Implied Trusts

Q: What does the Law of Property Act 1925 s. 53(2) state regarding formality requirements for implied trusts?

A: There are no formality requirements for implied trusts under s. 53(2) of the Law of Property Act 1925.

Q: On what basis do resulting trusts arise?

A: Resulting trusts arise on the basis of presumed intention and may occur due to the failure of a trust or apparent gifts.

Q: How does a resulting trust operate in equity?

A: A resulting trust compels the transferee to hold property on trust for the transferor based on a presumed intention.

Q: How does a resulting trust differ from an express trust?

A: - Express trust: The settlor certainly intended to create a trust over the property.

• Resulting trust: The transferor presumably intended to retain a beneficial interest in the property, Vandervell v IRC [1967].

Q: What are the two main situations that may give rise to a resulting trust, as described in Westdeutsche Landesbank Girozentrale v Islington LBC [1996]?

A: The two main situations are:

• Failure of a trust.

• Apparent gifts that are not intended as outright gifts.

Q: What happens when a trust fails?

A: If a trust fails, the equitable interest results back to the settlor, meaning the property is held on a resulting trust for them.

Q: In what ways can a trust fail, leading to a resulting trust?

A: A trust can fail due to:

• Failure of the trust.

• No trusts being declared.

• Incomplete disposal of the beneficial interest.

• Failure of a specific purpose.

Q: What was the issue in Re Diplock [1941]?

A: Caleb Diplock’s will intended to distribute his residuary estate to “charitable or benevolent objects.” This was not a valid charitable disposition, leading to a failure of the trust. The trust may fail because of how it has been expressed.

Q: What happens when property is conveyed to persons as trustees but no trusts are declared?

A: If no trusts are declared, the property may result back to the settlor or their estate, as seen in Vandervell v Inland Revenue Commissioners [1967].

Q: What is the issue with an incomplete disposal of the beneficial interest?

A: The equitable interest must go somewhere. If part of the interest is given to a beneficiary but the rest is unallocated, a resulting trust may arise.

Q: What was the issue in Re Trusts of the Abbott Fund [1900]?

A: A fund was raised for the maintenance of two deaf ladies. Upon their deaths, if the fund was intended for their maintenance specifically, the surplus should return to the donors. If it was a gift for the ladies, it should be distributed according to their wills.

Q: What was the issue in Re Andrew’s Trust [1905]?

A: A fund was raised for the education of a deceased clergyman’s children. Once all children had completed their education, the question arose as to what should happen to any surplus.

Q: What was the issue in Re Osoba [1975]?

A: A testator left property for the maintenance of his mother and widow, and the education of his daughter. Upon the deaths of the mother and widow, and after the daughter’s education was completed, the issue arose of what should happen to any remaining property.

Q: What is a Quistclose trust?

A: Failure of specific purposes: a Quistclose trust arises when money is loaned for a specific purpose, and if that purpose fails, the money is held on trust for the lender rather than forming part of the borrower’s assets. These trusts are uncommon.

Q: What was the issue in Barclays Bank v Quistclose Investments Ltd [1970]?

A: Quistclose loaned money to Rolls Razor Ltd to pay dividends to shareholders. Rolls Razor went into liquidation before declaring the dividend. Barclays Bank, a creditor, attempted to claim the money to pay the company’s debts.

Q: What is a purchase money resulting trust?

A: A purchase money resulting trust arises when someone makes a financial contribution to the purchase of property. This is because equity presumes bargains, not gifts, so the contributor is presumed to have a beneficial interest unless there is evidence that the contribution was intended as a gift.

Q: When does a resulting trust arise in property purchases, and how can it be rebutted?

A: A resulting trust arises if:

1. A person purchases property, but it is registered in another person’s name.

2. Multiple people contribute to a purchase, but the property is only registered in one name.

This presumption can be rebutted by evidence showing the contribution was intended as a gift.

Q: What is the presumption of advancement?

A: The presumption of advancement applies in limited circumstances where a voluntary transfer is presumed to be a gift, rather than held on resulting trust. It is stronger than the presumption of resulting trust but is rebuttable with evidence to the contrary.

Q: In what situations does the presumption of advancement apply?

A:

1. Husband to wife – A husband transferring property to his wife is presumed to be making a gift (but not vice versa). Pettitt v Pettitt [1970].

2. Transfers to children – Traditionally applied to transfers from a father to a legitimate child but now extends to both parents and those in loco parentis.

Q: What change does the Equality Act 2010 s. 199 introduce regarding the presumption of advancement?

A: The presumption of advancement is to be abolished under Equality Act 2010 s. 199, meaning such transfers will no longer be presumed to be gifts.

Q: What is a constructive trust?

A: A constructive trust arises by operation of law as a result of behaviour that equity will not tolerate. It is imposed by the court due to wrongdoing, independent of the trustee’s intention.

Q: What does a constructive trust compel the legal owner to do?

A: The legal owner is compelled to hold property on trust for the beneficiaries, giving them a proprietary interest that takes priority over creditors.

Q: When does a constructive trust arise?

A: It arises at the time of the relevant conduct that equity deems unacceptable.

Q: Can someone be called a constructive trustee without holding trust property?

A: No. Only a person holding relevant trust property can be called a constructive trustee. If they only have liability to account, there is no proprietary interest in trust property.

Q: What are some examples of situations where a constructive trust may arise?

A: Fiduciaries making unauthorised profits, acquisition by killing, mutual wills, fraudulent and unconscionable behaviour.

Q: Fiduciaries making unauthorised profits: What is a fiduciary?

A: A fiduciary is a person who owes a duty of good faith and loyalty, acting in relation to another’s property or affairs in a position of trust and confidence, as in Millett LJ Bristol & West Building Society v Mothew [1998].

Q: What are the key characteristics of a fiduciary relationship?

A: A fiduciary must:

• Act in good faith.

• Not make a profit from their trust.

• Avoid conflicts of interest.

• Not act for their own or a third party’s benefit without informed consent.

Q: What are four common examples of fiduciary relationships?

A:

1. Trustee/beneficiary

2. Company director/company

3. Agent/principal

4. Commercial partners

Q: Can a fiduciary ever make a profit?

A: Yes, but only if it is authorised. A fiduciary can receive payment if allowed under a trust instrument, the Trustee Act 2000, or a contractual agreement. However, they must not make an unauthorised profit or misuse their position for personal gain.

Q: What happened in Keech v Sandford (1726)?

A: Sandford, holding a lease on trust for Keech (an infant), tried to renew it for Keech’s benefit, but the landlord refused. Sandford then renewed the lease for himself, which the court ruled was an unauthorised profit and imposed a constructive trust over the lease.

Q: Trustees who are company directors: Does a trustee who becomes a director of a company in which the trust has a shareholding automatically become liable to the beneficiaries for director’s fees? 3 cases

A: No. Cases such as Re Macadam [1946], Re Dover Coalfield Extension Ltd [1908], and Re Gee [1948] establish that trustees who become directors do not automatically owe director’s fees to the beneficiaries.

Q: What happened in Re Macadam [1946]?

A: The trust owned shares in a company. The company’s articles allowed trustees to appoint two directors. The trustees appointed themselves as directors.

Q: What happened in Re Dover Coalfield Extension Ltd [1908]?

A: The trustees became directors of a company before holding any trust shares and later had trust shares registered in their names.

Q: Fiduciaries other than trustees: What determines a fiduciary’s liability for making a profit?

A: Liability depends on whether the fiduciary abused their position or trust property to make a profit, or whether there was a conflict of interest.

Q: What are 3 key cases concerning fiduciary liability for unauthorised profits?

A: Regal (Hastings) v Gulliver [1967]

Guinness Plc v Saunders [1990]

Industrial Development Consultants Ltd v Cooley [1972].

Q: Existence of a fiduciary relationship: Does English law have a comprehensive definition of fiduciary relationships?

A: No, English law has not developed a comprehensive definition. Some relationships, like trustee/beneficiary, are recognised as fiduciary.

Q: How did Finn define a fiduciary in Fiduciary Obligations?

A: Finn stated that a fiduciary is “simply, someone who undertakes for or on behalf of another in some particular matter or matters.” However, this was considered too broad (Swain v The Law Society [1983]).

Q: What must be present for a fiduciary relationship to exist?

A: There must be an inherent element of trust and confidence, where one party has a duty to act on behalf of the other and could potentially abuse their position for personal gain.

Q: What happens if no fiduciary relationship exists?

A: There will be no liability, as seen in Re Biss [1903].

Q: What were the facts of Boardman v Phipps [1967]?

A: Boardman, a solicitor to a trust, attended an AGM of a company in which the trust owned shares. He proposed the trustees buy a controlling interest to improve management, but they could not. Boardman then used his own money to buy the controlling interest, made management changes, and increased company profits.

Q: Why was Boardman v Phipps considered a constructive trust case?

A: A beneficiary sued Boardman for breach of fiduciary duty, as he had used knowledge gained in his fiduciary capacity for personal gain. The court imposed a constructive trust over his profits.

Q: Why do implied trusts arise in the context of family homes?

A: Family finances are usually organised for convenience rather than with the intention of acquiring property rights, leading to implied trusts when ownership is disputed.

Q: What is the simple solution to avoid disputes over ownership in the family home?

A: Entering into an express declaration of trust, which is conclusive regarding equitable ownership (Goodman v Gallant [1986]).

Q: What happens when property is conveyed into joint names?

A: A trust of land arises automatically.

Q: What were the facts of Stack v Dowden [2007]?

A: The parties cohabited and purchased a house in joint names. Ms Dowden contributed significantly more to the purchase price and mortgage payments. They kept finances strictly separate.

Q: What 7 factors did Baroness Hale suggest courts should consider in determining true intentions in Stack v Dowden?

A:

• Advice or discussions at the time of conveyance

• Purpose of property acquisition

• Nature of parties’ relationship

• Presence of children

• How the purchase was financed

• How the parties arranged personal finances

• Parties’ character and personalities

Q: What key issue was addressed in Jones v Kernott [2011]?

A: Whether parties’ intentions regarding ownership can change over time.

Q: What were the facts of Jones v Kernott [2011]?

A: The parties purchased a house in joint names, contributing jointly. After separation, Mr Kernott stopped contributing, cashed a life insurance policy, and bought his own house.

Q: What principle was established in Jones v Kernott?

A: Courts must determine the parties’ actual intentions, including any changes over time.

Q: What are the 3 key legal principles when parties purchase a family home in joint names?

A

1. An express declaration of trust is conclusive.

2. In the absence of an express declaration, equity follows the law, meaning equitable ownership mirrors legal ownership.

3. This presumption can be rebutted if there is sufficient evidence of contrary intention.

Q: What must a non-legal owner prove to claim an interest in a property conveyed to one party only?

A: They must demonstrate that they were intended to have an interest.

Q: What are the three ways a non-legal owner can establish an interest in the land?

A:

1. Express Trust – A clear agreement stating ownership shares.

2. Resulting Trust – Where financial contributions suggest an ownership interest.

3. Common Intention Constructive Trust – Based on shared intent and detrimental reliance.

Q: What is required for an express declaration of trust in relation to property?

A: An express declaration of trust must comply with the rule in Law of Property Act 1925 s. 53(1)(b), which may be satisfied by the transfer deeds.

Q: When does a purchase money resulting trust arise?

A: A purchase money resulting trust arises where one party (who is not the legal owner) has contributed to the purchase price of the land at the outset, with each party’s share being proportionate to their contribution.

Q: What is the key principle of a purchase money resulting trust?

A: It is based solely on initial direct financial contributions to the purchase price and does not consider other contributions.

Q: How did Marr v Collie [2017] challenge the presumption from Stack v Dowden?

A: Collie argued that the presumption “equity follows the law” from Stack v Dowden should apply, giving him an interest in the property. Marr argued that the presumption only applies to family homes, not investment properties.

Q: When does a common intention constructive trust arise?

A: It arises where there is an agreement between the parties to share ownership of land, and one party relies on this to their detriment, making it unconscionable for the legal owner to deny their interest.

Q: What two key elements must be proven for a constructive trust?

A: 1. A common intention to share ownership.

2. Detrimental reliance on that agreement.

Q: What did Lloyd’s Bank v Rosset [1991] establish about common intention?

A: It confirmed that common intention must be expressly stated or inferred from conduct, and that merely assisting with renovations is unlikely to establish a beneficial interest.

Q: Can common intention be inferred telepathically?

A: No, there must be actual discussion or conduct supporting common intention (Springette v Defoe [1992]).

Q: What was the significance of Eves v Eves [1971]?

A: The court found a common intention because the legal owner falsely told his partner that she could not be on the title due to her age, which implied that she would have been included otherwise.

Q: How did Grant v Edwards [1986] demonstrate detrimental reliance?

A: The claimant was led to believe she should not be a legal owner for legal reasons, and she acted on this assumption.

Q: What are four examples of detrimental reliance in a constructive trust claim? 3 cases

A:

• Direct contribution to purchase price (cash deposit or loan in their name).

• Mortgage repayments with both parties’ knowledge (Lightfoot v Lightfoot-Brown [2005]).

• Indirect contributions referable to the acquisition (Gissing v Gissing [1971]).

• Payment for substantial repairs and improvements (Aspden v Elvy [2012]).

Q: How did Oxley v Hiscock [2004] influence how courts divide beneficial interests?

A: The court considered the whole course of dealings between the parties when determining how to divide their shares.

Q: What is proprietary estoppel?

A: Proprietary estoppel is a way of creating a proprietary interest in property in the absence of following the correct formalities. It is recognised in common law and equity and acts as a remedial doctrine to right a wrong.

Q: What are the three elements the claimant must prove to establish proprietary estoppel?

A:

1. Representation

2. Reliance

3. Detriment

Q: What case established that a representation must be demonstrated for proprietary estoppel to apply?

A: Sinclair v Sinclair [2009]

Q: Can there be multiple representations over time for proprietary estoppel?

A: Yes, the Court can infer a representation from the circumstances, which leads the claimant to believe they have an interest in the property.

Q: What case illustrates that multiple representations can create proprietary estoppel?

A: Re Basham [1986] - Joan worked for her stepfather Henry for free and helped run various pubs. Henry convinced her to stay, indicating that she would inherit his cottage. Henry died intestate.

Q: What case involved a representation regarding a promise to inherit property, but the will was changed, leading to proprietary estoppel?

A: Gillett v Holt [2001] - Gillett worked on Holt’s farm for free. Holt promised Gillett the farm and executed a will to that effect. Holt later executed a new will, excluding Gillett.

Q: What case demonstrates that an assurance does not need to be explicit to create proprietary estoppel?

A: Thorner v Major [2009] - Thorner worked on Major’s farm for free. Although there was no explicit assurance, Major’s words and conduct led Thorner to believe he would inherit the farm.

Q: What must the claimant show regarding reliance on a representation in proprietary estoppel?

A: There must be a sufficient causal link between the representation and the reliance, where the claimant shows they acted in a particular way based on the assurance.

Q: What is the nature of detriment in proprietary estoppel?

A: Detriment need not involve financial expenditure, though often it will. It may include services provided without compensation, as seen in Gillett v Holt, Thorner v Major, and Jennings v Rice [2002].

Q: What case clarified that detriment in proprietary estoppel does not have to be financial?

A: Van Laethem v Brooker and another [2005]

Quote: “Detriment is not a narrow or technical concept… so long as it is something substantial.”

Q: What did the case Lissimore v Downing [2003] say about detriment in proprietary estoppel?

A: The claimant’s conduct must be detrimental or prejudicial, going beyond what might be expected, and induced by an assurance.

Q: What are possible remedies in proprietary estoppel?

A: Remedies might include equitable compensation (money), a right to occupy property for life, or transfer of absolute interest to the property. The remedy will always be the minimum necessary to do justice.

Q: What case established that the remedy in proprietary estoppel should be the minimum necessary to do justice?

A: Crabb v Arun District Council [1976]