Resulting Trusts Professor Cameron Stewart. Definition A resulting trust is a trust that arises...

Resulting Trusts

Professor Cameron Stewart

Definition

• A resulting trust is a trust that arises because equity presumes an intention to create a trust.

• They are often referred to as ‘implied’ trusts, although they should not be confused with express trusts where an intention to create the trust is implied from wording or surrounding circumstances.

Automatic resulting trusts

• Westdeutsche Landesbank Girozentrale v Islington Borough Council

• Resulting trusts which arise when there has been a failure of an express trust, or, alternatively, where there is a surplus of trust property after a trust has been terminated. In these situations the remaining trust property is held on resulting trust for the creator of the trust because it is presumed that the creator intended to receive any leftover beneficial interest

Presumed resulting trust

• Resulting trusts which arise because contributions have been made to the purchase of property but the contributor has not been given a legal title that is equivalent to that contribution. In such a transaction, equity presumes that the equivalent legal title is held on trust for the contributor

An institutional trust

• Any presumption that equity makes about a person’s intention can be rebutted by evidence of actual intention

• A resulting trust comes into existence from the date of the circumstances giving rise to its presumption

• The resulting trust is a property institution like an express trust, rather than a remedy


• Rickett and Grantham (2000) at 19:• The resulting trust and its foundational

presumptions operate as part of the law of property, simply as a series of default rules locating the beneficial interest in property when the transfer of the property is itself ambiguous as to the location of that interest, or ineffective to dispose of that interest


• Some scholars, like Chambers (1997), have argued that beyond this basic but fundamental role, lies an attempt by equity to prevent or reverse unjust enrichment on the part of those who have received legal title where there was no intention for them to obtain a beneficial interest.

Incomplete disposition of a beneficial interest

• A resulting trust will be imposed when there has been an incom plete disposition of a beneficial interest in a trust. This can occur when an express trust fails, when the purpose of a trust fails or when a trust surplus exists after satisfaction of the purpose of a trust.

Failure of an express trust

• After an express trust fails, equity imposes a resulting trust by presuming an intention on the part of the creator for the trust property to revert back to the creator.

Hodgson v Marks [1971] Ch 892• A, the owner of a house, voluntarily transferred it to B,

who in turn orally declared that the beneficial interest in the house remained with A.

• B subsequently sold the house to C. • Who gets the house?• Court of Appeal – no express trust because the the

statutory requirement of writing set out in the s 53(1)(b) of the Law of Property Act 1925 was not satisfied

• Failed express trust so resulting trust arose• No need for writing

Hodgson v Marks [1971] Ch 892• Russell LJ, at 933, said:• [T]he evidence is clear that [A’s] transfer was not intended

to operate as a gift, and, in those circumstances, I do not see why there was not a resulting trust of the beneficial interest to [A], which would not, of course, be affected by section 53(1). It was argued that a resulting trust is based upon implied intention, and that where there is an express trust for the transferor intended and declared – albeit ineffectively – there is no reason for such an implication. I do not accept that. If an attempted express trust fails, that seems to me just the occasion for implication of a resulting trust, whether the failure be due to uncertainty, or perpetuity, or lack of form.

Illegality

• If a trust fails for illegality, equity looks at the specific circumstances of the case and the particular policy behind the law that had been breached, before determining whether a resulting trust should be applied: Nelson v Nelson

Failure of the purpose of a loan

• Quistclose trusts • This trust has been classified by Lord Millet in

Twinsectra Ltd v Yardley [2002] 2 AC 164; [2002] 2 All ER 377, as a resulting trust

• Salvo v New Tel Ltd [2005] NSWCA 281: the majority (Spigelman CJ and Young CJ in Eq) favoured an express trust treatment

Trust surpluses after satisfaction of the purpose of a trust

• A trust surplus might exist after the beneficiaries in a fixed trust have taken all their entitlements or have died. In such cases there will be a resulting trust of the surplus back to the creator of the trust : Smith v Cooke [1891] AC 297.


• Charitable trusts that experience a trust surplus can often be saved cy-près with the surplus being employed for purposes as near as possible to that envisaged by the creator.

• However, cy-près schemes are dependent on the existence of a general charitable intention

• What if there is no general intention?


• If the trust lacks a general charitable intention any trust surplus will be held on resulting trust for the creator: Re Abbott Fund Trust [1900] 2 Ch 326.

Re Gillingham Bus Disaster Fund [1958] Ch 300

• In 1951, there was a bus crash which killed 24 Royal Marines cadets and injured several more.

• The local mayors of Gillingham, Rochester and Chatham wrote a letter to a daily newspaper which asked the public to contribute to a fund which was to be used to pay for the funeral expenses, the care expenses of the surviving cadets, and ‘then to such worthy cause or causes in memory of the boys who lost their lives, as the Mayors may determine’.

• Nearly £9000 was collected from known donors and anonymous donors. The trustees spent £2368 in defraying funeral expenses and caring for the surviving cadets with disabilities but the trustees were unsure about what to do with the surplus.


• The issue was what the trustees should do with the surplus.

• If the trust was charitable the surplus might be able to be used under a cy-près scheme.

• If not, the funds may have to be repaid to the donors under a resulting trust or be given to the Crown as bona vacantia.


• Harman J found that the trust was not charitable. The funeral and care expenses of this particular group of boys was not a charitable use. Nor was the idea that the Mayors could use the funds for ‘worthy causes’ as this could include both charitable and non-charitable objects. Given the trust was not charitable it was not possible to order a cy-près scheme.

• Harman J then found that a resulting trust arose, given that the purpose of the trust had failed. The resulting trust would mean that the surplus would be held on trust by the trustees for the donors. The fact that it would be difficult to identify the donors did not prevent the resulting trust from arising.

Purchase of property in another person’s name

• If a purchaser buys property and voluntarily directs the transfer of the property into the name of another person, equity presumes that the owner holds that property on resulting trust for the purchaser: Napier v Public Trustee (WA)

• For example, if A purchases property from B, and directs that B transfer the title into C’s name, equity presumes that C holds the property on trust for A.

Buffrey v Buffrey [2006] NSWSC 1349

• Palmer J at [14] :• [I]f a presumption of resulting trust or a

presumption of advancement arises where one party has contributed the whole of the acquisition cost of the property but the title to the property is placed in the name of another party:


• (a) whether either presumption is rebutted depends upon the intention solely of the party who provided the money because the question is whether that person intended to make a gift of an interest in the property to the person who did not contribute to its acquisition;


• (b) evidence by the person making the payment as to his or her intentions at the time of the transaction is admissible but the Court will treat that evidence with caution as the evidence of an interested party;


• (c) the Court is more assisted in determining the subjective intention of the person making the payment by evidence of that person’s contemporaneous statements of intention, subsequent admissions against interest, subsequent dealings with the property, and by evidence of other relevant surrounding circumstances.


• The presumption applies to both real and personal property

Russell v Scott (1936) 55 CLR 440

• An aunt opened a joint account with her nephew. She supplied all of the funds for the account and during her lifetime the account was used solely for her support.

• When the account was opened, the aunt had told the nephew and others that the balance remaining in the account at her death would belong to him.

Russell v Scott (1936) 55 CLR 440• The High Court found that the aunt intended the

nephew to take beneficially whatever remained in the account at the date of her death.

• The High Court held that the aunt had, during her lifetime, vested the legal right to the debt in the nephew including the legal right to take by survivorship on her death. Since however, she had provided all of the funds for the account, there arose a presumption of resulting trust in her favour. The real question was whether the presumption had been rebutted.


• The High Court held that, in relation to the balance of the account at her death, the presumption of resulting trust was rebutted and that, upon the aunt’s death, the principle of survivorship meant that the whole of the beneficial interest in the account passed to the nephew.

Russell v Scott (1936) 55 CLR 440• Dixon and Evatt JJ, at 451, said:• The right at law to the balance standing at the credit of the account

on the death of the aunt was thus vested in the nephew. The claim that it forms part of her estate must depend upon equity. It must depend upon the existence of an equitable obligation making him a trustee for the estate. What makes him a trustee of the legal right which survives to him? It is true a presumption that he is a trustee is raised by the fact of his aunt’s supplying the money that gave the legal right a value. As the relationship between them was not such as to raise a presumption of advancement, prima facie there is a resulting trust. But that is a mere question of onus of proof. The presumption of resulting trust does no more than call for proof of an intention to confer beneficial ownership; and in the present case satisfactory proof is forthcoming that one purpose of the transaction was to confer upon the nephew the beneficial ownership of the sum standing at the credit of the account when the aunt died.


Continuing at 454–4::•Doubtless a trustee [the nephew] was during her life-time, but the resulting trust upon which he held did not extend further than the donor intended; it did not exhaust the entire legal interest in every contingency. In the contingency of his surviving the donor and of the account then containing money, his legal interest was allowed to take effect unfettered by a trust. In respect of his jus accescendi his conscience could not be bound. For the resulting trust would be inconsistent with the true intention of that person whose presumed purpose it must depend.


• The presumption of resulting trust will not arise in cases where the purchase monies have been provided as a loan. The presumption only applies when the provider of the monies acts as a purchaser or directs that the purchase take place

Contributions to the purchase of property

• In cases where the purchase money is provided by two or more parties jointly, and the property is put into the name of one of the parties, equity will presume a resulting trust in favour of the other party or parties


• Neilson v Letch (No 2) [2006] NSWCA 254, • Mason P at [25]:

Where two or more persons have contributed the purchase money in unequal shares and the property is purchased in joint names, there is, in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money


• Buffrey v Buffrey at [14], Palmer J said:• [I]f the presumption of resulting trust arises

where the joint tenants have made unequal contributions to the acquisition cost:

• (a) the presumption may be rebutted by evidence showing that the common intention of the parties at the time of acquisition was for equality of interests despite inequality of contributions; …


• (b) evidence of the subjective and uncommunicated intention of one of the parties is inadmissible as going to prove the common intention;

• (c) the common intention of the parties may be ascertained from the evidence as to their contemporaneous communicated statements of intention, subsequent admissions against interest, subsequent mutual dealings with the property, and from evidence as to other relevant surrounding circumstances.


• For the presumption of resulting trust to arise, contributions that are made by the parties must go towards the purchase price of the property. Importantly, equity determines this by looking at what was provided by the parties at the date of purchase


• Several types of contribution can be recognised as contributions to purchase price. Obviously, direct payment of money towards purchase will be included, as will be legal fees, stamp duty and incidental costs associated with the costs of acquisition

Legal fees?• In Sivritas v Sivritas [2008] VSC 374, Kyrou J opined

that legal costs should only be accounted or if they were a necessary condition of obtaining registered ownership of the property. Kyrou J, at [126], said:

• On this basis, stamp duty and registration fees would be included but legal fees and bank fees would not be. Although legal fees and bank fees are normally incurred in the purchase of property, they are not always incurred, and where they are incurred, their amounts may vary significantly depending on the purchaser’s circumstances and, more importantly, they may be incurred as debts that are paid after the registration of the interest which is to be held on trust.

Mortgage Liability

• If a party has incurred a mortgage liability to provide contributions to the purchase price, that mortgage liability counts as a contribution: Fedorow v Federow [2011] ACTCA 10 at [27]; Schweitzer v Schweitzer [2010] VSC 543 at [26]; Brennan v Duncan [2006] NSWSC 674 at [8]; Bloch v Bloch (1981) 180 CLR 390.

• Joint mortgage liability is treated as equal contribution: Dinsdale v Arthur [2006] NSWSC 809 at [14]; Buffrey v Buffrey at [14].


• Because equity looks at contributions that are made at the date of purchase, the presumption of resulting trust will not arise when payments are made towards costs incurred after the property has been acquired

• Australian courts have refused to recognise payments of mortgage instalments as contri butions if they are made by a party who incurred no mortgage liability at the date of purchase


• in England the courts have recognised that some indirect financial contributions, which occur after purchase, may be considered in the calculation of the beneficial interests

• In Midlands Bank v Cooke, the Court of Appeal found that once some direct financial contribution had been made it was then open to the court to calculate the beneficial interests on the basis of all contributions, whether direct or indirect, whether prior to or after purchase


• Upgrades and maintenance will not be considered as contributions unless there was a common intention or agreement between the parties that is enforceable or gives rise to an estoppel

Purchased in stages?

• In Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278; 224 ALR 280, the High Court allowed amounts to be accounted for in a resulting trust where undeveloped land had been purchased and then built upon. The High Court found that there was a single ‘transaction’ which included both the purchase of the land and the construction of the house on that land, so that contributions to both could be taken into account.

The nature of co-ownership in resulting trusts

• Ordinarily equity’s presumption of resulting trust is based on the co-owners holding their shares as tenants in common

• However, in cases where the parties made equal contributions, equity presumed that the interests were held as joint tenants and not as tenants in common.


• Why did equity prefer joint tenancy when the contributions were equal? In such circumstances it was said that ‘equity followed the law’ and the common law always presumed that co-owners took as joint tenants in the absence of an express declaration of tenancy in common

• Statutory reforms have reversed the common law presumption of joint tenancy in some jurisdictions and imposed a presumption of tenancy in common


• In Delehunt v Carmody (1986) 161 CLR 464; 68 ALR 253, the High Court found that equity still followed the law in these jurisdictions and, given that the law had changed, equity would now presume tenancy in common when the parties make equal contributions to purchase price.

Rebutting the presumption of resulting trust

• When the presumption of resulting trusts arises, evidence can be admitted of the actual intention of the parties to prove that no such trust was intended

• Intention remains para mount in resulting trusts and evidence of the circumstances surrounding the transfers is admissible, whether it be written or parol evidence. However, it is important to note that the evidence must relate to the intention of the parties at the time that the interests were created

Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353

• At 365–6, the High Court said• The presumption can be rebutted or qualified by evidence

which manifests an intention to the contrary. Apart from admissions, the only evidence that is relevant and admissible comprises the acts and declarations of the parties before or at the time of the purchase … or so immediately thereafter as to constitute a part of the transaction … Subsequent statements or acts by the donor could only be evidence not for but against him so far as they were admissions that the plaintiffs were the beneficial owners of the shares. Subsequent statements or acts by the plaintiffs could only be evidence not for but against them so far as they were admissions that the shares were allotted to them as trustees for their father.

Wilkins v Wilkins [2007] VSC 100

• Kaye J : [E]vidence of subsequent declarations as to intention by the donor, unconnected in time with the purchase of the property, is inadmissible if it is adduced to prove the truth of those declarations. Of course, such evidence may be admissible on other bases, for example, to rebut evidence adduced by the party holding the legal interest and which opposes the implication of a resulting trust. Thus for example where, in a case such as this, the party claiming to own the property absolutely has adduced evidence as to acts or conduct of the purchaser which are said to be inconsistent with the existence of a resulting trust, the donor (or his or her representatives) is entitled to adduce evidence to rebut that testimony

Australian Building and Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460

• Ward J at [133] : Evidence of the acts or statements … prior to or at the time of the transaction may be used to rebut the presumption. There is some authority to suggest that evidence of subsequent acts or statements may only be used to support the presumption (essentially as admissions) (eg La Housse v Counsel [2008] WASCA 207). However, it is clear from the authorities extracted below that testimonial evidence by the party of his or her intention at the time of the transaction is admissible, though generally viewed with caution. Given that there are no especial rules governing admissibility in matters of the present kind (Damberg at [45]) (and though there is no question of such evidence in the present case) there appears no compelling reason why other evidence of subsequent acts or statements will necessarily be inadmissible unless against interest, though such evidence also would likely be viewed with caution.

The presumption of advancement• In some cases equity refuses to presume an

intention to create a resulting trust and instead presumes that any purchase or contribution was intended to be a gift by way of advancement.

• This presumption of advancement only arises in cases where purchase monies or contributions are provided by a husband to a wife or by a parent to a child (not necessarily biological children but someone to whom the provider of funds stands in the position of a parent).

The presumption of advancement• It does not arise in other fiduciary

relationships, like those between companies and directors: SCE Building Constructions Pty Ltd (in liq) v Saad [2003] NSWSC 796

• The effect of a presumption of advancement is to override the presumption of resulting trust with the result that the legal and equitable estates will stay where they lie

True presumption?• In Wirth v Wirth, Dixon CJ quoted from Sir William Page Wood VC

to the effect that the presumption of advancement was ‘to preclude a resulting trust from arising for the purchaser’

• In Martin v Martin – HC says ‘is called a presumption of advancement but it is rather the absence of any reason for assuming that a trust arose’

• In Calverly v Green - Murphy J said that ‘[t]he presumption of advancement, supposed to be an exception to the presumption of resulting trust, has always been a misuse of the term presumption, and is unnecessary’.

• Deane J -[T]he ‘presumption of advancement’, is not, if viewed in isolation, strictly a presumption at all. It is simply that there are certain relationships in which equity infers that … there is an ‘absence of any reason for assuming [presuming] that a trust arose.

• Anderson v McPherson (No 2) – Edelman J- not a presumption

The presumption of advancement• The presumption of advancement, like the

presumption of resulti ng trust, can be rebutted by evidence of the intention of the parties at the time of the transfer. If it is shown that there was no actual intention to confer a beneficial interest on the legal title holder the presumption will not be effective and the normal presumption of resulting trust will apply

The presumption of advancement• The presumption of advancement arises when a

husband either provides the purchase price or makes contributions to the purchase price of property in which the wife is given a legal interest

• It does not arise in cases of transfers from a wife to her husband: March v March (1945) 62 WN(NSW) 111. In the past it has been assumed that the husband had a natural duty to provide for his wife (and children) and this gave rise to the presumption

The presumption of advancement• In Scott v Pauly (1917) 24 CLR 274 at 282, Isaacs J

stated that the presumption of advancement,– … is an inference which the courts of equity in practice

drew from the mere fact of the purchaser being the father, and the head of the family, under the primary moral obligation to provide for the children of the marriage, and in that respect differing from the mother.

The presumption of advancement• In Calverley v Green (1984) 155 CLR 242 at

268; (1984) 56 ALR 483 at 501, Deane J advocated an adjustment of the doctrine to ‘reflect modern conceptions of equality in status and obligations of a wife vis-a-vis a husband’.

The presumption of advancement• The presumption can also arise in cases where a

transfer occurs between a man and his intended wife or fiancee: Wirth v Wirth (1956) 98 CLR 228; Bertei v Feher [2000] WASCA 165. Such a transfer is consid ered to be a gift in contemplation of marriage. If the marriage does not occur the gift should be returned. If the gift is not returned it will be then held on resulting trust: Jenkins v Wynen [1992] 1 Qd R 40

Calverley v Green (1984) 155 CLR 242

• Arthur Calverley and Dianne Green had been in a longstanding de facto relationship and lived as husband and wife for more than 10 years.

• In the early years of the relationship they lived in Arthur’s house but they eventually decided to buy a new house to live in.

• Arthur had difficulty in obtaining finance on his own, but finance was eventually approved on the basis that he and Dianne would be jointly and severally liable under a mortgage.


• However, it was agreed that the repayments of that mortgage would be made by Arthur. A deposit of $9000 was paid by Arthur from the proceeds of the sale of his house and the balance was raised from the mortgage. The parties were registered as joint tenants.

• On dissolution of the relationship, Dianne claimed her half share in the house.

• At trial - she had no beneficial interest in the property because the sole reason for naming her a joint tenant was to obtain finance.

• The Court of Appeal reversed that decision and found that the parties were joint owners in both law and equity.


• The issue was whether the property should be split 50:50 as a reflection of their legal interests as joint tenants or whether a resulting trust should arise which would reflect their contributions to the purchase price. Another issue arose in relation to the presumption of advancement and whether that presumption should be applied to de facto relationships.


• A majority of the High Court (Gibbs CJ, Mason, Brennan and Deane JJ; Murphy J dissenting) found that the woman’s liability under the mortgage was a contribution to the purchase price of the house.

• A resulting trust was presumed which reflected the respective contributions of the parties to the purchase price.

• Within the majority Mason, Brennan and Deane JJ found that there was no presumption of advancement that operated in the context of de facto relationships.

• Gibbs CJ felt that the presumption could arise in de facto relationships but that it had been rebutted by the actual intentions of the parties


• Mason and Brennan JJ stated at CLR 260 that:– The term ‘de facto husband and wife’ embraces a wide

variety of hetero sexual relationships; it is a term obfuscatory of any legal principle except in distinguishing the relationship from that of husband and wife. It would be wrong to apply … the presumption of advancement …

Trustees of the Property of John Daniel Cummins v Cummins [2006] HCA 6

• Mr Cummins, a barrister, had become bankrupt after failing to pay income tax for nearly 45 years.

• He and his wife had purchased a house in 1970. Mr Cummins had contributed 23.7 per cent to the purchase price and Mrs Cummins had contributed 76.3 per cent.

• In 1987 Mr Cummins transferred his legal and beneficial interests in the matrimonial home to his wife.

• No consideration had been paid for by Mrs Cummins, although there was a contract, stamp duty had been paid and a valuer’s report had been paid for by her.


• Mr Cummins argued that the main purpose for doing this was to limit his exposure to professional negligence liability, as he claimed to fear the possibility that barristers would lose their immunity from negligence.

• The trustee in bankruptcy argued that the main purpose in transferring the home was to avoid the Commonwealth Government’s considerable claims for unpaid income tax.


• The High Court found that the transaction was void as its main purpose was to avoid creditors.

• The High Court found that where a husband and a wife purchase a matrimonial property it will generally be inferred that the property will be held equally between them irrespective of the contributions that were made.

• Equally, if the property has been registered in joint names, equity will not interfere with that joint tenancy by creating disproportionate shares reflecting their contributions.

At [71]• There is no occasion for equity to fasten upon the

registered interest held by the joint tenants a trust obligation representing differently proportionate interests as tenants in common. The subsistence of the matrimonial relationship, as Mason and Brennan JJ emphasised in Calverley v Green[86], supports the choice of joint tenancy with the prospect of survivorship. That answers one of the two concerns of equity, indicated by Deane J in Corin v Patton[87], which founds a presumed intention in favour of tenancy in common. The range of financial considerations and accidental circumstances in the matrimonial relationship referred to by Professor Scott answers the second concern of equity, namely the disproportion between quantum of beneficial ownership and contribution to the acquisition of the matrimonial home.

Perpetual Trustees Victoria Limited v Peter Van den Heuval No 2 [2009] NSWSC 483

• Claim under the Torrens Assurance Fund• Husband and wife had been joint tenants but• Fraud by husband – what did the woman have

under Torrens?• One half in joint tenancy

Sui Mei Huen v Official Receiver for Official Trustee in Bankruptcy (2008) 248 ALR 1

• Divorced couple where the ex-husband had become bankrupt. • Prior to the bankruptcy, the couple had owned a home as joint

tenants, subject to a mortgage under which both parties were jointly liable.

• Due to marital difficulties the man had moved out of the home and later signed an agreement which stated that the whole property belonged to the wife.

• The surrender of his interest was on the condition that the wife paid all future outgoings, indemnified the husband against any liability in relation to the mortgage, and made no further claim on him under the Family Law Act 1975 (Cth) or for maintenance and support.


• The husband was later made bankrupt and the trustee in bankruptcy challenged the agreement concerning ownership of the house.

• A federal magistrate found that the agreement was invalid as it was voluntary and that the husband retained his interest in the house as per the presumed Cummins joint tenancy.


• The Full Federal Court overturned the federal magistrate’s findings. They found that the Cummins presumption of joint tenancy was not irrebuttable.

• It could be displaced by an express or constructive agreement between a husband and wife concerning their interests.

• In this case the agreement between the parties had created a constructive trust of the husband’s legal half-interest in the property in favour of the wife, which was conditional on the wife’s obligations to pay the mortgage and to forbear from suing for maintenance.

• To that extent the Cummins presumption of joint tenancy had been rebutted and the agreement was enforceable against the ex-husband and, consequently, the trustee in bankruptcy.

English position

• Stack v Dowden [2007] UKHL 17• Presumptions have been jettisoned for

domestic relationships• Start with a presumption of 50% if in joint

names and then displace with evidence of contrary intention

The presumption of advancement• There is a presumption of advancement when

purchase money is provided by a parent and the legal title is taken by a child

• The key requirement is that the purchase price be provided by someone in loco parentis (in the position of a parent). As such the presump tion can also apply to illegitimate and adopted children, as well as to other forms of familial relationship, as long as one party has acted as the parent for the other

The presumption of advancement• Traditionally, it was thought that the

presumption of advance ment would only arise when a father provided funds for the purchase of property for his children: Scott v Pauly (1917) 24 CLR 274 at 282, per Isaacs J. However, in more recent cases the presumption has been recognised as arising between a mother and her children: Brown v Brown (1993) 31 NSWLR 582

Anderson v McPherson (No 2) [2012] WASC 19

• Bruce and Carolyn Anderson provided the majority of the purchase price on a property that was put into their names (for one half-share) and into the names of their son,Troy, and daughter–in-law, Stephannie (for the other half-share).

• This was done on the basis of an express agreement that Bruce and Carol would be able to live at the property with Troy and Stephannie, and that Troy and Stephannie would make all the mortgage repayments on the property and that other expenses would be shared.


• Troy and Stephannie later separated, and Bruce and Carol claimed that the legal half share held by Troy and Stephannie was held on resulting trust.

• Stephannie countered by arguing that the half share was subject to the presumption of advancement.

• Troy did not contest the proceedings.


• Edelman J – no advancement -• [144] Stephannie asserted that her relationship with Bruce and

Carol was one where they were in loco parentis. It has long been recognised that the ‘presumption of advancement’ canbeen extended beyond a situation of parent and child to instances where the relationship is akin to parent and child because one person acts in loco parentis (in place of a parent) to the other…

• [151] But the relationship between Stephannie and her parents in law, although close and warm, was not a parent-child relationship. Bruce and Carol were, and are, generous, warm and welcoming people. Ms Gallagher’s evidence was that their kindness extended beyond Stephannie to other friends … As she was their daughter-in-law, Stephannie was treated with even greater kindness and warmth. But even though Stephannie was partly estranged from her mother and father, Bruce and Carol did not take the place of her parents


• Edelman J – no presumption of resulting trust either

• The evidence showed an intention that the legal title was intended to reflect the ownership of the parties

The presumption and adultchildren

• The presumption applies to adult children: Brown v Brown; Sellers v Siemianowski [2008] NSWSC 538; Sleboda v Sleboda [2008] NSWCA 122; Dearing v Dearing [2009] NSWSC 1394 at [32]. English authority suggests that the presumption gets weaker as the child gains more independence.

Lasker v Lasker [2008] 1 WLR 2695

• Lord Neuberger at 2700:• The presumption of advancement still exists,

although it was said as long ago as 1970 to be a relatively weak presumption which can be rebutted on comparatively slight evidence: see per Lord Upjohn in Pettit v Pettit [1970] AC 777 at 814. I would add that it is even weaker where, as here, the child was over 18 years of age and managed her own affairs at the time of the transaction.

Canadian position

• Canadian courts have for some time not applied the presumption of advancement to independent adult children: McLear v McLear Estate (2000) 33 ETR (2d) 272 (Ont SCJ); Cooper v Cooper Estate (1999) 27 ETR (2d) 170 (Sask QB). T

• The Supreme Court of Canada has followed these cases but found further that, in transfers of property from parents to adult children, there should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of that parent’s affairs: Pecore v Pecore [2007] 1 SCR 795

Gifts and resulting trusts

• Presumptions of resulting trust and of advancement can also arise in gifts (voluntary transfers of property). For example, if A makes a gift of property to B, a presumption of resulting trust may arise that B holds the property on trust for A


• Equity treats gifts of realty differently to gifts of personalty. Unfortunately the operation of the presumptions in gifts of land has been made problematic because of the operation of the Statute of Uses 1535. Prior to that statute, equity presumed that any interest in land given without con sideration to a stranger (meaning someone to whom a presumption of advancement would not arise) was held on resulting use


• After the statute the use was executed and the ownership reverted back to the grantor, leaving the transfer ineffectual

• To enable people to make gifts of realty, the courts recognised the voluntary transfers if they were expressed to be given ‘unto and to the use of’ the stranger

• Legislation provides that no presumption of resulting trust will arise in a voluntary transfer of realty, unless the transferor expresses an intention to create a use or a trust: Conveyancing Act 1919 (NSW), s 44

Torrens land?

• In Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273, Windeyer J found that s 44 did apply to registered Torrens dealings as they were conveyances within the meaning of the section.

• However, in Ryan v Hopkinson (1990) 14 Fam LR 151 at 155, Bryson J, in ruling that s 44(1) did not so apply

• Later cases have preferred the views expressed by Windeyer J: Bhana v Bhana [2002] NSWSC 117; Singh v Singh [2004] NSWSC 109 at [34]–[35]; Drayson v Drayson [2011] NSWSC 965 at [59].


• With regards to personalty, if a gift is made to a stranger of per sonalty which can produce income, then a resulting trust will be presumed: Hendry v E F Hendry Pty Ltd [2003] SASC 157. Otherwise, gifts of personalty will not give rise to a resulting trust.

Problem

• Han and Leia entered into a de facto relationship in 1975. In 1976 they had a child named Luke. In 1987 they purchased a house in Lucastown for $150,000. The purchase price was paid by Han; the money coming to Han as an inheritance from the estate of his late uncle. At the time of purchase, Han decided to have the property registered in his, Leia’s and Luke’s names as tenants in common and in equal shares.

Problem

• In 1994, when Luke reached his majority age, with the Yavin Bank Ltd in the joint names of Han and Luke. Han told Luke that he would be making all the deposits into the account and would withdraw from the account whenever it may become necessary. However, he also said that if anything should ever happen to him (ie Han) the money then in the account would belong to Luke.

Problem

• Two weeks ago Han and Leia died in a car accident. In his will Han left his entire estate to Beru, his daughter that he had fathered in 1972 before he had met Leia. In her will Leia left her entire estate to Luke. At the time of their deaths the Lucastown property was worth $300,000, and the bank account at Yavin Bank Ltd had a balance of $5000

Problem

• Beru seeks your advice as to whether she has any entitlements in the Lucastown property and the bank account, and if not who is entitled and to what extent.

Solution

• Given that the problem concerns parties who are deceased, it is not subject to any of the legislative regimes controlling de facto relationships and must be dealt with using equity

Solution• Dealing first with the interests in the property at

Lucastown, Han, Luke and Leia each owned an equivalent tenancy in common equalling one-third of the value of the property. Tenancies in common contain no right of survivorship so at law the interests that will pass through Han’s will to Beru are her father’s one-third interest in the house. Similarly Luke will receive Leia’s one-third interest, leaving him with a two-thirds interest at common law. However, it is open to equity to adjust the beneficial interests of the parties and whatever interests equity believes were beneficially owned by Han at the time of his death will pass to Beru, via Han’s will. Similarly, any beneficial interests held by Leia will pass to Luke, via her will.

Solution• Given that Han provided the entirety of the

purchase price, a presumption of resulting trust is raised in Han’s favour over both Leia’s one-third interest and Luke’s one-third interest

• There is no pre sumption of advancement in favour of Leia that will override the presumption of resulting trust. She is a de facto partner and, as such, no presumption of advancement can be raised in her favour

Solution• There does not appear to be any evidence of

Han’s actual intention to rebut this presump tion. The beneficial interest therefore belonged to Han and passes to Beru in his will

• A presumption of advancement can be successfully raised in Luke’s favour

• It matters not that Luke was born out of wedlock

• Therefore his interest is not held on resulting trust and one-third legal title stays with him

Solution• In relation to the bank account, it should be

noted that the pre sumptions arise over transfers of both real and personal property

• The presumptions of resulting trust and advancement apply to joint bank accounts where one party provides all the funds for that account: Russell v Scott (1936) 55 CLR 440

Solution• The presumption of advancement is obviously

paramount here, given the relationship between Han and Luke. It does not matter that Luke was an adult when the bank account was opened: Brown v Brown (1993) 31 NSWLR 582. There is no evidence of actual intention that rebuts the presumption of advancement. Therefore the benefi cial interest remains with Luke.

Resulting Trusts Professor Cameron Stewart. Definition A resulting trust is a trust that arises...

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