Resulting Trusts

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A resulting trust is a trust imposed by the courts based on the presumption that the parties intended to create a trust. They arise out of two main scenarios:

  1. Unequal contributions to purchase price.
    • Where one person pays the entire purchase price but registers the title in another's name, it's deemed as held on trust for the one who paid: Little v Little.[1]
    • Where parties pay for a property in unequal shares, even if they are listed as joint tenants (which indicates they own equal shares), there is a presumption that the person who paid less holds that portion of the property he didn't pay for in trust for the other person: Calverley v Green.[2]
    • The presumptions can be rebutted as follows:
      • If there is evidence that a gift was intended.
      • If the purchaser was a husband, male fiancé,[4] father or mother,[5] of the other person, then a contrary presumption applies (the ‘presumption of advancement’ - ie, that it was a gift).
        • Note that a wife purchasing for a husband still raises the presumption of a resulting trust and not the presumption of advancement.
  2. Failure to fully dispose of the beneficial interest in property:
    • If a person fails to transfer title properly to another (eg, failed express trusts), the property will transfer back to the person on a resulting trust.

This article is a topic within the subject Property, Equity and Trusts 1.

Contents

Required Reading

Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 355-373 [4.93-4.108]

Introduction

[6] A resulting trust is a trust that arise by reason of the presumed intentions of the parties. In other words, the courts will sometime presume that a trust was intended and thus impose one. They arise out of two main scenarios:

  1. Unequal contributions to purchase price.
  2. Failure to fully dispose of the beneficial interest in property.

Because a resulting trust arises out of a presumption, the trust is always rebuttable by evidence to the contrary.[7]

Unequal Shares

A resulting trust arises when a person's contribution to a purchase is smaller than the title he receives for it. The most extreme version of unequal contribution is 'purchase money resulting trust' which is when someone buys a property for someone else completely.

  • One person (A) completely purchases property for another (B) and arranges transfer of title to B (without B paying at all).
  • In such a case, the court presumes that B (who legally owns the property although he didn't pay for it) holds the property on trust for A (thus the property belongs to the purchaser).[8]
    • This applies in the case where several people contribute to the purchase, but the title is not in all of their name - there will be a resulting trust in proportions to their contributions.

This resulting trust can be rebutted:

  • If there is evidence that A intended to make a gift to B, the presumption will be rebutted.
    • In other words, every time a gift is made, it is presumed to be held on trust until evidence shows its a gift.
  • If A was a husband, male fiancé,[9] father or mother,[10] of B, then a contrary presumption applies (the ‘presumption of advancement’ - ie, that it was a gift).
    • Note that a wife purchasing for a husband still raises the presumption of a resulting trust and not the presumption of advancement.

Of course, the contribution does not have to be complete for a resulting trust to arise - where parties pay for a property in unequal shares, even if they are listed as joint tenants (which indicates they own equal shares), there is a presumption that the person who paid less holds that portion of the property he didn't pay for in trust for the other person.[11]

  • For example, if A pays 70% and B 30%, regardless of the fact they are listed as joint tenants, B will hold that 20% he hasn't paid for on a resulting trust for A.
  • Again, this presumption is easily rebutted if there is a relationship which gives rise to a presumption of advancement.[12]

This was discussed in Trustees of the Property of Cummins (A Bankrupt) v Cummins

  • Usually, unequal contribution does indeed mean that a resulting trust will arise.
  • However, when its a husband and wife, the contributions are less relevant and instead it can be assumed that each meant to be joint-tenant (owning equal share) rather than tenants in common (each owning as per their contribution) because they bought a house to live in equally.

And in Buffrey v Buffrey:[13]

  • Facts: Parties had legal title in an investment property as joint tenants. Husband provided most of the purchase money for the property, with the balance being made up by mortgage for which he & his wife were jointly liable.
  • Held: the presumption of advancement had been rebutted because the purchase was made mainly for the benefit of the husband. Therefore, there is the presumption that the wife holds her share on a resulting trust for the husband, because it was an investment property, the parties arranged their financial affairs separately, and because the wife's presence as a joint tenant was due to the bank's insistence on the mortgage.

This area of resulting trusts has its problems: they only apply to direct contributions to the purchase price of property, which means that subsequent contributions to mortgage payments by a person who is not A or B would not give rise to the presumption of resulting trust (unless they are joint mortgagors).[14]

  • Since the vast majority of property is purchased these days under mortgage, and not by direct payments, equity is wholly unequipped to recognise contributions to the resources of the family.
  • Women are particularly harshly affected, as their domestic work is not given an economic value.
  • Lord Denning began a line of authority to give courts discretion to vary established proprietary rights between husband and wife if it were just to do so.[15] However, this was expressly not followed in Australia,[16] and scrapped in England.[17]

Failure to Fully Dispose

It often occurs that a person attempts to transfer title but does it do properly (usually, this refers to failed express trusts). In such cases, the property will transfer back to the person on a resulting trust. Examples include:

  • When the beneficiary dies before the settlor.
  • Where the trust is void for illegality.
  • Where trust fails because it does not satisfy one of the three certainties.
  • When a life tenancy was given and there is no remainderman.
  • When gifts fail.

This is why the next of kin has an interest in challenging the validity of gifts under a will - because the property will transfer back to the (now deceased) settlor, and the next of kin will receive it as a result.

End

This is the end of this topic. Click here to go back to the main subject page for Property, Equity and Trusts 1.

References

Property Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

Equity Textbook refers to Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012.

  1. (1988) 15 NSWLR 42.
  2. (1984) 155 CLR 242.
  3. (2006) 227 CLR 278
  4. Wirth v Wirth (1956) 98 CLR 228.
  5. Dullow v Dullow (1986) 3 NSWLR 531.
  6. Property Textbook, pp. 355-362 [4.93-4.100].
  7. Calverley v Green (1984) 155 CLR 242.
  8. Little v Little (1988) 15 NSWLR 42.
  9. Wirth v Wirth (1956) 98 CLR 228.
  10. Dullow v Dullow (1986) 3 NSWLR 531.
  11. Calverley v Green (1984) 155 CLR 242.
  12. Calverley v Green (1984) 155 CLR 242.
  13. (2007) 12 BPR 23.
  14. Baumgartner v Baumgartner (1987) 164 CLR 137, 156.
  15. Jones v Maynard [1951] Ch 572; [1951] 1 All ER 802; Rimmer v Rimmer [1953] 1 QB 63.
  16. Wirth v Wirth (1956) 98 CLR 228.
  17. Gissing v Gissing [1971] 2 All ER 780.
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