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Equity & Trusts Equity & Trusts Family Property There is no concept of community of family property in English law. Husband and wife, and civil partners, do not automatically own half each of the family home and other assets. In determining whether property has been transferred or a trust created, we firstly consider whether an express trust has been created, failing that we look at a resulting trust and a constructive trust. Resulting Trust Resulting trusts are implied where a person transfers property or money to another in circumstances where it is unclear who owns the beneficial interest. The transferee holds the property or money on a resulting trust for the transferor. Lord Browne-Wilkinson confirmed that resulting trusts will arise only in certain cases (Westdeutsche): a)! Voluntary transfer/purchase money resulting trusts b)! Incomplete disposal of trust’s equitable interest Presumptions Presumption of a resulting trust: a)! Voluntary Transfer of Property: Where a person transfers property to another without consideration and no evidence as to the transferor’s intention, there will be a presumption of a resulting trust created in favour of the transferor (Thavorn). This does not apply to land (S60(3) LPA 1925) b)! Voluntary Transfer of Purchase Money: Where a person has made direct contributions to the purchase price of a property (e.g. deposit), it will be presumed that the transferee holds it (or part of it) on resulting trust for the transferor. Only payments at the time of acquisition give rise to a resulting trust (Curley v Parkes) 1 Equity & Trusts →! Curley v Parkes – Contribution to purchase price cannot just be legal fees or stamp duty →! Abrahams – Also applies to lottery syndicates →! Parrott v Parkin – Can be over chattels e.g. a Yacht →! Stack v Dowden – Other factor need to be considered apar6t from financial contributions to determine shares →! Laksar v Laksar – Resulting trust still useful where the property was bought as an investment Presumption of advancement: a)! Under Obligation to Provide: The presumption of advancement applies (over a resulting trust) 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. This applies in; •! Parent to child or loco parentis to child (Bennet v Bennet) •! Husband/fiancé to wife/fiancée (Pettit v Pettit) The presumption can be rebutted, and easily in appropriate circumstances (McGrath v Wallis). →! Sekhor v Alissa – Used the absence of presumption of advancement between mother and daughter to arrive at right result Note: Section 199 of the Equality Act 2010 will abolish the presumption of advancement from a date to be appointed Rebutting Presumptions An explanation for the property being put in sole name can rebut a presumption of advancement (McGrath v Wallis). This could be: •! Evidence that a gift or a loan was intended 2 Equity & Trusts •! Evidence that transferor intended to retain some power over the property would tend to suggest a resulting trust •! There is more likely to be a resulting trust if parties are strangers rather than family members Further considerations: →! Fowkes v Pascoe – More likely to be a resulting trust rather than a gift when property is put into a solicitor’s name →! Warren v Gurney – Retention of title deeds to land was accepted as evidence for a resulting trust →! Marshall v Crutwell – The reason of convenience can be used to rebut the presumption of advancement →! S60(3) LPA 1925 – If property is realty, the presumption of resulting trust is less likely to apply Admissibility of evidence Only acts done and statements made at, or before (or immediately after), the time of the transactions are admissible for or against declarer, subsequent self-justifying statements or acts can be used as evidence against the declarer (Shephard v Cartwright) →! S1 Civil Evidence Act 1995 – Possible provides a way to allow subsequent acts as evidence Illegality: The courts will not allow a party to rebut one of the presumptions by adducing evidence of his own illegality or fraud (Gascoigne v Gascoigne; Tinker v Tinker). Fraud here means unconscionable, not criminality. 3 Equity & Trusts →! Gascoigne v Gascoigne – purchased a lease of land and put in his wife’s name to avoid his creditors. When the relationship ended tried to rebut the presumption of advancement but was not permitted to do so on public policy grounds Exceptions: •! The claimant may be allowed to use evidence of his fraudulent purpose to rebut the presumption of advancement if the purpose had not been carried out (Tribe v Tribe) •! A claimant may be able to enforce their right on the property if the can establish it without having to rely on evidence of illegality (Tinsley v Milligan; Lowson v Coombes) →! Lowson v Coombes – Both contributed to the purchase price but was put in one person’s name as in Tinsley. A resulting trust was inferred as the claimant didn’t have to rely on the fact that he tried to hide the property from divorce proceedings →! Silverwood v Silverwood – Reliance principle is a ‘straitjacket’; a more flexible approach would be more appropriate Incomplete Disposal of a Trust’s Equitable Interest Resulting trusts of this type arise where: •! the settlor transfers property to trustees on trust; but •! does not dispose of all or part of his equitable interest (e.g. because the declared trusts are void or do not exhaust the trust fund) Reasons why attempted trust might not dispose of the equitable interest a)! There is a gap in the beneficial ownership because the trust does not name a beneficiary who attains a vested interest b)! Attempted trust lacks certainty of objects 4 Equity & Trusts c)! Attempted trust does not define beneficial interests with sufficient certainty d)! Attempted trust offends the rules against perpetuity e)! Attempted trust offends the beneficiary principle For a resulting trust there has to be an initial transfer of property to another on trust, so the list above does not include; trusts which fail due to uncertainty of subject matter in respect of the whole of the trust property or dispositions where there is no certainty of intention to create a trust Constructive Trust A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his beneficial interest in the property (Paragon Finance). Common Intention Constructive Trust 1.! Legal ownership in both names: If the parties have purchased the home in their joint names, the legal title must be held as joint tenants. As for the beneficial interests, if there was no express declaration (S53(1)(b) LPA 1925) or statements, there is a prima facie case that beneficial interests in the property were joint and equal – except if a party is able to prove common intention that their beneficial interests should be different from their legal interests (Stack v Dowden). 2.! Legal estate in the name of one party only: In the absence of an express declaration of trust that the legal owner holds on trust for the claiming party then they may claim a resulting trust (as above) or a common intention constructive trust (Stack v Dowden). Two criteria must be present to established (Lloyds Bank v Rosset): 5 Equity & Trusts a)! Common intention: A common intention to share ownership of the land. This intention may be express (i.e. an assurance by the legal owner that the claimant has an equitable interest) or inferred from conduct →! Stack v Dowden obiter; Abbott v Abbott – Court should look at circumstances to work out intention, as approach in Lloyds bank may be outdated; but still applied in later cases of Morris v Morris and James v Thomas →! Lloyds Bank v Rosset – Direct contributions to the purchase price or mortgage repayments can count as conduct but non-financial acts such as looking after the family will not be considered sufficient →! Le Foe v Le Foe – Payment of household expenses can be included if payments are substantial and made pursuant to an express agreement e.g. one party pays mortgage repayments and the other pays expenses b)! Detrimental reliance: The party claiming an equitable interest by way of constructive trust must also show that he acted to his detriment in reliance on the common intention →! Gissing – Can create a ‘cestui que’ trust ( in favour of the beneficiary) by the settlor encouraging the beneficiary to act to their detriment or by reasonably acting to upon a belief of beneficial ownership →! Lloyds Bank v Rosset – Significant alteration in position is required Ascertaining Beneficial Interest To work out interest, the court will determine a fair share with regards to the whole course of dealings (Oxley). Courts shouldn’t consider what is fair but rather what the parties intended. The starting point will be an even split then evidence to rebut this will be considered (Stack v Dowden). 6 Equity & Trusts →! Jones v Kernott – Need to look at the intention and whole course of dealings in consideration of final interest because initial agreement as to the shares of the beneficial interest could change over time. Applied in Galarotti →! Midland Bank v Cooke – A mathematical calculation, based on the proportion of purchase price contributed is not the correct approach Commercial Settings A Pallant v Morgan equity will be invoked where the defendant has acquired property in circumstances where it would be inequitable to allow him to treat it as his own (Banner Homes). Requirements: •! There should be an arrangement or understanding that one party (Y) will try to buy property and that if he succeeds, the other party (X) will obtain some interest in it.
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