Learning Outcomes
This article explains the nature of resulting trusts as a type of implied trust. It focuses on how presumed resulting trusts arise, particularly through voluntary conveyances and contributions to purchase price, and the key presumptions involved, including the presumption of advancement. You will learn how these presumptions can be rebutted and the significance of intention in these contexts. Understanding these principles is necessary for applying the correct analysis to property ownership scenarios, particularly relevant for SQE1 assessment questions involving co-ownership and beneficial interests.
SQE1 Syllabus
For SQE1, you are required to understand the principles governing implied trusts, specifically focusing on resulting trusts within the context of land law and trusts. Your revision should ensure you can identify and apply the rules relating to how resulting trusts are presumed and established.
As you work through this article, remember to pay particular attention in your revision to:
- The distinction between express and implied trusts, particularly resulting trusts.
- The circumstances giving rise to a presumed resulting trust (voluntary conveyance and purchase money contributions).
- The operation and effect of the presumption of resulting trust.
- The operation, effect, and rebuttal of the presumption of advancement.
- The type of evidence required to rebut these presumptions.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
-
In which situation does a resulting trust typically arise?
- Where a settlor expressly declares their intention in writing.
- Where property is transferred to another without consideration, and no gift is presumed.
- Where a trustee breaches their fiduciary duty.
- Where a valid contract for sale of land is created.
-
What is the 'presumption of advancement'?
- A presumption that any property advance must be repaid.
- A presumption in certain relationships that a transfer of property is intended as a gift.
- A presumption that trustees have the power to advance capital to beneficiaries.
- A presumption that the first person to contribute acquires the largest share.
-
Which of the following relationships traditionally gives rise to the presumption of advancement?
- Mother to child.
- Aunt to nephew.
- Father to child.
- Siblings.
-
True or False: The presumption of a resulting trust applies equally to voluntary transfers of land and personalty.
Introduction
Unlike express trusts, which are created by the clear intention of a settlor, implied trusts arise by operation of law. Resulting trusts are a key category of implied trust. They typically arise in situations where property is transferred to someone who pays nothing for it, or where someone contributes to the purchase price of property but their contribution is not reflected in the legal title. Equity presumes intentions based on these actions, leading to the 'resulting' back of the beneficial interest to the person who provided the property or funds, unless evidence indicates a different intention, such as an outright gift. Understanding these trusts requires familiarity with certain legal presumptions and how they operate.
Presumed Resulting Trusts
A presumed resulting trust arises where the law presumes, based on the circumstances of a transaction, that the transferor of property intended to retain the beneficial interest, despite transferring the legal title to another. This presumption is rebuttable with evidence of a contrary intention. There are two main scenarios where this presumption typically applies.
Voluntary Conveyance
Where an individual (A) transfers property they own to another person (B) without receiving any consideration (payment or equivalent value) in return, equity may presume that A did not intend to make a gift of the beneficial interest to B. In such cases, B holds the legal title on a resulting trust for A.
Key Term: Resulting trust A trust implied by law where the beneficial interest in property returns (results back) to the original transferor or contributor, based on presumed intention or the failure of an express trust.
This presumption applies readily to transfers of personal property (personalty), such as shares or money. For voluntary transfers of land (realty), the position is modified by section 60(3) of the Law of Property Act 1925 (LPA 1925). This section states that a resulting trust shall not be implied merely because the property is not expressed to be conveyed for the use or benefit of the grantee. While this suggests the presumption may not automatically apply to land, courts often still find a resulting trust if the circumstances indicate no gift was intended, particularly between strangers (Hodgson v Marks [1971] Ch 892).
Purchase in the Name of Another
A presumed resulting trust also arises where property is purchased using money provided by one person (A), but the legal title is put into the name of another person (B). Equity presumes that A intended to retain the beneficial interest, and therefore B holds the property on resulting trust for A.
Key Term: Purchase money resulting trust A resulting trust presumed to arise when one person provides the funds to purchase property, but the legal title is taken in the name of another person. The person providing the funds is presumed to retain the beneficial interest.
If multiple people contribute to the purchase price, but legal title is only in the name(s) of some contributors, a resulting trust may be presumed where the contributors hold the beneficial interest in proportion to their contributions.
Worked Example 1.1
Fatima provides the entire £300,000 purchase price for a house, but the legal title is registered solely in the name of her friend, George. There is no written agreement about ownership. What is the likely initial position regarding beneficial ownership?
Answer: Equity will likely presume a resulting trust. George holds the legal title, but Fatima, having provided the entire purchase price, is presumed to hold the entire beneficial interest. George holds the house on a resulting trust for Fatima.
Worked Example 1.2
Alex contributes £50,000 and Ben contributes £150,000 towards the purchase of an investment property costing £200,000. The legal title is registered in Ben's sole name. How is the beneficial ownership likely to be divided?
Answer: A purchase money resulting trust is presumed. Ben holds the legal title on trust for both himself and Alex. Their beneficial interests are presumed to be in proportion to their contributions: Alex (25%) and Ben (75%).
Rebutting the Presumption of Resulting Trust
The presumption of a resulting trust is not absolute and can be rebutted by evidence showing that the transferor (A) actually intended to make a gift to the transferee (B), or that the money provided was intended as a loan. The burden of proof lies on the person seeking to rebut the presumption (usually B, the legal title holder). Evidence considered usually relates to the circumstances at the time of the transfer.
A key way the presumption of resulting trust is rebutted is through the counter-presumption of advancement.
Presumption of Advancement
In certain relationships, equity presumes that a voluntary transfer or contribution to purchase price is intended as a gift (an 'advancement') rather than creating a resulting trust. This presumption arises from a perceived moral obligation to provide for the recipient.
Key Term: Presumption of advancement A presumption, arising in specific relationships (e.g., father to child, husband to wife), that a transfer of property or contribution to purchase price was intended as a gift, rebutting the presumption of a resulting trust.
Historically, this presumption applied where:
- A father transferred property to his child.
- A person standing in loco parentis (acting as a parent) transferred property to a child under their care.
- A husband transferred property to his wife.
- A fiancé transferred property to his fiancée (if they subsequently married).
The presumption did not traditionally apply from mother to child or wife to husband, reflecting outdated societal views. In these reverse scenarios, the presumption of resulting trust would apply unless rebutted.
Worked Example 1.3
David buys shares but registers them in the name of his adult daughter, Chloe. There is no other evidence of his intention. What presumption applies?
Answer: The presumption of advancement applies. As David is Chloe's father, equity presumes the transfer was intended as a gift. Chloe holds both legal and beneficial title, unless David can provide evidence to rebut this presumption (e.g., evidence from the time of transfer showing he intended to retain beneficial ownership).
Rebutting the Presumption of Advancement
The presumption of advancement can itself be rebutted by evidence showing that the transferor did not intend to make a gift. Evidence must relate to intentions at the time of the transfer. Subsequent declarations or actions by the transferor cannot typically be used in their own favour to rebut the presumption.
Exam Warning
Section 199 of the Equality Act 2010 abolishes the presumption of advancement. However, this section is not yet in force. For SQE1 purposes, you must apply the law as it currently stands, including the traditional presumption of advancement and its limitations. Be aware of the specific relationships it covers.
Illegality
If a transfer was made for an illegal purpose (e.g., to defraud creditors), the court must consider public policy factors to determine whether allowing a claim based on a resulting trust (or rebutting a presumption of advancement) would be contrary to the integrity of the legal system (Patel v Mirza [2016] UKSC 42). This involves assessing the purpose of the prohibition transgressed, other relevant public policies, and proportionality. The previous reliance principle from Tinsley v Milligan [1994] 1 AC 340 is no longer the sole test.
Key Point Checklist
This article has covered the following key knowledge points:
- Resulting trusts are implied by law based on presumed intentions or failure of express trusts.
- Presumed resulting trusts arise from voluntary conveyances (especially of personalty) or contributions to purchase price without consideration.
- The contributor is presumed to retain a beneficial interest proportionate to their contribution.
- This presumption can be rebutted by evidence of a contrary intention (e.g., gift or loan).
- The presumption of advancement acts as a counter-presumption in certain relationships (father-child, husband-wife), suggesting a gift was intended.
- The presumption of advancement can also be rebutted by evidence of contrary intention.
- Evidence for rebuttal usually must relate to the time of the transaction.
- LPA 1925, s.60(3) affects the presumption for voluntary conveyances of land.
- Illegality may affect the court's willingness to recognise a resulting trust based on public policy considerations.
Key Terms and Concepts
- Resulting trust
- Purchase money resulting trust
- Presumption of advancement
