Express and Implied Trusts Lecture

EXPRESS TRUSTS

Express trusts are a device of disposition which, in land, separates beneficial ownership from the legal title held by the trustee. A settlor can declare themselves trustee, transfer the land to a trustee during their lifetime or create a trust by will. The trustee holds the property for the beneficiary and may be one of several beneficiaries. The terms of trusteeship are set by the settlor, and so the trustee must act according to those terms. A breach of those terms is regarded as an affront to the conscience of the court of equity, and therefore a trustee can be required by the court to comply with the express terms of the trust.

No technical words are required, but the intention to create a trust, its subject matter and its beneficiaries must be sufficiently certain. The words and conduct are assessed objectively. It is possible to ‘create a trust…without knowing it’ (Re Schebsman, deceased [1944] Ch. 83). Trusts of land can also arise by operation of law. Where A took a transfer from B on the understanding that B could live rent-free in one of the cottages transferred for as long as B wished, A held the cottage subject to a constructive trust (Bannister v Bannister [1948] 2 All ER 133, CA). In the case of a family home, one partner expressing to the other that they have equal rights may evidence a common intention to share the property, on which the other partner acts to their detriment (Hammond v Mitchell [1991] 1 W.L.R. 1127 per Waite J).

Formalities for creating equitable rights

Given that a trust can therefore be (potentially) created so easily, the recognition of equitable rights in trusts of land is coupled with a requirement for formality. The requirement of formality stems from the Statute of Frauds 1677 and two related policy considerations. The first is that it reduces the likelihood of controversy arising from allegations of fraud or mistake; the second is it is consistent with the English legal system’s preference for formal methods of creations of interests in land.

With such rights, a central rule is that a declaration of trust relating to land must ordinarily be ‘manifested and proved’ by some writing signed by a person able to declare the trust, or by their will (Law of Property Act 1925, s.53(1)(b)). The signed writing can follow an oral declaration. A trust created by will must ordinarily satisfy section 9 of the Wills Act 1837. The failure of documentary formality, as a consequence, results in a ‘merely voluntary declaration of trust… unenforceable for want of writing’ (Gissing v Gissing [1971] A.C. 886 per Lord Diplock). As for a constructive trust based on common intention, a trust ‘does not come into being merely from a gratuitous intention to transfer or create a beneficial interest’ (Austin v Keele (1987) 10 NSWLR 283, PC on appeal from New South Wales per Lord Oliver of Aylmerton).

Formalities and equity

That being said, there are limited situations in which the statutory requirement for formality is circumvented by the court exercising its equitable jurisdiction. One example, as you will recall from your revision in Equity and Trusts, is a secret trust. The testator must intend to impose a trust and communicate its terms to the intended trustee, who must accept it. Where the will appears to make an outright gift, this can occur at any time before death. Where the will discloses the trust but not its terms, communication and acceptance must take place at or before execution (Blackwell v Blackwell [1929] AC 318). The court when faced with these situations intends to avoid allowing statute being used as an instrument for committing or abetting a fraud. The Law of Property Act 1925 was not intended to replace one form of fraud (i.e. the alleged beneficiary claiming the existence of a trust) with another (i.e. the reliance by the trustee themselves on a technical fault in the trust to avoid being rendered as the trustee).

Hence, in Rochefoucauld v Boustead [1897] 1 Ch. 196, the statutory requirement for writing was held not to apply in a situation where A has acquired a title in land from X, on terms agreed orally with X that the land is to be held by A on trust for B. If A were able to renege on these terms by reliance on the statutory formalities, that would offend the equitable conscience of the court. The constructive trust arises because A acquired title on that basis. A promise first made after acquisition does not bring this rule into play (Khan v Khan [2025] EWCA Civ 1436).

Where co-owners have expressly declared their beneficial shares, one cannot disregard the declaration simply because its technical significance was not understood (Pink v Lawrence (1978) 36 P. & C.R. 98). Rarer still is the invocation of rectification, according to which a court may rectify a declaration of trust if the instrument mistakenly fails to record the parties’ actual intentions (Wilson v Wilson [1969] 1 WLR 1470, ChD). By and large, an express declaration of trust, evidenced and signed for in writing, is conclusive of the beneficial shares it declares at the time, unless rectified or set aside. The declaration, so far as it concerns the persons named in it, ‘necessarily concludes the question of title… for all time’ (Pettitt v Pettitt [1970] A.C. 777 per Lord Upjohn). A later effective variation or proprietary estoppel may alter those shares (Pankhania v Chandegra [2012] EWCA Civ 1438).

IMPLIED TRUSTS

Although there is an insistence on the need to uphold formalities and avoid complications following informal creation of trusts of land, nevertheless there are exceptions to the need to comply in an unyielding manner to ensuring all trusts are put in writing. Hence, unlike with express trusts of land, implied trusts of land are not required to be evidenced in writing and do not require the signature of the settlor (Law of Property Act 1925, s.53(2)).

In the context of implied trusts, there are two types of trusts: resulting trusts and constructive trusts.

Resulting Trusts

Dealing first with resulting trusts, the presumption at the heart of a purchase-money resulting trust is ‘no more than a consensus of judicial opinion disclosed by reported cases as to the most likely inference of fact to be drawn in the absence of any evidence to the contrary’ (Pettitt v Pettitt [1970] per Lord Upjohn). According to this doctrine, the “nominal” purchaser (A) of some land, where they purchase the land using money provided by another (B), is presumed by equity to be holding the land on a trust that ‘results’ back to B, the “real” purchaser. This is an application of the principle as stated by Eyre CB: ‘A trust of a legal estate… results to the man who advances the purchase-money’ (Dyer v Dyer (1788) 2 Cox Eq. Cas. 92).

This rule serves to displace the usual rule, namely that equitable ownership follows legal title. According to this rationale, given that A is the named purchaser of the land, they are presumed also to be the beneficial owner of the land. If B contributes to the purchase price, equity may infer that B intended to retain an interest. This was described in New Zealand as the ‘solid tug of money’ (Hofman v Hofman [1965] NZLR 795 per Woodhouse J). B need not prove a bargain with A. A different kind of resulting trust arises where property is transferred on express trusts which fail to dispose of the whole beneficial interest. The undisposed interest normally results to the settlor or the settlor’s estate (Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669).

An unrebutted purchase-money resulting trust will recognise in B, the party which provided the purchase-money to the person with the paper title (A), a degree of ownership over the land which coheres in its degree to the size of the contribution made by B to the purchase. If B provided the entirety of the purchase money, then B is absolutely the equitable owner. In this manner, equity serves to give ‘the force of law to moral obligations’ (Sekhon v Alissa [1989] 2 F.L.R. 94 per Hoffmann J).

Resulting Trusts and Inequity

An unlawful purpose does not automatically bar a claim to a resulting trust. In the case of Tinsley v Milligan [1994] 1 AC 340, the House of Lords held that A held the property on resulting trust for A and B in equal shares, even though title had been put in A’s sole name to enable fraudulent claims for social security benefits.

This case was examined in 2016 by the UK Supreme Court in Patel v Mirza [2016] UKSC 42. The Court rejected the “reliance test” in Tinsley, under which it mattered whether B had to rely on the illegality to establish the claim. The court now considers the purpose of the prohibition, any other public policies affected by denying the claim, and whether denial would be a proportionate response.

Date of acquisition

Purchase-money resulting trusts come into being at the date of acquisition of the property by A: the exact distribution of beneficial entitlement between A and B (i.e. the respective beneficial share of each party over the land) is said to ‘crystallise’ at the date of acquisition (Bernard v Josephs [1982] Ch. 391). In other words, according to the classic idea of resulting trusts, the only intentions which are relevant are those which existed at the time of the taking of title by A (Gissing v Gissing [1971]). Later payments do not of themselves alter the shares under a purchase-money resulting trust (Curley v Parkes [2005] 1 P. & C.R. DG15).

Where the purchase is funded by mortgage, liability assumed for the mortgage debt at acquisition can itself count towards the purchase price. If B neither contributes to the deposit nor assumes any mortgage liability at acquisition, yet once the mortgage has commenced makes significant - or even the only - contributions to the mortgage, those later payments alone do not give B a share under a purchase-money resulting trust. They may, however, be evidence of a common intention under a constructive trust (Abbott v Abbott [2007] UKPC 53, on appeal from Antigua and Barbuda, per Baroness Hale of Richmond). Further discussion of constructive trusts is found below.

Presumptions

Purchase-money resulting trusts, as mentioned, depend on a presumption: namely, that because B has advanced some or all of the purchase-money for the land by the date of acquisition, B is presumed to hold a beneficial interest via resulting trust. But this presumption is rebuttable: if evidence can be provided which shows on the balance of probabilities that B never intended to hold a beneficial interest over the land, then a resulting trust will not apply. In the case of a family home bought in joint names, the usual starting point is instead that the parties share the beneficial ownership equally.

Evidence that the money was intended as a gift rebuts the presumption. For example, where a father announces at his son’s wedding reception that he, the father, intends to provide the married couple with money to buy a marital home, that is a gift and does not give rise to a resulting trust (Walker v Walker, unreported, 12 April, 1984, CA). Whether the advance was a gift is a question of the donor’s intention. As with the case of Walker v Walker, the alleged gift will usually be found in the family context.

Where B voluntarily conveys land to A, a resulting trust is not implied merely because the conveyance omits words stating that A is to take for their own benefit. This does not preclude a resulting trust on the facts (Law of Property Act 1925, s.60(3), and also Ali v Khan [2002] 2 P. & C.R. DG19).

Presumption of Advancement

Resulting trusts can also be displaced by another, contrary presumption: the ‘presumption of advancement.’ Under this latter presumption, an inference arises of intent to donate money towards the purchase of a legal estate: the donor wished to ‘advance’ (that is, make a gift to) the nominal purchaser of the legal estate. This presumption has tended to operate in the family context where, contrary to the centrality of bargains over altruism, instead there may be altruistic motives on the part of the donor towards the donee. There is a ‘moral obligation to give’ (Bennet v Bennet (1879) 10 Ch. D. 474 per Jessel MR).

As with the former presumption, evidence of actual intention can show there was no such altruistic motive; but otherwise the default presumption of advancement will apply. This presumption reiterates ‘the prima facie position… that the equitable interest is presumed to follow the legal estate and to be at home with the legal title’ (Calverley v Green (1984) 155 CLR 242 (HC of Australia) per Deane J). Expressed differently, if a father provides their son with purchase money for purchasing a new home, the presumption of advancement applies, because the bond of familial ties and affection is sufficient to give rise to an ‘obligation in conscience to provide’ (Scott v Pauly (1917) 24 CLR 274 (HC of Australia)).

The older authorities did not presume advancement simply because a mother transferred property to her daughter (Sekhon v Alissa [1989]). More recently, the Court of Appeal recognised that the presumption can apply between mother and daughter. It is particularly weak where the child is an independent adult (Laskar v Laskar [2008] EWCA Civ 347, [20]–[21]). It may also arise where a person has assumed a parent’s obligation to provide for the child. The ties also go only one way. A child who provides purchase money for their parent is not presumed to have made a gift (Binmatt v Ali (1981) unreported, 6 October, CA. See also Passi v Hansrani [2024] EWHC 2062 (Ch)).

It has been suggested that such notions are outdated; indeed, that the whole doctrine of presumed advancement is outdated. Section 199 of the Equality Act 2010 provides for its abolition but has not been brought into force. It has been said that the presumption of advancement has now become relegated to a ‘judicial instrument of last resort’ (McGrath v Wallis [1995] 2 FLR 114, per Nourse LJ. See also Ali v Khan [2002], per Morritt V-C). In particular, the presumption when applied from husbands towards wives has received significant judicial criticism. In Pettitt v Pettitt, Lord Diplock said the presumption was ‘an abuse of legal technique… to apply to transactions between the post-war generation of married couples presumptions which are based upon inferences of fact which an earlier generation of judges drew as to the most likely intentions of earlier generations of spouses belonging to the propertied classes of a different social era.’ Similar criticisms have been made elsewhere (Lowson v Coombes [1999] Ch. 373 per Robert Walker LJ).

There may be other ways in which the presumption of a resulting trust can be rebutted. For example, the provision of money by B to A can simply be intended to constitute contributions towards living expenses and shared outgoings (Mehra v Shah [2004] EWCA Civ 632).

Key Points:

• The parties with the legal title purchase the land by way of loan.
• The parties claiming a beneficial entitlement stake their claim on financial contributions towards the expenses and outgoings of the household of the land.
• Those contributions, having not been made towards the purchase price of the property, did not give rise to a purchase-money resulting trust.
• NOTE: This case is from 1976 and predates Stack v Dowden. In determining beneficial ownership of a family home under a common intention constructive trust, the court may consider how the parties shared household expenses. It should therefore not be relied on to suggest parties in place of the parents would only be entitled to an occupational licence. It is simply presented here to indicate how the timing and size of financial contributions will be relevant to the question of whether there is a resulting trust.

Loans

Loans are of a different nature: a lender does not advance money in the same manner as B does in the scenario described above. The lender does not therefore take on any beneficial entitlement under a resulting trust. Otherwise, lenders and building societies would be able to take almost absolute beneficial entitlement to all properties for which they provide loans. An unsecured lender has a personal right to repayment of the loan and any agreed interest. A mortgage gives the lender security over the property. The right to possession is subject to the terms of the mortgage and statutory restrictions. The statutory power of sale is exercisable only when its conditions are met (Law of Property Act 1925, ss.101 and 103). In exceptional circumstances, a private lender (more likely an individual rather than a lending company) might derive greater rights than the lender might usually obtain where the family arrangements are such that the parties involved deem it appropriate to give the lender some degree of property ownership.

Key Points:

• The person providing the purchase money was the aunt of the nominal purchaser of the property.
• The loan was made on the understanding that the aunt could live in the property. The judge held that she could stay until the loan was repaid.
• The relative had acted ‘in the capacity of a lender’, and therefore had no resulting interest.

Further difficulties

One persistent difficulty within resulting trusts is the ability to ascertain the contours of “purchase money”: in other words, it has been a problem for resulting trusts doctrine to identify which financial contributions are contributions towards the purchase and those which are not, meaning which contributions are ‘referable’ to A’s acquisition of title (Burns v Burns [1984] Ch 317, CA per Fox LJ). This problem is especially pertinent to those contributions which may have been made after the date of the acquisition of the land, and yet relate to the land. Payments for improvements and payments made to discharge a later debt secured on the property are not, merely for that reason, contributions to its acquisition (Winkworth v Edward Baron Development Co Ltd [1986] 1 W.L.R. 1512).

It would seem that the most straightforward kind of contribution would be a direct cash contribution towards the purchase price of the property up to the date of acquisition. Where the purchase-money presumption applies and is not rebutted, the fraction of their contribution towards the purchase price defines their share: for example, where the legal owner contributes two thirds of the purchase price, and the hopeful beneficiary contributes the final third, that final beneficiary is entitled to a one-third share of the property (Cowcher v Cowcher [1972] 1 W.L.R. 425 per Bagnall J). Contributions towards the family household, however, are less likely to constitute money which are referable; Lord Diplock has said that the mere sharing of family living expenses does not necessarily indicate such pooling of resources will constitute a contribution towards the acquisition of family property (Gissing v Gissing [1971]).

Purchase-money resulting trusts remain relevant, particularly to investment purchases, where contributions are made at or before acquisition (Curley v Parkes [2005]). Whether a purchase is an investment is relevant, but the parties’ intentions still matter (Laskar v Laskar [2008] EWCA Civ 347. See also Marr v Collie [2017] UKPC 17, on appeal from The Bahamas). In the family home context, the law has ‘moved on’ from the rigid and limited application of resulting trusts to the wider doctrine of constructive trusts (Stack v Dowden [2007] per Lord Walker and Baroness Hale).

Constructive Trusts

The starting point is that, as mentioned already, an express declaration of trust of land ordinarily requires signed written evidence. A disposition of an existing equitable interest must itself be in writing signed by the person disposing of it or by their agent authorised in writing, or made by will (Law of Property Act 1925, s.53(1)(b)-(c)). A deliberately signed email can suffice (Hudson v Hathway [2022] EWCA Civ 1648). However, equity may be prepared to impose a trust where it sees that an estate owner has behaved unconscionably within the context of a bargain. Where an owner of a legal estate enters into a bargain with another person to allocate or share beneficial ownership of the land with the other person, and the other person has acted to their detriment in reliance on it, equity will prevent the estate owner from avoiding that agreement; the court acts to ‘construct a trust’ to give effect to that bargain (Grant v Edwards [1986] Ch. 638 per Nourse LJ).

In the words of the New York Court of Appeals, the constructive trust provides ‘the formula through which the conscience of equity finds expression’ (Beatty v Guggenheim Exploration Co. 225 NY 380 (1919)). In England and Wales a constructive trust can arise where land is acquired under a joint venture on an agreed basis which it would be unconscionable for the legal owner to deny (Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372, CA).

Definition

The classic formulation of a common intention constructive trust was posited by Lord Diplock in Gissing v Gissing, in which His Lordship stated that equity enforces or ‘constructs’ a trust in circumstances where ‘[The legal owner] has so conducted himself that it would be inequitable to allow him to deny to [the alleged beneficial owner] a beneficial interest in the land.’ Lord Diplock sought to limit the reach and breadth of this statement by a qualifying statement: an inequitable outcome will be prevented only if ‘[the legal owner] by his words or conduct has induced [the alleged beneficial owner] to act to [the alleged beneficial owner’s] own detriment in the reasonable belief that by so acting [the alleged beneficial owner] was acquiring a beneficial interest in the land.’ As mentioned at the outset regarding implied trusts, a constructive trust is fully enforceable because it is not required to be in writing (Law of Property Act 1925 s.53(2)). A constructive trust of land takes effect by operation of law and falls within the definition of a ‘trust of land’ as per the Trusts of Land and Appointment of Trustees Act 1996.

As seen, the conscience of the legal owner in their words and conduct is crucial: the court cannot impose a constructive trust unless, save the other requirements, ‘it is satisfied that the conscience of the estate owner is affected’ (Ashburn Anstalt v Arnold [1989] Ch. 1 per Fox LJ). Where the claimant has acted to their detriment on a shared intention, it would be a ‘breach of faith’ for the legal owner to deny the claimant’s interest (Gissing v Gissing [1971] per Viscount Dilhorne).

Elements

The Diplock formula explains how the following are related:

1. The bargain,
2. Change of position (the so-called ‘acting to their detriment’), and
3. Equitable fraud (why it would be unconscionable to disclaim the bargain).

1. Bargain

The Court of Appeal in Oxley v Hiscock [2005] Fam. 211 identified as the first issue in a claim to share a home in the sole name of A to be whether there was any common intention on the part of A and B that each should have a beneficial interest in the land. Sole legal ownership is the starting point for sole beneficial ownership. B must establish an actual common intention to share, expressed or inferred from conduct, and detrimental reliance. In the absence of an express declaration, a family home bought in joint names is presumed to be owned jointly in equity. The party asserting different shares must show a contrary common intention. In short, Oxley asks whether there was a bargain. The second issue is a matter of how much; that is, the amount of the beneficial entitlements as they are shared between A and B. The House of Lords in Stack v Dowden [2007] 2 A.C. 432 said the court can settle this question of how much by reference to what the parties ‘must, in the light of their conduct, be taken to have intended.’ Where entitlement to share is established but the actual proportions cannot be inferred, the court may attribute the shares it considers fair having regard to the parties’ whole course of dealing with the property (Jones v Kernott [2011] UKSC 53). A shared intention may arise or change after acquisition (James v Thomas [2007] EWCA Civ 1212 per Sir John Chadwick).

The problem is that the parties may not necessarily agree that a bargain they enter into is necessarily of a proprietary nature (Binions v Evans [1972] Ch. 359 per Lord Denning). A purchaser’s knowledge of someone else’s claim alone does not create a trust. What matters is whether the purchaser acquired the land on an agreed basis which it would be unconscionable to deny (Banner Homes Group plc v Luff Developments Ltd [2000] Ch. 372).

2. Change of position

It is essential that the person claiming a beneficial entitlement under a common intention constructive trust must show that they acted to their detriment in reliance on the agreement or significantly altered their position in reliance on it, thereby acquiring ‘an enforceable interest… by way either of a constructive trust or of a proprietary estoppel’ (Lloyds Bank v Rosset [1991] 1 A.C. 107 per Lord Bridge). There must exist a causal link between the agreement and the detriment taken on by the alleged beneficial owner. As put by Lord Hope of Craighead on appeal from Jamaica, there must be ‘a sufficient link between the common intention and the conduct which is relied upon to show that the claimant has acted on the common intention to their detriment’ (Green v Green [2003] UKPC 39).

As to what facts might constitute a change of position, this can include contributions of finance and the attention of one’s labour to a joint venture between themselves and the legal owner (Chan Pui Chun v Leung Kam Ho [2003] 1 P. & C.R. DG2 per Jonathan Parker LJ).

3. Equitable fraud

Where the claimant has acted to their detriment on the parties’ common intention, it would be unconscionable for the legal owner to deny the claimant’s interest. The trust arises when those facts exist. The claimant need not prove dishonesty or wait for an actual denial. Where title was acquired on agreed terms, as in Bannister below, the trust arises on acquisition without separate proof of detrimental reliance by the beneficiary (Khan v Khan [2025] EWCA Civ 1436).

Key Points:

• The property exchanged hands at a lower than market value.
• The parties were related.
• A had agreed before taking the conveyance that B could live rent-free for as long as B wished.
• B had acted to their detriment by conveying the property to A. They acted according to the bargain.
• The promise was made orally and was not recorded in the conveyance.
• A later sought to resile from their promise.

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