4. Resulting Trust

KEY DEFINITION A resulting trust (on the basis of law, на основании закона) is presumed to arise when A contributes to the purchase price of a piece of property which is put into B's name; or A transfers property to B, receiving nothing in return. In these cases it is presumed that B holds on trust for A. This presumption can be rebutted if there is evidence that the parties did not intend to create a trust.

KEY DEFINITION A presumption of advancement occurs where a husband transfers property to his wife or a father to his child, the presumption is of a gift. This presumption can be rebutted if there is evidence that he wanted to create a trust.

Reading: A resulting trust was established in the case of Sekhon v. Alissa [1989]. Here the house had been bought in the name of the defendant daughter. She had contributed to the purchase price, but her mother had paid the balance. The mother claimed a share in the house under a resulting trust, arguing that, although it was bought in her daughter's name, it was purchased as a joint commercial venture and that they both intended to own it in propor­tion to their respective financial contributions. The daughter attempted to rebut the presumption of resulting trust by arguing that her mother's financial con­tribution was intended as a gift or a loan. The court therefore had to decide what was the actual or presumed intention of the parties at the time of the con­veyance. Was the mother's financial contribution a gift or an unsecured loan, or was the mother intended to have a beneficial interest in the property? The Court of Appeal held that the law presumed a resulting trust in the mother's favour, and on the facts the presumption was not rebutted by the daughter's allegation that the money was a gift or a loan.

Another case where a claim was made under a resulting trust was Springette v. Defoe [1992]. In this case the parties, two elderly cohabitants, had bought their house, but there was nothing in the registered transfer quantifying their respective beneficial interests in the property. Each party had paid half the mortgage instalments, but the plaintiff had paid most of the balance of the purchase price. When the relationship broke down, Miss Springette issued an originating summons claiming she was entitled to 75 per cent of the proceeds of sale, as this represented her contribution to the purchase. At first instance, the trial judge granted them an equal share of the beneficial interest, on the basis that it was their uncommunicated belief or intention that they were to share the property equally. However, the Court of Appeal allowed Miss Springette's appeal, holding that as there was no discussion between the parties at to their respective beneficial interests, there was no evidence to rebut the pre­sumption that she was entitled to a 75 per cent of the beneficial interest under a resulting trust.

5. Constructive Trust

KEY DEFINITION In order to establish a constructive trust, it is necessary to show: 1. A common intention to share ownership. This is proved by evidence of an express agreement to share ownership or it can be inferred from a direct contribution to the purchase price or mortgage instalment. 2. Actions by the claimant in reliance on the common intention.

Reading: The leading case on constructive trusts of the home is Lloyds Bank v. Rosset [1991].

Lloyds Bank v. Rosset [1991] 1 AC 107 Concerning: constructive trusts Facts The house had been purchased in the husband's sole name. Although his wife had helped to renovate the house, she had made no financial contribu­tion to its purchase or renovation. She had never discussed ownership of the property with her husband. Mr Rosset had charged the house to Lloyds Bank as security for a loan, but Mrs Rosset knew nothing of this. When Mr Rosset went into debt, the bank claimed possession of the house and an order for sale. Mrs Rosset, by way of defence to the bank's claim, argued that she had a beneficial interest in the house under a constructive trust and that this interest, coupled with her actual occupation, gave her an overriding inter­est under s.70(l)(g) Land Registration Act 1925 which would defeat the bank's claims. In a dispute between Mr and Mrs Rosset and their bank, which had a mortgage over their house, a key issue arose: did Mrs Rosset have an interest under a constructive trust? Legal principle In order to establish a constructive trust, it must be shown that there was an express agreement to share ownership of the property. In the absence of an actual conversation, such an agreement could only be inferred from a contribution to the purchase price or mortgage instalment. Mrs Rosset, therefore, was not entitled to claim an interest under a constructive trust. The House of Lords dismissed her appeal, holding that her activities in relation to the renovation of the house were insufficient to justify the inference of a common intention that she was entitled to a bene­ficial interest under a constructive trust.

Quantification of the Beneficial Interest

Reading:

1) Oxley v. Hiscock [2005] Fam 211 Concerning: calculation of the share a party has under a constructive trust Facts Mr Hiscock and Ms Oxley lived together for about 20 years without marrying. When their relationship broke down, a dispute arose over the ownership of their house, which was in Mr Hiscock's name. Ms Oxley had contributed around 20% of the purchase price. They had not discussed what shares they were to own in the property. Legal principle Having established a constructive trust, the parties were to share the equitable interest in line with their agreement. If the parties had not made clear what share each was to have, then the court would decide what share would be fair in all the circumstances. The court was not bound to reflect exactly their financial contributions. In this case it was decided that Ms Oxley should have 40%.

2) Midland Bank v. Cooke and Another [1995] Facts The husband purchased the matrimonial home for £8450, the purchase moneys consisting of £6450 by way of a mortgage, £1000 of his own savings and £1000 by way of a wedding gift from his parents to him and his wife. The wife had made no direct contribution to the purchase price, except for the £500 representing her half-share of the wedding gift, but she had made con­siderable financial contributions to the upkeep of the house and to the house­hold. She claimed a beneficial interest in the home. Legal principle At first instance, the county court judge held that her interest in the house amounted to a sum equivalent to 6.47 per cent of the value of the property, which represented her half-share of the wedding gift of £1000 advanced by her in-laws. She appealed. The Court of Appeal allowed her appeal, holding that, as she and her husband had agreed to share everything equally, including the house, she was entitled to half the beneficial interest.