The Creation of Property Rights in Land

[Section 53] does not affect the creation or operation of resulting, implied or constructive trusts.

This statutory footing gives the court a method to recognise an informal acquisition of rights in land by the means of implied trust.

Implied trust is a trust that arises from operation of law or a presumed but not expressed intention by looking at the background, conduct and relationship of the parties. This can be subdivided into two different trusts, resulting trust and constructive trust. Although it seems that sometimes the court uses resulting and constructive trust interchangeably like there is no distinction between them [2] it is important to know the differences between the two.

Resulting trust relates mainly when the transferee receives a legal title to the land from the transferor but without the beneficial ownership, this means that the transferee holds the legal estate on a trust and the beneficial ownership ‘results’ back to the transferor. This concept was defined by Lord Reid in Vandervell v IRC:

Where is appears to have been the intention of the donor that the donee should not take beneficially, there will be a resulting trust in favour of the donor. [3]

Resulting trust can further be divided into two categories, the first is automatic resulting trust. This takes effect when an express trust fails, for example, person A creates a trust and transfers land to person B who holds in trust for the beneficiary person C, person C dies before the trust was executed, this causes the beneficial ownership to be as stated by Lord Wilberforce ‘in the air’ [4] and thus it must return to person A.

The second category is purchase money resulting trust, this involves another party contributing to the purchase of a legal estate, an example scenario would be that person A wants to buy a legal estate and asks person B to make a contribution towards the purchase, A will then acquire the legal title however equity will intervene and dictate that A will hold the legal title on a resulting trust for B as well depending on the contribution B has made, if B provided the money for the purchase entirely then he will have complete beneficial ownership, this is because a ‘trust of legal estate… results to the man who advances the purchase-money.’ [5]

When is come to resulting trust, it is presumed by the court that if a person contributes to the purchase of land he will hold some interest in it, as Gray and Gray explains:

People who lay out large cash sums in the context of purchase of land do not harbour particularly altruistic intentions, but really rather expect, regardless of the destination of the legal title purchased, to derive a beneficial return from their investment in the form of an aliquot share of the equity. [6]

However the presumption of 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,’ [7] which means that this presumption may be rebutted by evidence that the person intended the contribution to be a gift such as in Walker v Walker (1984). The court is more likely to accept the presumption that the contribution was intended as a gift if the two parties have a familiar relationship such as father and son, this is known as a presumption of advancement.

Constructive trust on the other hand operates when person A ‘by his words or conduct has induced [B] to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land’ [8] but then denies the rights that was promised to B. Constructive trust requires three main elements to take place, first that a ‘bargain’ was struck between the two parties, second that there was a change of position, detriment or material sacrifice to B because of the bargain, and lastly that A was executing equitable fraud or the unconscionable denial of rights to B by ‘asserting the absolute, exclusive or unqualified nature of his own rights.’ [9] If the three elements are present the court will construct a trust to impede one party being unjustly enriched at the expense of another.

Proprietary estoppel is another mean that can be used to create rights in land informally, this doctrine is very similar to constructive trust, so similar in fact that some such as Robert Walker LJ [10] commented that there is no real difference between the two. One major difference between the two however is the fact that constructive trust relies on the bargain for the beneficial ownership whilst proprietary estoppel focuses on representation that creates an expectation of entitlement, this distinction is very important because to establish a constructive trust it would require to establish a common intention but to establish a proprietary estoppel would only require an assurance which is much less definite than an intention. This important difference allows proprietary estoppel to:

Extend beyond the constructive trust to circumstances of passive representation of entitlement, where the representator has in no sense bargained with the representee for a conferment of rights, but has simply stood back watching the representee incur disadvantage in the expectation that she has rights. [11]

In conclusion, the use of resulting, constructive trust and proprietary estoppel is a sufficient way to policing the informal creation to rights in land. Resulting trust deals on the contribution towards the purchase of land, constructive trust deals with ‘identifying the true beneficial owner or owners, and the seize of their beneficial interests’ and proprietary estoppel enables equitable claim to be asserted ‘against the conscience of the true owner’. [12]