W301 Equity and Trusts Unit 11 Resulting Trusts

Question

In September 2014 June transferred all her investments to her son, Ken, aged 40. She also opened a bank account in his name and paid in £10,000 of her own money. June took these steps in order to obtain a state benefit. Six months later she applied to her local Jobcentre Plus office for the benefit. On the application form she claimed to own no property at all. The Jobcentre Plus office wrote back explaining that her application was rejected as the benefit had, in fact been withdrawn generally the week before she had applied.

June is now asking Ken to transfer the investments back to her. Ken refuses.

(a)Explain whether June can demand the return of the investments.

(b)How would your answer differ if, instead of June transferring the shares, the transfer had been made by Ken’s father, Patrick, in order to deceive the Jobcentre Plus office?

Tutors’ Notes

(a)June has made a voluntary transfer of her investments and purchased the bank account in the name of another. There is no presumption of advancement between mother and son unless the mother is in loco parentis. Assuming that she was not in loco parentis, the presumption of resulting trust will apply (Sekhon v Alissa). She can rely on this presumption and recover her property even though the transfers were part of an illegal scheme to defraud the DSS (Tinsley v Milligan).

Ken can rebut the presumption of resulting trust by evidence that she intended to make a gift to him. He could argue that she must have intended to divest herself of the property and not retain an equitable interest by way of resulting trust so that she could genuinely tell the Jobcentre Plus office that she owned no property.

(b)A voluntary transfer or purchase by a father in favour of his child gives rise to the presumption of advancement (a presumption that he intended to make a gift)) although this presumption is weak and easily rebutted(McGrath v Wallis). In Laskar v Laskar doubt was expressed whether the presumption of advancement should apply to adult children.

Patrick has two alternative arguments:

  • Argue that the presumption of advancement does not apply to adult children such as Ken. Patrick could then rely on the presumption of resulting trust as above.
  • If the presumption of advancement does apply, Patrick will seek to rebut it by evidence he intended a resulting trust. This evidence will be his illegal intent to deceive the DSS. The court will not admit evidence of an illegal purpose in order to rebut the presumption of advancement (Gascoigne v Gascoigne). However, in Tribe v Tribe, it was held that evidence of an illegal purpose which has not been carried out is admissible. The question whether the illegal purpose has been implemented depends on whether, in this case, the Jobcentre Plus office was deceived. It appears that it was not because the withdrawal of the benefit meant that they did not consider Patrick’s application. Therefore, it would appear that Patrick can recover the property.