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Resulting trust – Essay (1700 words)

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Resulting trust, an equitable doctrine established by the courts, serves to restore the beneficial
interest or equitable ownership of a property to its original transferor. This principle allows for
the reversion of rights in situations where the legal title is held by one party, but the underlying
equitable interest rightfully belongs to another.

The legal framework surrounding resulting trusts heavily relies on the application of two key
presumptions: the presumption of resulting trust and the presumption of advancement. These
presumptions play a pivotal role in shaping the concept and principles associated with
resulting trusts.

As categorized in the case of Venderwell-No.2 (1974), resulting trusts can be classified into two
main categories: presumed resulting trusts (PRTs) and automatic resulting trusts (ARTs).
Under the category of PRTs, there are two subcategories: voluntary conveyance resulting
trusts (VCRTs) and purchase money resulting trusts (PMRTs). On the other hand, ARTs is also
known as failed trust resulting trusts (FTRTs).

VCRT movable property:

The courts have consistently recognized that a presumption of Resulting Trust (RT) arises in
equity in favor of the individual who has voluntarily conveyed property in another's name
without receiving any consideration. This presumption, known as the Voluntary Conveyance
Resulting Trust (VCRT), operates as a legal principle to protect the equitable interest of the
transferor.

The legal principles governing the creation of Resulting Trusts (RT) in relation to movable
property without consideration were elucidated in the case of Re Vinogradoff (1953). In this
case, Farewell J. addressed the issue of unclear intentions in a transfer of stocks and held that
in the instance, the stocks would belong to the settlor. The court's decision established the
general rule that when movable property is conveyed without consideration, a presumption of
Voluntary Conveyance Resulting Trust (VCRT) arises.

The significance of clear intention in the transfer of beneficial interests was reiterated in the
case of Thavorn v BCCI (1985). In this case, Lloyd J. emphasized the importance of providing
concrete evidence regarding the transfer of beneficial interest. The court held that in the
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absence of even the slightest evidence indicating a transfer of beneficial interest, a resulting
trust would be created.

Lloyd J.'s decision in Thavorn v BCCI underscores the requirement for a clear manifestation of
intent when it comes to the transfer of beneficial interests. Mere assumptions or speculative
assertions are insufficient to establish the existence of a transfer. The burden of proof lies with
the party asserting the transfer of beneficial interest to present substantial evidence
supporting their claim

According to Farewell J., unless this presumption is successfully rebutted by demonstrating

that the transfer was intended as a gift or the creation of a trust, the property is deemed to be
held on resulting trust for the transferor. Thus, in cases involving movable property conveyed
without consideration, the burden of proof rests on the transferee to rebut the presumption of
VCRT by providing evidence that the transfer was intended as a gift or the establishment of a
trust. An example was set out in Arosso v Coutts 2002 where the evidence of gift rebutted the
presumption and no resulting trust had been created.

VCRT immovable property:

Prior to the enactment of the Law of Property Act 1925, the courts adopted a distinct
approach when it came to immovable properties. In such cases, if the transfer documents
failed to explicitly state that the land was given for absolute use and benefit, a resulting trust
would automatically be created.

By imposing the requirement of an explicit provision for absolute use and benefit, the courts
sought to prevent any ambiguity or misconstruction of the transferor's intentions.

It is important to note that the enactment of the Law of Property Act 1925 introduced
significant changes to the law relating to immovable properties, including the creation and
transfer of equitable interests. However, the previous approach regarding resulting trusts in
cases of immovable properties remains relevant in understanding the historical development
of the law in this area.

The enactment of Section 60(3) of the Law of Property Act (LPA) has brought about a
significant change in the common law position concerning resulting trusts for immovable
properties. The courts now adhere to the literal approach prescribed by this provision, as
emphasized by Lord Browne-Wilkinson.
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Under Section 60(3) of the LPA, the absence of an express statement in the transfer documents
regarding the purpose of the transfer does not automatically give rise to a resulting trust. The
courts no longer rely solely on the absence of an express provision to infer the existence of a
resulting trust.

In light of Section 60(3) of the Law of Property Act (LPA), it can be inferred that this provision
establishes a presumption of gift in cases involving the voluntary conveyance of immovable
property, such as land. This presumption means that the property is presumed to be a gift,
unless there is strong evidence to the contrary.

To rebut this presumption and establish the existence of a resulting trust, the courts require a
high standard of proof. The burden lies on the party seeking to establish the resulting trust to
present compelling and substantial evidence that overcomes the presumption of gift.

A notable case illustrating this principle is Lohia v Lohia (2001), where the court declined to
create a resulting trust when a son transferred his share to his father. In that case, the court
emphasized that the evidence required to rebut the presumption of gift must be particularly
strong. It was highlighted that if the shares had been transferred to a stranger, it would have
constituted stronger evidence supporting the existence of a resulting trust.

This approach was reaffirmed by J Chief Master Marsh in the case of NCA v Dong (2017). The
courts consistently maintain the view that the standard of proof for rebutting the presumption
of gift in immovable property transfers should be high, ensuring that the intentions of the
parties are clear and unequivocal.

Purchase Money Resulting Trust (PMRT), (add cases from notes):

Another significant presumption in the context of resulting trusts is the Presumption of

Purchase Money Resulting Trust (PMRT), which arises in favor of the person who contributes
towards the payment of the purchase price of the property. Under this presumption, the
interest in the property is directly proportional to the proportion of money contributed by the
individual.

However, it is important to note that this presumption can be rebutted by providing strong
evidence that demonstrates a different intention behind the contribution of money. The courts
have established that a high threshold of evidence must be met in order to rebut the
presumption. Such evidence may include demonstrating that the money was contributed with
the intention of making a gift, providing a loan, or creating a trust in favor of a third party.
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Presumption of Advancement (add cases from notes):

The third presumption in the context of resulting trusts is the Presumption of Advancement,
which sets it apart from the other presumptions. Unlike the other presumptions, the
Presumption of Advancement does not serve to revert the equitable interest back to the
transferor, but rather operates on the presumption that the transfer was intended as a gift,
unless compelling evidence is presented to rebut this presumption.

It is important to note that the Presumption of Advancement only arises in specific

relationships, typically between husband and wife or father and child. This presumption
reflects a historical understanding from the 19th century, where there was a belief that certain
transfers between family members should be presumed as gifts rather than resulting trusts.

However, it is crucial to recognize that the Presumption of Advancement has faced

considerable criticism in modern times. Critics argue that this presumption is no longer aligned
with contemporary concepts of family responsibility and fails to reflect the changing dynamics
of familial relationships. As a result, there have been calls for the abolition or revision of this
presumption to better align with current societal expectations.

Illegality:

Evidence of illegality in resulting trusts has undergone a nuanced development within the legal
framework. Previously, the courts generally considered such evidence to be inadmissible, as
exemplified in the cases of Gascoigne (1919) and Tinsley (1994). However, over time, there has
been a shift in the courts' approach, allowing for greater leniency in admitting such evidence,
as evidenced in the case of Tribe (1995), where the claimant had withdrawn from the
wrongdoing and demonstrated locus poenitentiae.

Nevertheless, a significant turning point occurred in the case of Patel (2017), where the courts
overturned the decisions in Tinsley (1994) and Tribe (1995) and admitted evidence of illegality.
This decision marked a notable shift in the courts' stance, signaling a departure from the
previous approach. It is important to note that the admissibility of evidence of illegality in
resulting trusts is now subject to the specific circumstances of each case and the principles of
public policy.

Automatic or Failed Resulting Trust):

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An additional category of resulting trust is the Automatic or Failed Resulting Trust, which may
arise in favor of the settlor when an express trust fails. This type of trust is automatically
created by operation of law. Several situations can give rise to an Automatic Resulting Trust, as
illustrated in various cases.

One such situation is when there is uncertainty regarding the subject matter of the trust, as
seen in the case of Palmer v Simmonds. Similarly, the uncertainty of the object matter can also
lead to the failure of an express trust and the subsequent creation of an Automatic Resulting
Trust. This was evident in the case of Re Wright. In some cases, a Half Secret Trust may fail if it
was communicated after the making of the will, as demonstrated in the case of Re Keen.
Moreover, in the case of Morice v Bishop, the court determined that the trust, intended for a
private purpose, was invalid, leading to the creation of a resulting trust.

Furthermore, an Automatic Resulting Trust may come into effect when a trust becomes
impractical to administer, capricious, or in violation of the rules governing perpetuity. In these
circumstances, the courts will intervene to rectify situations where a trust has become
unworkable or fails to meet legal requirements, ensuring that the settlor's interests are
protected.