Implied Trusts

Equity and Trusts - Chapter 6

What is a resulting trust?

Implied where a person transfers property or money to another in circumstances where it is or becomes unclear who owns the beneficial interest

Not intention to make a gift - money held on trust or in a joint purchase, in shares proportionate to their contributions

Can a resulting trust be rebutted?

YES:

i) counter-presumption of advancement

ii) direct evidence of A’s intention to make an outright transfer

How would a resulting trust arise from an incomplete disposal of a trust’s equitable interest?

a) transfers property to trustees on trust BUT

b) does not dispose of all or part of their equitable interest (eg because the declared trusts are void or do not exhaust the trust fund)

What else gives rise to a resulting trust?

i) FAILED DECLARATION OF TRUST - i.e. fails the three certainties/capricious/unworkable/against perpetuities.

In all these circumstances, the trust property, which has been validly transferred to the trustees, will be held by those trustees on resulting trust for the settlor - on basis as settlor would have intended this to happen if trust failed.

ii) B DOES NOT ACHIEVE CONTINGENCY

iii) B PREDECEASES (interest lapses and no substitute) - there will be a resulting trust for the T’s estate.

What is the presumption of resulting trust?

i) voluntary transfer

ii) X provides purchase money for Y - ‘you get what you pay for’ - your interest is equivalent to your financial contribution

iii) evidence that the transferor intended to retain some power over the property would tend to suggest a resulting trust - e.g. kept title deeds

*evidence should be at time of transfer - not after (could make it up)

What is a voluntary transfer?

When there is no consideration - there is no evidence of intention

The presumption is that Y holds the property on resulting trust for X

What are the limitations on a presumption of a resulting trust?

a) presumption is applied only in the absence of evidence of X’s actual intentions

b) can be rebutted - e.g. evidence it was a gift/loan (on birthday)

c) presumption is less likely to apply if the property in question is realty

d) when the parties are related such that X is taken as owing a moral obligation for Y’s welfare, the presumption is not one of resulting trust but of gift - this is called the ‘presumption of advancement’,

What is the presumption of advancement?

The presumption of advancement will apply where the person making the voluntary transfer or providing the purchase money is regarded as being under an obligation to provide for the other party

E.g:

a) father to child (does no apply to mother to child)

b) loco parents (taken on father’s responsibilities - e.g. single mother)

c) husband to wife (does not apply to wife to husband)

d) fiance to fiancee

*does not apply post Equality Act 2010.

What is a constructive trust?

Arise by law - often in property

• One party holds legal title to the home, and

• Another party has contributed or relied on a shared understanding that they would have an interest, and

• It would be inequitable to allow the legal owner to deny that interest

What evidence is needed of a common intention constructive trust?

a) there was a common intention between the parties that both were to have an interest - share ownership of the land (ie that the sole legal owner holds on trust for them both)

b) the claimant acted to their detriment relying on that common intention

What is an express common intention constructive trust?

This trust will exist where an agreement, arrangement or understanding was reached between the parties at the time the property was purchased (or exceptionally later) that the property was to be shared between them

Also need evidence to show that they acted to their detriment in reliance on the common intention - (e.g. household expenses, bringing up children)

What is an inferred common intention constructive trust?

If there is no evidence of express common intention, the court will infer a common intention from direct monetary contributions to the purchase, such as contributions to the purchase price or deposit (or later mortgage payments) - ‘nothing less will do’ - (e.g. household expenses not good enough)

How would the payment of household expenses be regarded as an indirect contribution to the purchase price?

If the payments are:

i) substantial (= detrimental)

ii) are made pursuant to an agreement that the parties will share the mortgage and expenses equally.

How are shares worked out in the absence of direct evidence?

Each party would be entitled to the share which the court considered to be fair having regard to the whole course of dealing

What is proprietary estoppel?

The doctrine of proprietary estoppel is another method by which a person may become entitled to an equitable interest in property in the absence of appropriate formalities

Applies to BOTH realty and personalty.

can be used as a course of action - the court ultimately decides the remedy in equity

How is equity established under proprietary estoppel?

i) The legal owner must have behaved in such a way that the claimant believes they have, or will get at some point in the future, some rights in relation to the property (e.g. repeatedly told them the house is theirs)

ii) the claimant acted to their detriment in consequence of this belief (need a causal connection)

iii) such that it would be unconscionable for the legal owner to insist on their strict legal ownership (can be passive or active)

iv) the court determines the appropriate remedy to award to satisfy the equity - the starting point for the remedy would be to enforce the promise (but can depart from this if more is required)

What is the difference between constructive trusts and proprietary estoppel?

i) CTs are based on the common intention of both parties to share ownership

• detriment = financial

• only remedy is a beneficial interest under that trust.

ii) PE stems from reliance on an assurance given by the legal owner as to some kind of property interest (either now or in the future)

• detriment = does not have to be financial (e.g. caring for an elderly person)

• court have discretion with remedy

• affected by equitable maxims - cannot delay or act unconscionably