Resulting Trusts and Illegality

Westduetsche Landesbank v Islington LBC (1996), Lord Browne-Wilkinson

‘A resulting trust is not imposed by law against the intentions of the trustee… but gives effect to his presumed intention’

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Westduetsche Landesbank v Islington LBC (1996), Lord Goff

A resulting trust should arise whenever a transferor cannot be shown to have possessed the intention to make an ‘out-and-out gift’

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Re Sick and Funeral Society of St John’s Sunday School, Golcar (1973), Megarry V-C

A resulting trust arises because any property a person does not effectively dispose of remains their own

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Vandervell v IRC (1967)

Where property is conveyed to persons with the intention that they act as trustees, failure to declare manner in which all of the beneficial interest is to be held on trust will entail that any property unaccounted for is held on RT for the settlor

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Vandervell v IRC (1967)

Here, the beneficial interest in an option to repurchase shares was not dealt with; held: RT of benefit of option arose in favour of settlor; beneficial interest had to rest in someone and was not deemed to have been abandoned

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Re Diplock (1951)

Here, there was a gift in a will “for purposes which the trustees consider to be charitable”; this was not exclusively charitable and thus a private purpose trust failed; held: property resulted back to settlor’s estate and could be claimed by graspi

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Re Atkinson’s Will Trusts (1978)

Uncertainty found in a residuary gift which ws to be divided between “such worthy causes as have been communicated by me to my trustees in my lifetime”; held: as no such causes had been communicated, a RT arose

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Barclays Bank v Quistclose Investments (1970)

Q paid money to RR on basis that money used solely for specified purpose (paying a dividend to shareholders) and deposited in separate account; RR became insolvent before any dividends were paid; HL: money advanced was held on RT for Q on basis that

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Re EVTR (1987)

Here, a loan made to company by former employee; stated purpose= company use money only for purchase of new equipment; company paid money to a supplier, but became insolvent before equipment was delivered; supplier returned part of money to company;

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Chang v Mishcon de Reya (2015)

Here, contrast, there was nothing to indicate a Quistclose type trust as the recipient had no idea that the funds were to be used solely for particular purposes

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Re Cochrane (1955)

Here, a post-nuptial settlement whereby both husband and wife brought property; income generated was to be paid to wife on condition that she continued to reside with husband; should either die, the other would be entitled to the entirety beneficiall

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Re Cochrane (1955)

Held: RT of income arose in favour of settors in proportion to their contributions; Harman J: RT=”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”

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Westduetsche Landesbank Girozentrale v Islington LBC (1996)

No RT will arise where the trust instrument explicitly excludes this possibility or where an inference can be drawn that some person was intended to take the property beneficially

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Re Trusts of the Abbot Fund (1900)

Here, Dr F collected sum of money, raising subscriptions from public to assist 2 women who were deaf and dumb; no provision was made as to disposal of any surplus; 2 women subsequently died

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Re Trusts of the Abbot Fund (1900)

Stirling J: the subscriptions were never intended to be an absolute gift to them and that a RT arose in favour of those who donated

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Re Andrews Trust (1905)

Here, money subscribed “for or towards” the education of the infant children of a deceased clergyman”; on completion of their education, issue re surplus funds

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Re Andrews Trust (1905)

Held: children were entitled to all the money in equal shares; court ascribed broadest possible meaning to “education” and held that overriding goal of benefitting children could still be reached

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Re Gillingham Bus Disaster Fund (1958)

Here, fund set up following disaster from bus accident; collection was for injured survivors who were all naval cadets; govt later declared it would assume resp’y for welfare of cadets so purpose of trust failed; held: surplus money must result back

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Re West Sussex Constabulary’s Trust (1971)

Here, money was received from donations, collecting boxes and proceeds from entertainment events used to benefit widows and dependants of deceased members of West Sussex Constabulary; money held by an unincorporated association which was eventually w

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Re West Sussex Constabulary’s Trust (1971)

Held: money from identifiable donations should go back on a RT; money from collecting boxes was outright gift and as no RT, inevitably must go to Crown as bona vacantia and proceeds of entertainment events were also to go bona vacantia; thos who purc

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Re Printers and Transferrers Amalgamated Trades Protection Society (1899)

Here, a RT though to arise where the unexpended funds of a society were redistributed on RT principles; division was in acc with amounts contributed by existing members

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Re Hobourn Aero Components Ltd’s Air Raid Disaster Fund (1946)

Held: followed Re Printers; any contributor to the disaster fund was entitled to an interest in the surplus under a RT in proportion to the amount contributed, but subject to any adjustment made on basis of a benefit derived from the fund; this appro

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Cunnack v Edwards (1895)

Here, financial contributions to a society, made to provide annuities for widows of its deceased members, were viewed as an out-and-out transfer (a gift); on dissolution of society, there was no-one to whom surplus could go to by way of RT; members h

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Hanchett-Stamford v Attorney General (2009)

if one member survives then that person may become absolutely entitled under the contract-holding theory

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Re Bucks Constabulary Fund (No 2) (1979)

Walton J: the distribution of property on dissolution was to be governed by the contract between the members; there is no residuary role for the RT

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Re Bucks Constabulary Fund (No 2) (1979)

Where the rules of the association are silent as to what should happen on dissolution, there is a presumption of equal division amongst the existing members

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Re Recher (1972)

Modern tendency is to treat the rights of the members as being of a contractual nature without imposing a RT

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Davis v Richards and Wallington Industries Ltd (1990)

Scott J considered winding up of a pension fund that contained contributions from 3 specific sources: those of employers, those of employees and money transferred from other funds; re employers’ overpayments, these would be returnable under a RT

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Davis v Richards and Wallington Industries Ltd (1990)

Employees’ contributions would go as bona vacantia; Scott J acknowledged fact that a party had received everything he had bargained for was not nec’y a decisive argument against a RT; however, he found no RT re employees because he could not devise a

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Air Jamaica v Charlton (1999)

Lord Millett did not approve of approach in Davis; concluded: it was impossible to say that the members had received all that they had bargained for, a RT of the surplus for employers and employees cmae into being; they were entitled in proportion to

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Lynch v Burke (1995), O’Flaherty J

Presumption invented by equity to defeat the misappropriation of property as a consequence of potentially fraudulent or improvident transactions

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Dyer v Dyer (1788)

If X buys property in the name of Y, there is a presumption that Y holds the property on RT for X

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Sekhon v Alissa (1989)

Here, a mother and daughter purchased a house together, but title was transferred only in the daughter’s name; the mother was entitled to a beneficial interest by reason of a RT in proportion to the amount of her contribution

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Jones v Kernott (2011)

Lord Walker and Lady Hale: “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 RT arising from their having co

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Stack v Dowden (2007)

Baroness Hale: “the starting point where there is joint legal ownership is joint beneficial ownership”

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Jones v Kernott (2011)

Or by demonstrating a shared common intention of the parties wich reflects a subsequent intention that there should be ownership in different proportions

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Fowler v Barron (2008)

The fact that the parties had contributed unequally to the acquisition of their home would not normally be sufficient to achieve rebuttal

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Adekunle v Ritchie (2007)

Here, a mother and son bought council house together under right to buy leg’n; mother=sitting tenant and had benefit of generous discount; she could not fund mortgage alone; facts thus very diff to normal cohabiting couple; primary purpose of purchas

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Laskar v Laskar (2008)

Here, property was purchased by mother and daughter as investment; presumption of equality did not apply as property was bought for development or letting purposes and the RT mechanism operated

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Springette v Defoe (1992)

A ‘right to buy’ discount under the Housing Act 1985 is also a direct contribution

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Burns v Burns (1984)

Paying household expenses and running costs is insufficient

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Curley v Parkes (2004)

Paying conveyancing costs and stamp duty is insufficient

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Savage v Dunningham (1974)

Periodic payment of rent is insufficient

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Arogundade v Arogundade (2005)

Here, a flat was purchased for £207,000; C contributed £62,000 to purchase price and under RT, obtained a 30% share in the property ; You get back proportionately what you put in; the exact valuation of the share will normally be calculated at the da

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Walker v Walker (1984)

Presumption of RT will be displaced by evidence that the transferor or contributorp intended to confer a gift ;Here, the public declaration by a father that he intended to give his newly-wedded son the money to set up a home was sufficient to show an

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Re Vinogradoff (1935)

Here, a grandmother made lifetime transfer of £800 of War Loan shares to her young granddaughter; however, transferor continued to receive the dividends until her death; subsequently, held: the granddaughter held the shares on RT for the grandmother’

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LPA 1925, s 60(3)

In relation to a voluntary transfer of land, no resulting trust is presumed from the mere fact that the owner of a legal estate makes a gratuitous transfer of his estate into the hands of another

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Chambers, Resulting Trusts (1997), pg 18-19; Mee, ‘Resulting trusts and voluntary conveyances of land’ [2012]

Debated whether this provisions removes PRT re voluntary conveyance of land

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Cheshire and Burn, Modern Law of Real Property (15th edn, 1994) pg 161

whether it was instead a mere word-saving mechanism rendering it unnecessary to use particular phrases to make transfer effective, whilst leaving the operation of the presumption intact

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Tinsley v Milligan (1993), Lord Browne-Wilkinson

On one hand, it is ‘arguable that the position has been altered by the 1925 property legislation’

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Swadling in Birks and Rose, Resulting Trusts and Equitable Compensation (2000, Oxford) pg 61

Although PRT was found in Hodgson v Marks (1971), although contentious – argued it should have been found on basis of express trusts

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Lohia v Lohia (2001)

Nicholas Strauss QC: on a ‘plain reading’ the presumption of RT had been abolished re voluntary conveyance of land – presumption will only arise if there is some fact in addition to the lack of consideration (e.g. illegality)

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Lohia v Lohia [2001]

However, CA, on appeal, found there to be a PRT, but did not opine on survival of PRT

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Mee (2012)

although, it is argued that Morritt VC was not aware of the approach of the CA in Lohia, which weakens the strength of the authority

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Ali v Khan (2002)

However, Morritt VC followed Nicholas Strauss QC

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Lohia v Lohia [2001] Strauss QC

It is doubtful whether differences between land personalty and between methods of making apparent gifts, provide meaningful basis for distinction

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Murless v Franklin (1818), Lord Eldon

Where the transferor is regarded as morally obliged to provide for the person benefitting

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Silver v Silver (1958)

Transferor to a wife

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Dyer v Dyer (1788)

Transferor to a child

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Bennet v Bennet (1879)

Older cases indicate there is no presumption of gift where mother pays the purchase money and the property is in the name of the child; because, in equity, there is no obligation on a mother to support her child

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Hepworth v Hepworth (1870); Re Orme (1883); Shephard v Cartwright (1955); Re Paradise Motor Co Ltd (1968)

Someone with whom he/she stands in loco parentis, e.g. grandchild

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Bennet v Bennet (1879), Jessel MR

Rationale: a person not the father may put themselves in the position of loco parentis to the child, and so incur the obligation to make provision for the child

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Bennett v Bennet (1879), Jessel MR

However, the rationale for the presumption of advancement is that the transferor, by the very nature of their position, is under a duty to provide for their child

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Jamie Glister, ‘The Presumption of Advancement to Adult Children’ [2007]

However, there may be no presumption regarding adult children

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Pecore v Pecore and Madsen Estate

Although transfers from parents to children would normally be covered by the presumption of advancement, the SC held that this presumption ceases to apply when the children becomes an adult

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Pecore v Pecore, Rothstein J

This is because, given that a principal justification for the presumption of advancement is parental obligation to support their dependent children, it seems that the presumption should not apply in respect of independent adult children

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Goodman v Gallant (1986)

There will be no room for presumption of either advancement of a RT

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Warrant v Gurney (1944)

Here, presumption of adv rebutted where father bought house which was conveyed into daughter’s name; father retained deed; on his death, daughter claimed unsuccessfully to be beneficial owner of house; held: retention of deed, coupled with other evid

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Tinsley v Milligan

The general rule: a presumption of advancement cannot be rebutted by evidence of an underlying illegal purpose

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Tribe v Tribe (1995), Nourse LJ

A modified approach: this general rule was subject to an exception if the ‘illegal purpose has not been carried into effect’

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Shephard v Cartwright (1955), Lord Simmonds

As in case of rebutting PRTs, only evidence of the plaintiff’s acts and declarations contemporaneous with the transaction are admissible in his favour to rebut the presumption of advancement – subsequent acts and declarations are only admissible agai

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Holman v Johnson (1775)

Lord Mansfield: “no court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act”

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Tinsley v Milligan (1994)

T argued that court should not enforce M’s claim because of the illegal purpose underlying the transaction, demanding a strict application of the maxim that ‘he who comes to equity must come with clean hands’

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Tinsley v Milligan (1994), Lord Browne-Wilkinson

Evidential approach: a claimant is entitled to enforce an equitable interest provided that he/she did not have to rely on the fact of the illegal purpose in order to establish that interest

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Silverwood v Silverwood (1997)

Elderly lady- transferred money to her grandchildren to enable her to claim income support to contribute towards the costs of her residential care – CA: plaintiff, who was a beneficiary under her will, was entitled to maintain that the money was held

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‘The Illegality Defence’, Law Com No 320, following No 154

Law Commission recommended abandonment of ‘reliance principle’ from Tinsley v Milligan in favour of granting the court a discretion to determine that a beneficiary ought not to be allowed to enforce the equitable interest

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Patel v Mirza (2016), Lord Toulson

The test in Tinsley v Milligan has been criticised and no longer be followed

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Patel v Mirza (2016)

The Supreme Court concluded that a claimant who satisfies the requirements of a claim for unjust enrichment should not be debarred from enforcing that claim on the ground that the failed consideration was unlawful

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Patel v Mirza (2016)

A claimant can recover sums paid under an illegal arrangement, so long as restitution is possible, as it simply returns the parties to the position they would have been in had no such illegal arrangement been made, whilst preventing the defendant bei

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Patel v Mirza (2016)

Relevant factors included (a) the underlying purpose of the prohibition which was illegally contravened, (b) public policy and (c) whether denial of the claim would be proportionate, bearing in mind that punishment was not a concern of the civil cour

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Patel v Mirza (2016)

Lord Toulson: In this case, the mischief at which the offence of insider trading was aimed at is market abuse. If no such activity occurred, there is no public policy basis to bar the return of money which had previously been intended to be used for

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Patel v Mirza (2016)

Lord Kerr: If courts concentrate on the illegal nature of the contract to the exclusion of other considerations, it could result in inconsistent legal and moral terms as propositions of law

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Resulting Trusts and Illegality

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