Resulting trust

Penner Chp 5:
feofees - 公共不動產管理人
feoffments - transfer of land or property to the other given the other the total right to sell it as well as the right to pass it on to his heir feoffments to use were so common, equity assume that this was the normal basis upon which land is conveyed.
This is called the presume resulting trust.  This presumption is not abolished today yet, probably the court usually could find sufficient evidence to know what the actual intention of the parties, on balance of probability
RT: 2 kinds: Presumed RT and Automatic RT
PRT: 2 kinds: voluntary transfer PRT and purchase contribution PRT
Purchase contribution PRT: IF, A pays C to transfer property to B Presumes, B holds property on trust for A
Difference between these 2 types of RT:
Megarry J in Re Vandervell (No.2) - ART does not depend on any intentions or presumptions, but is the automatic consequence of A's failure to dispose of what is vested in him

PRT: s.60(3)1925 Act, a RT is not to be implied merely because there is no express statement saying that this is a gift, not a trust
Lohia v Lohia - it did abolished the presumption
Ali v Khan - agrees wiht L v L
(N.B. the section does not abolish the presumption in purchase contribution PRT cases)
Fowkes v Pascoe - the presumption is rebutted since there is no other conceivable reason for her to transfer the stocks to him (Mrs Baker treated Mr Pascoe as a grandson, there is evidence that she intended to give the stocks to Mr Pascoe as a gift)
Re Vinogradoff - woman buy loan stock into joint names of herself and her 4-year-old granddaughter.
Held - presumption not rebutted - infant hold the stock on resulting trust (L: W + baby, e: W)
contribution in purchase contribution PRT should be read as "purchase contribution in money or money's worth"
Springette v Defoe - sitting tenant (現任租戶)
Assume A and B buy a house which costs GBP50,000.
A pays GBP10,000. Mortgage provides GBP40,000, under which both A and B are liable.
A's equitable share: (10 + 40/2)/50 x 100% = 60%
B's equitable share: (40/2)50 x 100% = 40%
If the house doubles in value; GBP100,000.

Assuming after paying the mortgage loan, the profit is GBP40,000. A gets 24k, B gets 16k.
The presumption of RT: In order for A to get the benefit of presumption, he only has to provide evidence of the transfer itself. A does not have to prove that B provides no consideration. B will then give evidence. E.g. shows that he pays for the car, written contract of sale.
B is said to rebut the presumption of RT.

What is the content of presumption of RT? 4 theories:
i) the law presumes that the transferor declares an express trust over the property now in B's hands (Swadling)
ii) A intended B to hold the property for A on trust (Mee)
iii) A did not intend for B to take the title to the property beneficially (Penner)
iv) no legal basis to which B can point to show that A intended B to receive the property for his own benefit (Chamber & Birks)

Different theories will give different result. e.g. payment by mistake. If you use theory (i), A does not intend to declare an express so no RT. If you use theory (iii), A did not intend for B to take beneficially, so there is a RT.

 i) criticism: it cannot explain many cases. Re Vinogradoff - if using this model, this case is wrongly decided. Penner pointed out that this model is still wrong because in family home cases, it does not seem that the husband has expressly declares an express trust.(my question, is it still RT? L: H, e: H+W)

Midland Bank v Cooke. Swadling would say, these are actually constructive trust, rather than presumed resulting trust. Because the wife's contribution is simply a factor in finding a constructive trust. (my question: if wife contributes
purchase contribution)

ii)
iii) 5.20 -24 skip - please read later Presumption of advancement: only father to child, or husband to wife.

Court will infer that a man is making a gift

Sekhon v Alisa -No presumption of advancement from mother to child, unless the mother is a widow If man wants to show that the transfer is not a gift, he has to provide evidence. 2 ways to understand the relationship between the 2 presumptions >> it is a second step to presumption of RT: where father leads evidence to overcome the presumption of advancement, the presumption of RT falls back into place >>there is no presumption of RT in cases where presumption of advancement applies.

Laskar v Lasker - suggests that the presumption of advancement might apply between mother and daughter as well
Antoni v Antoni - pres. of advancement operates between parent and child
Pecore v Pecore (Canadian case) - pres of advancement operates between parent and minor child
McGrath v Wallis - the pres of advancement is rebutted because:
1) putting the property under the son's name would assist an application of a mortgage
2) declaration of trust is drawn up by a solicitor (although never executed)
3) father is 63 years old, good health, no obvious reason that he is making a gift to his son.
The court did not say there is a purchase contribution RT in this case, rather the court declare a trust and determine the equitable shares based on their intention objectively
ART: what the s'or fails to give away, he keeps. Swalding and Chambers does not agree, because in the beginning s'or has a title, but at the end of story he has an equitable title, so we cannot say that he "keeps". It really just fails, leaving him exactly as he was before. So, Swalding thinks there is no ART at all.

The nature of corporate personality

Saloman v Saloman - at that time the Company Act required that there be seven members of the company. Saloman and family hold shares, paid:
-GBP10,000 worth of debentures giving a charge over company's asset,
-GBP20,000 of GBP1 shares
-GBP9,000 cash Mr Saloman then paid off all creditors in full
So he holds 20001 shares, his family hold 6 shares Insolvent >>
CA: shareholders has to be bona fide but here the family hold the shares just to comply with the Company Act
HL> irrelevant, there is a separate legal personality in this case. (But Mr Saloman is a sole trader operating through a corporation)  

Macaura v Northern Assurance - Mr Macaura sold timber to a company, he then insured the timber. Fire destroyed timber, HL: Timber belongs to company, not Mr Macaura company's asset (timber) belong to the company, not its shareholder
Lee v Lee's Air Farming - Mr Lee owned all shares, he is also the pilot. Plan crashed, widow claimed $ and said Mr Lee is a worker. NZ: no. Privy Council: yes because the company and Mr Lee were disctint legal entities

Note: s.3(4) CA 2006 still allows unlimited company to be formed.
Debenture - company can raise money by issuing debentures, it is like an acknowledge of debt, it evidence the fact that the company is liable to pay back a specific amount with interest. The money raised does not become part of the share capital.
Liquidator - a court appointed official

Disposition by a beneficiary of his interest

http://books.google.com/books?id=ga9gAQAAQBAJ&pg=PA149&lpg=PA149&dq=sub-trust+2+legal+title&source=bl&ots=4rjCZcE-tP&sig=t_zQsCk5qST3vV0hpwnJbnRU12c&hl=en&sa=X&ei=y73GUtbkBKquiQfRsoDYDA&ved=0CFwQ6AEwCQ#v=onepage&q=vandervell&f=false

s.53(1)(c) -

T - B1 (equitable interest)- B2 (beneficial interest)
Grainage v Wilberforce - if B1 creates a bare trust for B2, he simply drops out of picture(because you have nothing to do and so become superfluous. So in effect B1 is disposing his beneficial interest, so this "transaction" is caught by s.53 (1)(c)

Nelson v Greening & Sykes -
Lawrence Collins LJ - the creation of a bare trust might in practice make it more convenient for the t'ee to deal directly with the beneficiary, this was not the same thing as a matter of law.

Current position:  Declaration of sub-trust are not dispositions of the beneficiary's equitable interest

Vandervell - Vandervell directed the bank to transfer the shares to RCS, dividends were declared, shares were then bought back by VT.
IRC: V retained an interest in those shares so was liable for tax
2 arguments:
1. V's direction to the bank to make an outright transfer to RCS was an attempted disposition of V's equitable interest. Since it has not been made in writing it was ineffective and V retained his e interest.
2. the option to buy back the shares from the RCS, which had been granted to VT, was received by VT not beneficially but on trust, since VT's sole purpose was to be a trustee company. However, V had never declared the trusts on which VT was to hold the option, so in the absence of any effectively declared trust VT held the option on RT for V as settlor.

HL: rejects 1st argument but accepts the 2nd. So liable for tax on the dividends.
HL unanimously held that the direction to the bank, which was t'ee of the shares, to transfer them outright to the RCS was not a disposition of V's equitable interest so does not fall within 53(1)(c).
Lord Upjohn: the situation was analogous to an outright transfer by a shareholder with legal beneficial title to the shares, since transfer of legal title to the shares by the bank to the RCS itself required documentation, there was no reason to require an additional document to transfer the beneficial interest.
Lord Wilberforce: Re Rose principle


criticism to Lord Upjohn and Wilberforce:
1.
2. the rule in Re Rose applies once we know what steps the transferor needed to take to make the transfer effective. But the rule does not tell us what the necessary steps are, and this was the question which faced the court in Vandevell.



wiki:

The House of Lords, by three to two, found that Vandervell was indeed liable to pay tax on the £145,000 of dividends given to the Royal College of Surgeons. The House of Lords held that LPA 1925 s 53(1)(c) was not applicable to situations where a beneficiary directs his trustees, by way of his Saunders v Vautier right to do so, to transfer full legal and equitable^[5] ownership to someone else. As such, Vandervell had not successfully divested himself of ownership (legal and equitable) in the shares, since the Trust Company had an option to purchase the shares back from the RCS. The case is a proposition that an oral declaration to a bare trustee to transfer the trust property to a third party absolutely for his own benefit is a valid disposition. If the settlor does not divest himself adequately as in Vanderwell v IRC an ART would operate.The option to purchase a substantial fraction of the company for only £5000 was extremely valuable. As such, Vandervell was liable to pay surtax on the option.

Lord Wilberforce said that there was,

“

no need, or room to invoke a presumption. The conclusion, on the facts found, is simply that the option was vested in the trustee company as a trustee on trusts, not defined at the time, possibly to be defined later. But the equitable, or beneficial interest, cannot remain in the air: the consequence in law must be that it remains in the settlor.

Vandervell No.2:
Shares bought back by VT with money from the children's trusts.
VT wrote to IRC and said the shares were now held on trust for the children
IRC: you still have an interest in the shares
4 years later, V executed a deed by which he transferred all rights he might still have had in the option or shares to VT to hold on the children's trusts.
question before the court: whether V retain interest in the shares in the period between VT's purchase of the shares and V's execution of the final deed?


IRC:

Proving declaration of trust

In general, oral testimony is admissable in civil cases. Same rule applies to prove the right-holder has made a declaration of trust. Except: 1) Land: the admissibility rule s.7, 1677 Act> s53(b) 1925 Act: declaration of trust of land must be manifested and proved by some writing s.7 1677 Act is qualified by s.8 1677 Act. s.8 1677 Act> s53(2)1925 Act Purpose is to prevent perjury (偽證罪) long time ago Writing does not have to be pre-dated. It could be post-dated. Gisseng v Gisseng - wrong - the declaration itself does not need to be "in" writing ***s.53(b) is only a rule of evidence. It is not concerned with enforceability, but with proof, a logical prior question Sometimes court allow the evidence to come in. Rochefoucauld v Boustead. CA: the statute designed to prevent fraud could not be used to effect a fraud R v B criteria: i) must be express trust 2) Testamentary trust controverted fact - 反駁 misnomer - 人名誤載 Burden of proof: General rule is he who asserts must prove (e.g.the husband, because he wants to say that wife holds it for him, and it's not a gift). 2 exceptions: i)Not husband or father (e.g. third person, wants to show that husband did not say it's a trust and therefore the transfer is a gift) ii)

constitutions

Constitution - transfer of the rights from settlor to t'ee e.g. transfer of e benefit, s.53(1)(c) 1925 Act The effect of perfect constitution - B can enforce the trust against the t'ee. It does not matter even if B gives nothing in return Milroy v Lord - equity will not assist a volunteer to perfect an imperfect trust. imperfect constition cannot be interpreted as a declaration by the settlor of himself as trustee Richards v Delbridge - same argument for gifts EXCEPT 6 situations: 1) detrimental reliance - Pascoe v Turner, Dillwyn v Llewelyn 2) Re Rose - while the settlor has done everything in his power to perfect the gift/trust (3rd party's assistance is needed), court will perfect the gift criticism: no detrimental reliance, no base, and maxim "equity looks upon that as done which ought to be done" does not actually apply here. 3) Strong v Bird testatrix (留有遺囑的死者)intend to release the debt, i.e., promise not to sue. Re Stewart extend the rule from releaseing debt only to all kind of rights. 4) The rule in Ralli details: pls see covenants to settle 5) Donatio mortis causa If I die, this watch is yours. Normally such gift would be subject to Wills Act 1837, which prohibit oral wills. But court render valid. Conditions for the operation: Cain v Moon. 6) unconscionability. Pennington v Waine - same facts, but result hard to reconcile with M v L.

Breach of trust

Court order: specific performance, or appoint a new t'ee. personal liability proprietary liability A third part may be personally liable as well by assisting the breach of trust trust account: records of the rights coming into and going out of the trust fund taking of/calling for an account: B sues t'ee for breach of trust falsify an account: when the t'ee has entered into a transaction which is not authorised, or he has paid to a person who is not a beneficiary of the trust, B can failsy the account in respect of that particular transaction Remedy - t'ee restore the breach (e.g. buy back the property, any difference comes out from his own pocket). If he cannot restore it, he has to pay from his own pocket Surchaging - the trust fund has less value than it should have had, due to negligence of t'ee strict liability, can escape when: 1) B consent to the breach 2) exemption clause 3) s.61, 1925, court relieve

Constructive trust

Real trust:
1) enforceable contract
2) imperfect gift

Fake trust: 2 types: institutional (arise by rules) and remedial (court's discretion)

Reasons of why remedial trust arise: Professor Birks: events which give rise to right:
1)manifestation of consent 2)wrong 3)unjust enrichment 4)others
Wrong-doing: CL: damages e: liability to account as a constructive trustee, or, equitable compensation
Lister v Stubbs Dubai Aluminium, Lord Millett suggested to jettison the language of constructive trust
AG for HK v Reid, Lord Templeton: there is a C trust because "equity considers as done that which ought to have been done"
Unjust enrichment
Chase Mangattan v Isarel-British Bank, mistaken payment: equitable property in the transferor, the legal property in transferee, so there is a trust arisen by operation of law.
Criticism: this is wrong, because there is no pre-existing interest.
This case is disapproved in Westdeutsche Landesbank v Islington LBC