Resulting trusts

In some cases, it is not clear what was meant by a particular transaction. If someone pays money to a relative, it might be a gift, or it might have been advanced on trust, subject to certain conditions. The law also recognises so-called ‘resulting trusts’, or trusts arising from such circumstances based on certain presumptions.

Voluntary transfer of personalty

Any kind of property apart from land is referred to as ‘personalty’. If someone transfers personalty to someone else for free, a presumption of resulting trust will generally arise, which means the Court will presume recipient holds the personality on trust for the giver unless there is reason to believe it was intended explicitly as a gift.

This presumption is less likely to apply if the property being transferred is land (or ‘realty’). Section 60(3) of the LPA 1925 provides that ‘[i]n a voluntary conveyance a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee’.

Purchase monies resulting trusts

Another situation in which a resulting trust may be presumed to arise is one involving ‘purchase monies’. If someone buys property and arranges it to be put in someone else’s name, that second person will hold the legal title, but if it is deemed to be a resulting trust, with the recipient holding the property on behalf of the giver, the giver will own all of the equitable interest in that property.

Similarly, if someone contributes towards the purchase price of property in another’s name, there may be a presumption that they intended the recipient to hold that property on a resulting trust for both parties.

Presumption of Advancement

In other cases, a different presumption applies: the presumption of advancement (or presumption of gift). In such cases, there is no resulting trust. The transferor is presumed simply to be gifting property to the transferee.

This applies when the transferor is seen according to equity as being under a moral obligation to provide for the transferee. (Note that equity here reflects 19th century mores.) It can apply both in cases of voluntary transfers and the provision of purchase money:

(a)       from father to child (including an adult child);

(b)       from person in loco parentis to child under the age of 18 years;

(c)       from husband to wife; and

(d)       from fiancé (male) to fiancée (female), provided the couple go on to marry.

Rebutting a presumption

In order to rebut any of these presumptions, it is necessary to provide evidence of the transferor’s intention before or during the transfer. Any evidence of their intention after the transfer is irrelevant and thus invalid.