Reform of Presumed Resulting Trusts

‘The presumption of resulting trusts does no more than call for proof of an intention to confer beneficial ownership’

The presumption of resulting trusts largely operates as a mechanism for allocating the burden of proof when there is a dispute as to intended effect of a transaction on the beneficial ownership of property. As the Australian High Court stated in Russell v Scott: 

‘The presumption of resulting trusts does no more than call for proof of an intention to confer beneficial ownership.’

Thus where the presumption of resulting trust applies a transferee will have to discharge the burden of proof by demonstrating that a gift was intended, whereas if the presumption of advancement applies the transferor will bear the burden of providing that no gift was intended. The presumptions may serve the purpose of protecting vulnerable individuals where property has been transferred, or contributions made, in circumstances where there was very little evidence as to the intended nature of the transaction. However the operation of the presumptions can be criticised on the grounds that they are archaic and anachronistic. The presumptions themselves are based on nineteenth-century concepts of the family. Despite judicial comments that they are often inappropriate to modern situations, that they have lost much of their force, or are easily rebutted, they continue to enshrine outdate paternalistic and chauvinistic values. In the area of matrimonial property the inconsistencies are glaring, for example the presumption of advancement is applied between a husband and wife, but the presumption of resulting trust between a wife and husband.

These difficulties were recognised by the Law Commission in their Report, Family Law: Matrimonial Property. It concluded that the present law was unsatisfactory because:

‘…its application may not result in co-ownership of property even when a married couple desire this. Actual ownership may be held to depend on factors which neither party considered significant at the time of acquisition. In its treatment of money allowances and gifts of property the law discriminates between husband and wife.’

In the light of this inadequacy, the Law Commission considered a number of alternatives for reform. They rejected the wholesale introduction of community of property during marriage, whereby some or all of the property of a married couple would be automatically co-owned during the marriage, as unacceptable because it does not permit independent management during the marriage. Instead, they proposed a rewriting of the presumptions between a married couple in a manner which accords more closely to their likely intentions:

  1. Where money is spent to buy property or property or money is transferred by one spouse to the other, for their joint use or benefit the property is acquired or money transferred should be jointly owned.

  2. Where money or property is transferred by one spouse to the other for any other purpose, it should be jointly owned by that other.

The general rule should give way to a contrary intention on the part of the paying or transferring spouse, provided that the contrary intention is known to that other spouse.

Under these revised presumptions, a presumption of advancement would apply to both husbands and wives. The proposal would apply to married or engaged couples. In any event the gender bias of the presumptions may also contravene the European Convention on Human Rights.