Resulting Trusts
A resulting trust will typically arise when property is transferred for no consideration to a transferee, or is
bought in the name of the transferee, or for some other reason the genuine dispositive intention of the
donor fails (e.g. a charitable purpose has been satisfied before the funds donated have been exhausted) – in
such cases other things being equal the law will imply a trust in the property that “results” (“springs back”
Old English usage from the Latin) to the original transferor.
Usually distributed on a parri passu basis, since equity is equality
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1.
Note that the question of whether a “resulting trust” has arisen will often occur in the same factual context
as whether a “constructive trust” has arisen (i.e. circumstances call for the court to “construe” a trust from
the facts to prevent unconscionability) – we will discuss constructive trusts in later classes. But note here
that a common intention constructive trust may well operate over, say, matrimonial property where:
2.
Constructive trust – construing facts (versus resulting trust, which springs back)
•
Note: comprehensive statutory regime now in Australia for family court
•
Usually gifting to someone you know/live in, things go awry and someone claims that was not a gift and it
should ‘result back’ to them
•
Common intention constructive trust can operate side by side with a resulting trust
•
“first, that there be both a joint relationship or endeavour (often a domestic one), in which expenditure is shared
for the common benefit in the course of and for the purposes of which an asset is acquired (the scope of which
may be of relevance, and as Deane J in Muschinski considered, may change from time to time); second, that the
substratum of that joint relationship or endeavour, must have been removed or the joint endeavour prematurely
terminated "without attributable blame"; and third, that there must be the requisite element of unconscionability
(namely that it would be unconscionable for the benefit of those monetary and non-monetary contributions to be
retained by the other party to the joint endeavour): per Campbell J in West v Mead [2003] NSWSC 161.
This is the way in which a common intention constructive trust may arise
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Construing the facts looking to prevent unconscionability arising between the parties
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There might be a joint venture/endeavour that fails and attributable blame? – not much case law on
this
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There must be a requisite element of unconscionability i.e. it would be unconscionable for one party
to retain the benefit
§
Resulting trust looks at money ‘cash on the barrel’ – does not really work for situations of ongoing
domestic relationships where one party has made non-monetary contributions
§
Constructive trust works more fairly where there is are a lot of non-monetary contributions involved
Different to resulting trust which looks at money pure and simple i.e. how much have you paid
in/contributed to the acquisition of the purchase price (difficult when looking at ongoing
domestic relationship that may have persisted over 15 years, when one party has contributed
more in money and the other has been contributing in a non-monetary way e.g. looking after
kids)
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So constructive trust can operate more fairly and take into consideration the usually non-
monetary contribution of the female party
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West v Mead – two women living together, one was older and richer. Difficult because the other
party had contributed quite substantially
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Note – when litigating and one party makes a calderbank offer, then from that point on you are
entitled to ask for all your costs on an indemnity basis
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c
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Terminology here is tricky - cases in the first two situations are sometimes called “presumed resulting
trusts” while the third (where there has been a failure to dispose fully of the property) is sometimes called
an “automatic resulting trust”. (This is a UK distinction which does not seem to have been adopted in
Australian nomenclature). In Salvo v New Tel Ltd [2005] NSWCA 281 at [47] Spigelman CJ observed: “the
circumstances in which a trust should be classified as presumed, resulting or constructive are not the subject
of any authoritative determination” in Australia (i.e. we do not have any fixed normative category that we
can ascribe to a particular trust – this is the main issue). Remember in this context the “Quistclose trust” (is
it in fact a resulting trust because the property always stayed in the ownership of the original owner?)
Note – very fact intensive and a large amount of judicial discretion, hence difficult with precedent
because change in the facts can change the outcome easily despite seemingly established principles
§
4.
Note that now in the UK the Supreme Court has done away with the presumption of resulting trust and
advancement with respect to the matrimonial home on the basis that (a) the presumption of advancement
was unrealistic, and (b) it was discriminatory between men and women and married and unmarried
couples – now in the case of a purchase in joint names for joint occupation by married or unmarried couples
there is no presumption of resulting trust by virtue of unequal contribution of purchase money – the
presumption is one of joint tenancy in law and equity, which might be rebutted by evidence of contrary
intention: Jones v Kernott [2012] 1 AC 776.
I.e. the Supreme Court in the UK has intervened to remedy the legislature’s fault (from Jones v
Kernott)
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SO IN THE UK, If you have jointly purchased property by joint occupation by a couple who are married
or unmarried there is no presumption of resulting trust – the presumption is one of joint tenancy in
law or in equity (subject to contrary intention – though this is unlikely) – equality is equity,
presumption that you are in for the long haul
§
In Australia, the position has somewhat become similar because of the Cummins decision
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5.
As to gifts of realty under Torrens note section 7(3) Property Law Act which appears to remove the
presumption of resulting trust in relation to a gratuitous transfer of Torrens title land: Drayson v Drayson
[2011] NSWSC 965 at [59] discussing section 44 of the NSW Conveyancing Act. See also per Sloss J in
Voukidis v Voukidis [2018] VSC 267 at [282] – [304].
This section seems to remove presumption of resulting trust in relation to Torrens Land
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Voukidis v Voukidis – Sloss J writes about Victorian provision (same as Qld one)
§
6.
SO STARTING POINT – if transfer is gratuitous, then a resulting trust will arise. BUT, might be rebutted by
presumption of advancement…
On the other hand, in certain family situations, the presumption that a resulting trust has arisen because of
the gratuitous transfer will be met and defeated by a countervailing presumption of advancement –it is the
duty as a matter of equity for certain family members (chiefly older males and male spouses) to “advance”
the position of female family members in life by making gifts to them that did not attract the resulting trust
Comes from the whole law of equity which up until about 1990 involved protecting weaker parties i.e.
children and wives who could not own marital property
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So what sort of categories are subject to advancement?
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See below
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7.
So husband to wife (Wirth v Wirth (1956) 98 CLR 228 at 232 Dixon CJ; Hepworth v Hepworth (1963) 110 CLR
309 at 318 Windeyer J) and de facto spouse (Calverley v Green) – parents of either gender to child (Nelson v
Nelson (1995) 184 CLR 538.) De facto couples now covered by Property Law Act (Qld) s 286 under which the
Court may consider various matters listed in Subdivision 3 - similar to Family Law Act s 79. Have they
“presumptions” passed their use by date?
What about people in a same sex relationship? Does the concept of advancement apply?
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Now all covered by statute – PLA s 286, FLA s 79 (above)
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Presumption is looking at an evidentiary starting point i.e. who has to demonstrate an intention – if
you have subjective intention then there is no problem
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8.
The interplay of the two “presumptions” may influence the onus of proof. Remember that in Nelson v
Nelson the mother had purchased the property in her children’s names to allow her to claim subsidised
finance. Although there was a presumption of advancement in favour of the children, the mother was
permitted to adduce evidence about the original transaction even though this involved unravelling the
statutory illegality on terms.
Important case – Thorn v Kennedy – older man in relationship with younger woman, on eve of the
wedding wanted her to sign a contract that his much older adult children would get everything, she
signed – the HC said that deal was no good
§
So where there is a power imbalance the courts might not shy away from intervening despite a
contract
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9.
The leading case is Calverley v Green (for general purposes, this is the main case in this area in terms of
resulting trust by way of purchase) (1984) 155 CLR 242 per Gibbs CJ at 246 – 247.
10.
“Where a person purchases property in the name of another, or in the name of himself and another jointly, the question
whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property
depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the
purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser
intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take
beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the
purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the
name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the
other or others. For the presumption to apply the money must have been provided by the purchaser in his character as
such - not, for example, as a loan (need to have actually put the money in as a purchaser). Consistently with these
principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property
is purchased in their joint names, there is, again 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.”
About intention of purchaser
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So if someone puts in 40% and someone puts in 60% and there is a joint purchase, on the title there is
the notion of joint tenancy, but in equity we have the underlying imbalanced interest which reflects
the contributions to the purchase price
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6. The claim is grounded on the presumed intention which is attributed to the settlor. Evidence of actual intention may
be given –it includes acts and declarations of the parties before or at the time of the purchase “or so immediately after
it as to constitute a part of the transaction”: per Mason and Brennan JJ in Calverley at 262. Subsequent declarations are
admissible only as admissions against interest. In some cases, evidence of actual intention may be available: Cetojevic v
Cetojevic [2006] NSWSC 431.
So if you have contemporaneous evidence of what the parties are intending, that evidence can be
adduced to demonstrate the intention
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But if subsequent declaration, then such declarations are only admissible against interest (as per usual
rules of evidence) i.e. you cannot later on make a statement about your intention at the time, unless it
is evidence given later AGAINST your interest
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May be possible to have evidence of ACTUAL intention
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Cetojevic v Cetojevic -Son died prematurely and had given express evidence of his intention in regards
to the property
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7. If a property is jointly acquired by borrowing from a mortgagee, it is the promise and obligation to satisfy the
mortgage over a period of time (say 30 years) which provides the consideration for the purchase price, NOT the
payment from time to time of individual mortgage instalments:
When you go to the bank to borrow money, the bulk of the funds comes from the bank which you then
undertake to pay off over an extended period of time
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“The property was purchased on the basis that the purchasers should pay it off over 20 years, a basis familiar to many
home buyers. It is understandable but erroneous to regard the payment of mortgage instalments as payment of the
purchase price of a home. The purchase price is what is paid in order to acquire the property; the mortgage instalments
are paid to the lender from whom the money to pay some or all of the purchase price is borrowed. In this case, the price
was $27,250, of which $18,000 was borrowed from the mortgagee by the plaintiff and defendant jointly. The balance
was paid by the defendant out of his own funds, being part of the proceeds of the sale of the Mt Pritchard property.
Thus the plaintiff and defendant both contributed to the purchase price of the Baulkham Hills property. They mortgaged
that property to secure the performance of their joint and several obligation to repay principal and to pay interest. The
payment of instalments under the mortgage was not a payment of the purchase price but a payment towards
securing the release of the charge which the parties created over the property purchased”: per Mason and Brennan JJ
at 257.
Can raise evidentiary issues in an insolvent context if for e.g. Ms X has consorted with Mr Y, and he has gone
off and she continues to pay off mortgage for 10-12 years, and then Mr Y’s trustee in BR comes round and
tries to claim half the house – looks right since they bought the house 50-50%, but what about the payments
she paid?
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Court does permit a charge over the property to be rendered in favour of the party who continues to pay it –
so an equitable charge arises by virtue of those payments which is secured over the property and operates
against the trustee in BR
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Severence in equity by BR issue – if you have joint title and you go BR, as per S58 and 134 of BR Act, your
half of the property vests in the trustee in BR and they will move to sell your half in equity (i.e. sever the
tenancy) – so automatic severance which occurs.
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Key question is trying to maximise the amount you can point to which has been contributed by the
“innocent party” i.e. the one that has NOT gone broke
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What is included in the “purchase price” is a large and difficult property question beyond our scope in this
lecture: see my ALJ article at 269 – 271 and the discussion in Buffrey v Buffrey [2006] NSWSC 1349 per
Palmer J below. Note that a party may be entitled to an account in equity for moneys contributed to the
ongoing mortgage, maintenance and upkeep of the property after its acquisition: Draper v Official Trustee
[2006] FCAFC 157.
Leverage affect of contributing a small amount earlier□
You may be entitled to account in equity e.g. Draper v Official Trustee – one party fighting
trustee in BR having made large contributions
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8.
In Buffrey v Buffrey at [14] Palmer J summarised the position: 9.
The presumptions of resulting trust and advancement often compete in cases between husband and wife, or de facto
spouses, or between parent and child, where title to property is held in joint names but the parties have made unequal
contributions to the cost of acquisition.
one begins with the presumption that the equitable title to the property is at home with the legal title but
that presumption, like all evidentiary presumptions, gives way to facts showing the contrary;
So do not let anyone onto your title – once they are on, you are relying on
equity to get them off the title – co-owner can always seek an order for sale,
which is a powerful ability
}
So might not matter that they contributed nothing to the purchase price
}
1.
where property is held in joint names but the joint tenants have not contributed equally to the cost of
acquisition, it is a presumption of equity, not lightly displaced, that the beneficial interests in the property
are to be held between the parties upon a resulting trust in proportion to their respective contributions to
the acquisition cost;
2.
the presumption of resulting trust may be rebutted by showing that there is a relationship between the
parties giving rise to the presumption of advancement so that the party who has contributed less or nothing
to the acquisition cost is nevertheless to have an interest in accordance with the legal title;
3.
if 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;
4.
If the presumption of advancement arises where joint tenants have made unequal contributions to the
acquisition cost:
(a) whether the presumption is rebutted depends upon the intention solely of the party who provided the
larger contribution because the question is whether that person intended to make a gift conferring equality
of interest in the property on a person who did not contribute equally to its acquisition;
(b) evidence as to the intention of the person making the larger contribution is admissible and assessed in
the same way as in the case where one party has provided the whole of the acquisition cost;
5.
if 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;
6.
for the purposes of the presumptions of both of resulting trust and of advancement:
(a) the acquisition cost of property includes the costs, fees and disbursements incidental to its acquisition;
(b) a party contributes to acquisition cost by borrowing funds necessary to make up the acquisition cost,
whether or not that party subsequently contributes to payment of principal and interest due on the
borrowing;
(c) parties borrowing jointly in order to make up the acquisition cost are treated as having contributed the
borrowed capital in equal shares; - when you enter into a mortgage, bank has two forms of security (charge
over the land + your personal covenant to repay)
(d) a party who does not borrow funds to make up the acquisition cost but who subsequently pays, or
contributes to payment of, principal and interest on such a borrowing does not, by that fact alone, make a
contribution to acquisition cost.
7.
In Damberg v Damberg [2001] NSWCA 87;(2001) 52 NSWLR 492, Heydon JA considered that the relevant
standard of proof for the rebuttal of the presumption of advancement is the balance of probabilities. The
Full Court of the Family Court has held that the onus of proof lies with the person seeking to rebut either the
presumption of advancement, or the presumption of a resulting trust (Vadisanis & Vadisanis [2014]
FamCAFC 97, [43]–[44]).
Just note q’s of onus of proof – requirement to reduce evidence to prove something □
From time to time, evidentiary onus arises that requires you to adduce evidence □
Formal legal onus in every case – P must demonstrate their case on the balance of probabilities □
Frequently there will be internal evidentiary onuses where on party produces evidence and then
an onus arises for the other party to produce evidence to the contrary
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10.
The position has become a little less clear since Trustees of the Property of Cummins v Cummins (2006) 227
CLR 278. The main problem flowing from Cummins is that the High Court appears to have moved to a
presumption of joint equal ownership of matrimonial property notwithstanding that the parties may have
contributed unequally to the purchase price. It is important to note the insolvency context – Mrs Cummins
was trying to look back to the original purchase to which she had contributed more than her husband to
keep a larger proportion of the proceeds of the sale of the matrimonial home out of the hands of his trustee
in bankruptcy – remember that a sequestration order has the effect of severing a joint tenancy in equity –
the trustee will then move for possession of the property with a view to realising its value by sale.
11.
In Cummins in 1967, many years before his insolvency in 2000, the bankrupt and his wife had jointly purchased a house
property in which to live. There was no doubt that the wife contributed the greater percentage (76.3%) of the purchase
price – earlier before his insolvency the husband had attempted to transfer his share (said to be 50%) of the property to
his wife but this transfer was set aside under section 121 of the Bankruptcy Act.
Was Mrs Cummins able to extract the value? I.e. could she rely on the fact that she had paid for most
of it?
§
At first instance Sackville J held that the presumption of resulting trust arising from the contribution of
unequal amounts to the purchase was rebutted by the common intention of the parties that they should be
joint beneficial owners. The Full Federal Court overturned this decision but the High Court restored it. Here
the title was taken jointly and the parties had intended to live in it together. The High Court applied US
authority to the following effect (at [72]):
12.
“The present case concerns the traditional matrimonial relationship. Here, the following view expressed in the present
edition of Professor Scott's work respecting beneficial ownership of the matrimonial home should be accepted: "It is
often a purely accidental circumstance whether money of the husband or of the wife is actually used to pay the
purchase price to the vendor, where both are contributing by money or labor to the various expenses of the household.
It is often a matter of chance whether the family expenses are incurred and discharged or services are rendered in the
maintenance of the home before or after the purchase." To that may be added the statement in the same work:
"Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in
the name of one of them, it may be inferred that it was intended that each of the spouses should have a one-half
interest in the property, regardless of the amounts contributed by them”.
That reasoning applies with added force in the present case where the title was taken in the joint names of the spouses.
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, 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, 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
(so when you are living with someone and carrying on duties that attract no monetary payment, then as time rolls
forward it becomes 50-50 essentially)
So assumption here that there was a joint endeavour/venture from the beginning, despite
different contributions to purchase price
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So Cummins cuts across all our accepted reasoning but raises questions – what happens if you
have only been married 3 years and someone has contributed 90%?
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Cummins considers a long marriage and there is a concept of the interest each person brought
to the marriage eroding i.e. the distinction between what you and your partner brought
diminishes over time since you become a joint unit
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How then is property to be “protected”? Does it assist if it is held legally by the parties as tenants in
common in shares of 999 to 1? How far back can the trustee in bankruptcy reach?
It is a possibility this could prevent the trustee from clawing back 50% of the property – of course the
issue that the wife could go BR too
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MIGHT have some persuasion
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But depends on whether the transfer was made at the time one party was insolvent, OR that the party
did it deliberately to move property out of reach of creditors – can then be struck down under general
provision – s 127 PLA, or s 121 BR Act
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BUT NOTE Trustee of the bankrupt estate of Wallace v Wallace [2016] FCCA 963 – transfer of home
from husband to wife for natural love and affection while solvent and ten years before sequestration
order caught by section 121!! (I.e. allowed to be clawed back by the trustee of BR)
§
13.
Does it help to use a discretionary trust? Note the notion of a “controlled entity” under section 139D and
section 5F of the Bankruptcy Act.
May well be that property in the hands of a trustee can still be clawed back by the trustee in BR
§
Note – most cases of BR are for $10-12 k, although the BR cases for $52M are the ones that attract
media attention, and the ones which the legislature targets
§
14.
Joint bank accounts revisited! You will recall that we looked at the case of the joint bank account and the
resulting trust in the context of the recent cases review at the end of semester one.
15.
Joint bank accounts, the resulting trust and other questions16.
It is common for the holders of a joint bank account to have contributed unequally to the amount in the
account. On the death of one account holder, does his or her estate have a claim by way of resulting trust to
the amount contributed to the account, or does the survivor take the lot? Are the terms upon which the
account was opened decisive? In Whitlock v Moree the Privy Council in a split decision has analysed all
relevant authority on the topic, including Russell v Scott, the leading High Court authority.
The nature of a joint bank account
It is useful to begin with a statement of basic principles. It is clear that where a bank account is in credit the
relationship between the bank and the customer is that of debtor and creditor. A chose in action is created,
which may fluctuate in value depending upon the state of the account. At common law, legal title to (as
opposed to beneficial ownership of) property in co-ownership can only be joint title. Survivorship in favour
of a joint owner is “an inevitable, indeed inherent, aspect of joint legal title”. Thus, “a sum standing to the
credit of a joint account is a debt owed to the holders of the account jointly”. Furthermore, and
axiomatically, “unless the terms of the account permit the bank to discharge the debt by releasing the funds
to or at the direction of one of the parties to the account, the debt owed by the bank can only be discharged
by payment to or with the authority of both parties jointly”.
Ownership of items purchased from the joint account
Is there any limitation on the authority of the parties to use the funds to purchase property
§
E.g. if you buy a chattel, that legal title vests in you – the question is whether there is any implied
limitation on what you can spend the money on from your joint account holder
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More relevant in regards to purchase of very expensive chattels e.g. if a joint account holder went and
bought an expensive car – is there a limit on their power to use the funds?
§
Pecor v Pecor – Canadian authority – Whitlock says this is NOT the Australian common law position –
this authority is only mentioned in the dissenting judgment – as a general rule, do not separate legal
and equitable interests
§
SO, (in footnote 20), usually the statement in the instrument as to who has the beneficial ownership is
conclusive – although you may rely on equitable grounds (e.g. frauds, misrepresentation, mistake etc.)
to argue against that
§
So simply looking at objective intention – may well be that there has been no declaration made
§
Looking at account opening document, and the legal title as set out in the particular instrument
§
In Re Bishop Stamp J concluded that a husband and wife as joint account holders are to be treated as acting
with the authority of the other in making a purchase using funds in the joint account so that “if one of the
spouses purchases a chattel for his own benefit or an investment in his or her own name, that chattel or
investment belongs to the person in whose name it is purchased or invested: for … there is … no equity in
the other space to displace the legal ownership of the one in whose name the investment is purchased.”
In Re Bishop Stamp J distinguished the judgment of Vaisey J in Jones v Maynard in which it had been held that a
husband was not entitled to disaggregate the contents of a “pool” of funds to which the spouses had contributed
unequally over the years; as a consequence, the husband held a moiety on such an asset on behalf of his wife
(who could invoke the “quaint” presumption of advancement had the purchase been made in her name alone).
Subsequently, in Ebner v Official Trustee in Bankruptcy Finkelstein J doubted whether it was possible for a joint
owner “who reaches the bank first” can thereupon divert jointly-owned funds in such a way as to deprive the co-
owner of any entitlement to investments purchased with them. In West v Mead Campbell J (as he then was)
agreed with doubts expressed by Finkelstein J but observed that all turned on the nature of any “diversion” of
funds – “that assumes that there is some limitation on the authority on the party who has reached the bank first,
which does not enable him or her to use the funds in the way he or she has in fact used them”. In In the matter of
Worthbrook Limited Brereton J commented that the scope of any “limitation” on the relevant account-holder’s
authority is a complete answer to the reservations on the general principle expressed in Rathwell and endorsed in
Ebner.
Issues arising from joint ownership – the “equitable toolkit”
There are a number of issues that arise from joint ownership. To begin, at common law, legal title to property in
co-ownership can only be “joint title” and a right of survivorship is an inevitable incident of such ownership.
However, by means of the interposition of a trust, the forms of co-ownership beneficially may be infinitely various.
To determine the extent of beneficial ownership various “contents of an equitable toolkit” may be deployed.
If, for example, property has been transferred to legal title holders by a written instrument, a statement “as
to the beneficial ownership of the property in that instrument is usually conclusive”. The question is to be
determined by construing the relevant instrument objectively. Any such determination may be subject “to
the usual equitable challenges such as fraud, duress, undue influence, misrepresentation and rectification,
and to the more restricted common law doctrines of non est factum and mistake”.
In construing any dispositive instrument, as with all construction, an objective approach must be taken – the
subjective intention of the maker of the instrument is not admissible. The joint owners may declare how
their interests are to be held. If, as all too frequently happens, no such declaration has been made, then a
court of equity may find a constructive or resulting trust has arisen.
In relation to a joint bank account, the relevant document to be construed is the document which opens the
account. (It may be that the contractual document also has a dispositive effect because it contains an
assignment of the respective interests of the parties.) Thus, once the parties have declared their interests by
means of a signed written instrument, there is no room for the operation of the doctrine of resulting trusts.
It follows that, in the absence of any claim of mistake or non est factum, or some equitable malfeasance
involving fraud, duress, undue influence or misrepresentation, the onus lies “squarely on the party
challenging the effect of the agreement …”.
(It may be interpolated that this is precisely the position which prevails in relation to Torrens title land and
which makes it vital not to let any plausible “stranger” onto the title – the starting point of any analysis is the
state of the register: Ingram v Little.)
Thus, “where the parties to a joint account have declared their beneficial interests in it in signed writing, it
would be both extraordinary and unsatisfactory for the courts to have to resolve a dispute about their
beneficial interests by any open-ended factual inquiry about their subjective intentions, or the subjective
intentions of whichever of them provided the money”.
In some Canadian authorities the view had been taken that any dispositive statement in an account-opening
document was relevant only to the legal title, not the equitable ownership: Pecore v Pecore.
In Whitlock the majority makes it clear that there is no general rule that an account agreement affects only
the legal title – the question is always one of the true construction of the agreement.
Whitlock v Maree declines the Canadian position – so the notion that you might have someone
denying equitable title which clouds the position with respect to a joint bank account is particularly
Canadian
§
From an objective point of view, not many with joint bank accounts thinking in terms of both
equitable and legal title – most people do not think about the equitable title, although you could make
it clear that there was not to be any survivorship (but this would add a large transaction cost to setting
up the account)
§
This accords with the leading Australian authority, Russell v Scott. In that case, there was nothing in the
terms of the contract which dealt with the beneficial interest so the matter had to be determined by
recourse to the doctrine of resulting trust.
No express clause that there was intention to confer upon him beneficial ownership, on the
facts of the case
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Compare to Pecore where there were some indications on the doc itself that money was to be
used for limited purpose, i.e. to pay utilities – but no express limitation contained in the
document itself, and there COULD have been (notifying this intention to the bank)
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The terms of the documents
Here, clause 20 of the joint account agreement was a “pellucidly clear declaration” that the survivor of the joint
tenants was to have the beneficial interest in the account. An express assignment clause strengthened this
conclusion. Private bank customers in the Bahamas (or elsewhere) do not “go around, like lawyers, thinking
constantly of distinctions between legal title and beneficial ownership when contemplating the ownership of
property”.
This was thus a case “in which two holders of a joint account have, by an agreement with the bank to which they
were both parties, expressly set out above their signatures a declaration as to the beneficial interests in that joint
account which, on its true construction, provides for any balance on the account to be the beneficial property of
the survivor, upon the death of the other account holder, regardless who contributed the money to the credit of
the account before that date”.
Lord Carnawath (with Lord Wilson) in dissent
Lord Carnawath held that the use of a joint bank account did not, from an intending customer’s point of view,
necessarily involve any vehicle for the transfer of property in the longer term, rather than being a “convenient
vehicle for … co-operation (for whatever reasons) in handling funds for the time being”. This should thus inform
any construction of the documents.
In this regard, his Lordship paid particular attention to the reasoning of Dixon and Evatt JJ in Russell v Scott. In the
absence of an express clause, there the contest between the claim of the surviving nephew and the aunt’s estate
depended on the characterisation of any equitable obligation imposed upon him. The legal estate had survived to
him by virtue of the joint tenancy. There was no relationship generating a presumption of advancement – but was
a presumption of resulting trust rebutted by proof of an intention to confer upon him beneficial ownership? On
the facts, the answer to this question was yes.
In Lord Carnawath’s view, the key question was the proper interpretation of clause 20 and its effect on the legal
and equitable title to the chose in action constituted by the joint account. Thus, at issue was “what the clause
discloses about the common intentions of the parties, in respect of the beneficial (as opposed to the legal) interest
in the relevant funds”.
His Lordship drew support for his view from the decision of the Supreme Court of Canada in Niles v Lake. There,
the relevant clause provided for a right of survivorship and an express assignment to the survivor of all moneys
and interest in the joint account. The Supreme Court of Canada held (reversing the Ontario Court of Appeal) that
the clause did not determine the beneficial interest in the account, nor rebut the presumption of resulting trust.
The decision was unanimous, but the reasoning diverse.
Lord Carnawath then examined in great detail subsequent Canadian and Singaporean authority which had
discussed Niles v Lake. In construing clause 20, he noted that it was part of the standard form prepared by the
bank; it was not a document designed by the customer to dispose of a valuable chose in action. Moreover, the
account seemed to have been set up for a limited purpose – “to pay utilities” – which had been handwritten on
the form. He thus concluded that the document was not intended to dispose of the full beneficial interest.
Conclusion
The case is a useful reminder of the importance in a joint account document of addressing the question of
survivorship. If it is established expressly as a joint account, with a right of survivorship (and a fortiori an express
assignment provision) it is hard to see why the survivor should not take in every case. True it is that a laywoman
may not have clearly in mind the distinction between the types of joint ownership; nevertheless, most people of a
certain age who have jointly purchased property would be well aware of the practical effects of entering into a
joint tenancy, particularly as “blended” families, and ageing parents, make the ultimate destination of a
proprietary interest of first importance.
Position is becoming more difficult – now have a large number of people in blended relationships, successive
relationships etc. (problem with property passing down one end of the relationship, bypassing lots of the
children)
○
Calverly v Green - resulting trust depends on intention of purchaser. Unless
presumption of advancement, resulting trust presumed.
S 7(3) PLA removes presumption of resulting trust for transfer of Torrens
land
Buffrey v Buffrey: Presumption of advancement
BEST SECTION TO STEP THROUGH
Relationships under which presumption of advancement will arise
Resulting Trusts
31 October 2018
16:08
