Presumed resulting trust: purchase money provided by another
Hamid Rahimi paid the whole £300,000 price of a buy-to-let flat in Manchester, England, which was registered in the sole name of his business associate, Sean Doyle, because Hamid was abroad on a long work posting when the purchase had to be completed. They are not related, are not in a personal relationship, and neither has ever lived in the flat. There is no written declaration of trust and no evidence either way about whether Hamid intended a gift. Sean now claims that the flat is his.
Which of the following best describes the beneficial ownership of the flat?
Choose one answer to see the reasoning.
Worked answer
Correct answer A: Sean holds it on resulting trust for Hamid, who paid the whole price, and nothing rebuts the presumption.
THE RULE TO REMEMBER
Where A pays for property put in B's name, B is presumed to hold it on resulting trust for A in proportion to A's contribution, unless an intention to give is shown.
Presumed resulting trust: purchase money provided by another
In Westdeutsche Landesbank v Islington LBC Lord Browne-Wilkinson described the first type of resulting trust. Where A pays wholly or in part for property vested in B alone, there is a presumption that A did not intend a gift, and the property is held on trust for A in proportion to his contribution. The presumption can be rebutted by evidence that A intended an outright transfer, but there is no such evidence here. Hamid paid the entire price for a flat registered in Sean's name, so Sean holds it on resulting trust for Hamid absolutely. This is an investment property bought by business associates, not a family home, so the common intention approach in Stack v Dowden and Jones v Kernott is not the starting point. No signed writing is needed. Section 53(2) of the Law of Property Act 1925 provides that s.53 does not affect the creation or operation of resulting trusts.
Why B is wrong: 'Equity follows the law' gives way to the presumption of resulting trust where someone else provided the purchase money.
Why C is wrong: Section 53(2) LPA 1925 exempts resulting trusts from the writing requirements.
Why D is wrong: Equal shares would ignore that Hamid alone provided the price; shares follow contributions under a resulting trust.
Why E is wrong: Nothing suggests a loan; the presumption gives Hamid a proprietary interest in the flat itself.
A little more practice done.
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