Presumed resulting trusts of land: NCA v Dong & Ors [2017] EWHC 3116

This is, I must concede, one for the property law geeks (such as myself) who find excitement in the debate over whether or not s.60(3) of the Law of Property Act 1925 has swept away the presumption of a resulting trust upon the gratuitous transfer of land. Chief Master Marsh has weighed into the fray in NCA v Dong [2017] EWHC 3116 (Ch) with his view on the point.

If such matters float your boat, then read on.

Very simply, a resulting trust will be presumed in circumstances where A transfers property to B and B provides no consideration. The rationale is for such a presumption is simple – the law assumes that people do not intend to give away their property unless they are receiving something in return and imposes a trust to give effect to the presumption that the recipient was not intended to take the property beneficially in such circumstances. The presumption can be rebutted by proof that the transferor did intend the recipient to take the property beneficially.

In the case of personal property, bank accounts, stocks and shares, money etc, the presumption of a resulting trust indisputably applies in the circumstances of a voluntary transfer as a rebuttable starting point.

However, the question of whether or not a resulting trust will be presumed in the case of a voluntary transfer of land is a point of considerable controversy, which arises from the provisions of s.60(3) of the Law of Property Act 1925.

S.60(3) provides:

“In 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”

This provision has been interpreted, in some quarters, literally to mean that no resulting trust in favour of the grantor arises on a voluntary conveyance of a freehold estate.

The question of whether or not section 60(3) does away with the presumption of a resulting trust where land has been transferred for nil consideration has vexed the courts on a number of occasions and we have conflicting decisions on the point. Regrettably the Supreme Court in Prest v Petrodel Resources Ltd [2013] 2 AC 415 missed the opportunity to determine the point. Lord Sumption in Prest at [49] proceeded on the basis that equity would presume a resulting trust upon a voluntary transfer and that was part of his reasoning in that case for finding that certain properties, which had been transferred to the husband’s company, remained the property of the husband. However, s.60(3) was not raised before the court and the controversy on the issue was not mentioned. It does not appear to me, therefore, that Prest can be taken as authority that the presumption of a resulting trust arising from a gratuitous transfer survives the coming into force of s.60(3).

If s.60(3) has the effect of doing away with the presumption of a resulting trust, it creates an inconsistency with the position that applies to a voluntary conveyance of land and that which applies to other types of property.

It is difficult to see why that should be so, although one possible justification is that the formal requirements for the transfer of land make it less likely that someone would inadvertently transfer away legal title to land without intending the recipient to become the beneficial owner. Conversely, legal title to personal property is more readily transferred away and title to some types of personal property is perhaps more likely to be transferred to another for administrative convenience than might be the case with land – the obvious example being the scenario of the elderly person transferring a bank account into the joint names of themselves and a trusted relative for the purpose of enabling the relative to assist them with their financial affairs (see for a case in which the presumption applied and was not rebutted Re Northall (deceased) [2010] EWHC 1448 (Ch) c.f. Aroso v Coutts [2002] 1 All ER (Comm) 241).

We have two decisions that lean in favour of the view that s.60(3) does what it says on the tin and has abolished the presumption of a resulting trust in relation to a voluntary conveyance of land: Lohia v Lohia  [2001] WTLR 101, in which Nicholas Strauss QC, sitting as a deputy High Court judge, held that it should be taken at face value: if A gratuitously conveys freehold or leasehold land to B or, probably, to A and B, no presumption will be made in A’s favour, that he does not intend B to take beneficially, and so no trust of the land for B will arise in the absence of positive evidence that A intended to create one; and Ali v Khan and others [2002] EWCA Civ 974 in which the Court of Appeal cites Lohia with apparent approval (per Morritt V-C at [24]) but without any discussion of the point and which is in any event obiter as a resulting trust was found to have arisen on the facts. Furthermore, the Court of Appeal in Ali v Khan made no reference to the comments of the Court of Appeal in Lohia, which, in upholding the decision of Nicholas Strauss QC on a different point commented as follows (per Mummery LJ [24]): “s.60(3) is so inextricably bound up in centuries of English legal history that it would be bold for this court to pronounce upon it without having heard very extensive argument, preferably in the context in which such a decision on the point was crucial to the outcome of the case.”

Leaning in the contrary direction in favour of the view that the presumption of a resulting trust arising on the voluntary transfer of land survives s.60(3), we have Mrs Justice Eleanor King in M v M  [2013] EWHC 2534 (Fam) who, citing Mummery LJ’s comments in Lohia, pronounced herself to be  “not so bold” as to say that the presumption of a resulting trust had been abolished and proceeded on the footing that it was alive and kicking, and now Chief Master Marsh in NCA v Dong & Ors [2017] EWHC 3116 (Ch).

This is not a case of any particular interest on the facts, however Chief Master Marsh’s analysis on the legal question of the operation of s.60(3) is careful and persuasive:

Chief Master Marsh noted that the need for s.60(3) arose from the repeal of the Statute of Uses 1535. Prior to its abolition, the convention was for a conveyance to include words to the effect that the property was conveyed for the use or benefit of the grantee.

He considered that the mischief towards which s.60(3) is aimed was a technical one – the failure to include formula of words in a conveyance, namely the failure to say that the property is not expressed to be conveyed for the “use or benefit” of the grantee – and that the draftsman of the LPA was concerned to clarify the position arising from the repeal of the Statute of Uses.

He derived support from this view from the heading to s.60, which explicitly describes the subject matter of the section as “Abolition of technicalities in regard to conveyances and deeds”, and further from the fact that s.60 appears in the LPA in the part dealing with “Conveyances and other Instruments” and which is largely concerned with the technical nuts and bolts of conveying interests in land.

He cited with approval the following passage from Snell’s Equity 33rd Ed at 25-017, discussing Lohia:
“This literal interpretation produces the anomaly that a resulting trust of real property would be precluded by the provision where on the same facts a trust of personal property would arise. The preferable interpretation would be that the provision merely introduces the possibility that the grantee may take the beneficial interest in the land even though the words “to the use or benefit of the grantee” are not expressed in the conveyance. That is to say, the provision was only intended as a conveyancing reform to simplify the words of limitation in the conveyance, not to preclude the application of the substantive law of resulting trust to voluntary conveyances of land.”

He preferred this view to the literal interpretation noting that, if it had been the intention of the draftsman to do away with a presumption of law of long standing, it might have been expected that the Act would have said so in terms and it would be even more surprising for the presumption to have been abolished only in relation to land with a saving provision for chattels. It would have been very easy for the draftsman to have said that the presumption to which the sub-section is addressed is abolished. After all the LPA consolidated the fundamental reforms to the way in which land was held and conveyed and is explicit about change where it needs to be. Instead the sub-section says a resulting trust is not to be implied “merely by reason of” a failure to use a time-honoured conveyancing formula.

Given that, even in the absence of such a presumption, a resulting trust may be inferred from the evidence, and given further that these sorts of presumptions will generally be found to be readily rebutted and the modern preference for considering all of the available evidence and striving to ascertain the parties’ intentions in favour of relying upon presumptions, the question of whether or not a resulting trust will be presumed merely be reason of a voluntary transfer of property may seem an arid and academic debate.

However, as Chief Master Mash notes, the presumption may have particular importance in cases where it is a third party to the transfer who is trying to establish that a resulting trust has arisen. These sorts of cases arise fairly frequently – for example where a creditor, trustee in bankruptcy or beneficiary with an interest in an estate seeks to establish that beneficial ownership of the asset remained with the transferor such that the asset is available to satisfy the creditors’ claims or falls into an estate. In such circumstances, the parties to the transaction hold all of the cards and the third party may be able to advance no positive evidence on the issue. The presumption of a resulting trust in such cases, as a starting point that may easily be rebutted, may balance out that sort of evidential imbalance without leading to unfairness.

We will have to wait to see if a later court will reach a decisive view on the point, however for now, Chief Master Marsh’s comments in Dong strike me as the soundest analysis on the point to date.