continued to pay his share, he then went bankrupt and she won the lottery
I: RT?
H: Yes, but he was holding the money for her

Question 13

Relationships giving rise to presumption of advancement

Answer 13

• Father and child
• Husband and wife
• Persons standing in loco parentis

Question 14

Which section abolishes the presumption of advancement?

Answer 14

s199 Equality Act

Question 15

Shephard v Cartwright 1955

Answer 15

F: Father purchased shares in the name of children, then he wanted to get money out of the account and the children allowed him to do so not knowing about this, father gave instructions as to signing of documents
I: Could the declaration rebut the presumption of the gift?
H: No

Question 16

Gascoigne v Gascoigne 1918

Answer 16

F: H transferred property to W to hide something illegal
I: Presumption of advancement?
H: Yes, could not be rebutted because illegality

Question 17

Tinsley v Milligan 1994

Answer 17

F: Lesbian couple purchased a house registered in the sole name of Tinsley but joint equitable ownership, Milligan pretended to be a lodger to get social benefits which contributed towards the bills, then they split up
I: Presumption of RT?
H: M was entitled to rely on the presumption of RT to claim a half share in the house because M did not need to rely on her illegal actions; she had an equitable interest under a RT because she had contributed to the purchase price

Now overruled by Patel v Mirza 2016

Question 18

3 categories of automatic resulting trusts according to Virgo

Answer 18

• Initial failure of an inter-vivos trust
• Invalidity
• Subsequent failure

Question 19

Re Ames’ Settlement 1947

Answer 19

F: A couple got married and H’s father transferred some money for the benefit of them and their children, then discovered marriage never consummated
I: Was the money on RT for father?
H: Yes, the trust void as the marriage void

Question 20

Re Gillingham 1958

Answer 20

F: Money raised for victims of an accident, a fund was created for victims and their families through anonymous donations, no one claimed the money
I: Was there an RT?
H: Yes, but since no one claimed, a memorial built

Question 21

Quistclose trust

Answer 21

A trust created where a creditor has lent money to a debtor for a particular purpose and if he uses the money for any other purpose, it is held on trust for the creditor

Question 22

Barclays Bank v Quistclose 1970

Answer 22

F: Rolls Razor owed money to Barclays, it needed more to pay a dividend, Quistclose agreed to a loan on the condition the dividend would be paid with it, the money was paid into the account but before it was used, Rolls Razor went into voluntary liquidation, Quistclose sought to recover the money before Barclays as they retained a beneficial interest
I: Was Quistclose’s argument right
H: Yes - primary trust for the purpose of paying the dividends and if it fails, then a secondary trust in favour of the lender

Question 23

What did Lord Millett say about the nature of the trust in Twinsectra?

Answer 23

That it’s a Quistclose trust, and he analysed Quistclose trusts like unjust enrichment

Question 24

Gap theory about RTs

Answer 24

B not allowed to deny he holds the money on trust as inequitable but C dead so he has to hold for someone - A

Question 25

Invalidity theory about RTs

Answer 25

A’s attempt failed, so put him back in the original position, equity can’t do this as legal title already with B, so it can put the trust on RT so Saunders v Vautier can apply and positions can be restored

Question 26

Westdeutsche theory about RTs

Answer 26

A intended that if B couldn’t hold on trust for C, then she should hold for A - doesn’t explain Vandervell

Question 27

Megarry Vandervell theory about RTs

Answer 27

B holds on trust for A because at the start of the story, A has a legal and beneficial interest in the money he wants to transfer, then successfully transfers the legal title but not beneficial which stays with him -> hence automatic RT

Question 28

Millet Air Jamaica theory about RTs

Answer 28

B holds for A because the beneficial interest in the money cannot rest in C and A does not intend that it should rest in B

Question 29

Birks-Chambers theory about RTs

Answer 29

A does not intend that B should benefit! from it, thus unjust enrichment