Illegality, Resulting Trusts and Twin Presumptions: Antiquated Law Meets Modern Society

• Author: Olivia Carpenter
• Position: L.L.B candidate, Swansea University
• Pages: 19-35

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ILLEGALITY, RESULTING TRUSTS AND TWIN PRESUMPTIONS:

ANTIQUATED LAW MEETS MODERN SOCIETY

Olivia Carpenter*

ABSTRACT

This article examines the clash between out-dated principles and contemporar y societal

ideals in the context of trusts and illegality. The operation of the presumptions of r esulting

trust and advancement in relation to the jurisdictions of the United Kingdom, Republic of

Ireland, and Austra lia will be analysed. The cross-jurisdictional trend has been in favour of

taking steps to accommodate modern viewpoints in order to counteract discriminatory

distinctions such as those created in Tinsley v Milligan. The orthodox model of the

presumption of advancement is incompatible with both Article 5 P rotocol 7 of the European

Convention on Human Rights and the equality guar antee in the Irish Constitution, and as a

result Northern Ireland, Austra lia and the United Kingdom have taken positive steps towards

effectuating its abolition. It is hoped that in time, calls for change in the Republic of Ireland

will serve as the impetus for the implementation of equally strong measur es. Ultimately, in

light of these issues, it shall be shown that the abolition of the presumption of advancement

on a cross-jurisdictional scale is a welcome development for human rights and equality.

A INTRODUCTION

Illegality in the law of trusts presents us with a myriad of complex dilemmas. The modern

law is lacking, due to fundamentally out-dated legal precedence. The aftermath of Tinsley v

Milligan

1 caused a re-evaluation of the established principles of illegality in the law of trusts.

Enonchong has highlighted that the ruling in Tinsley, when juxtaposed with the anachronistic

presumption of advancement, and the principles of presumed resulting trusts, has created

conflict with this twin relationship in this area of law.2 In the United Kingdom, the Law

Commission has turned to address these conflicts, and after succinct analysis has proposed a

series of reforms. The response to these proposals has been inadequate, and Davies argues

that the outcome of the limited reform is disappointing, and hardly a surprise,3 due to the fact

that the Courts are reluctant to stray too far from the established path. Through the cross-

jurisdictional examination of the effect of these issues, this article shall argue ultimately that

*L.L.B candidate, Swansea University.

1 [1994] 1 AC 340.

2 Nelson Enonchong, ‘Effects of Illegality: A Comparative Study in French and English Law’ [1995] 44( 1) The

International and Comparative Law Quarterly 196, 197.

3 Paul Davies, ‘The Illegality Defence: Turning Back the Clock’ [2010] Conv 282, 282.

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judicial attempts to align conflicting relationships and policies have ‘left the English law on

the effects of illegality in a “confused and unsatisfactory state”’.

4

B PRESUMED RESULTING TRUSTS

In the United Kingdom, resulting trusts are distinguished from express trusts because the

Court instigates them. Swadling describes the presumption of resulting trust as ‘a legal

presumption that a trust was declared by the transferor in his own favour’.5 The general

principle of the presumption of resulting trust is set out in Dyer v Dyer,6 which states that the

presumption will arise in favour of a person who has paid a contribution to the purchase price

of a property for a transfer of property.7 The presumption operates with regard to personalty,

legal estates, and equitable interests. Chambers emphasises that the fundamental components

of the resulting trust are ‘the lack of the provider’s intention to benefit the recipient of the

property’,8 as well as an absence of the recipient’s consideration.9 According to Browne-

Wilkinson LJ, resulting trusts ‘arise because of a presumption that the transferor intended

them so to do.’10 At law, two vital resulting trust types surround the intention of property

owners, which are voluntary conveyance and purchase-money trusts. These circumstances

are ‘universally accepted as resting on a presumption’,11 and the issue with both is that it

‘appears that one person has been enriched at the expense of another’.12 The presumption is

rebuttable depending upon whether the transferor intends to make a gift of the property. Dyer

expands upon this principle, which states, ‘it is the established doctrine of a court of equity

that this resulting trust may be rebutted by circumstances in evidence’.13 If the presumption is

not rebutted, the transferee will hold the property on resulting trust for the transferor.14

4 Enonchong (n 2) 197, citing Bedford Insura nce Co. v Institutio de Resseguros do Brasil [1985] QB 966, 983

(Parker J).

5 Robert Chambers, ‘Is There A Presumption of Resulting Trusts?’ in Charles Mitchell (ed s), Constructive and

Resulting Trusts (Hart Publishing 2010) 267.

6 [1788] 2 Cox Eq Cas 92.

7 Chambers (n 5) 12.

8 ibid 26.

9 ibid 12; ‘Lack of consideration required for the presumption is not a requirement for the presumption of

resulting trust.’ See Chambers (n 5) 23; Bar clays Bank Ltd. v Quistclose Investments Ltd. [1970] AC 567.

10 Westdeutsche Landesba nk Giroentr ale v Islington LBC [1970] AC 567 [708] William Swadling, ‘Explaining

Resulting Trusts’ [2008] 124 Law Quarterly Review 72, 72.

11 Swadling (n 10) 77.

12 Chambers (n 5) 268.

13 Dyer v Dyer (n 6), [93] Swadling (n 10) 8.

14 Robert Pearce, John Stevens & Warren Barr, The Law of Trusts and Equitable Obliga tions (5th edn, Oxford

University Press 2010) 269.