SQE1 Equity & Trusts 2 — Questions and Answers
Question 1: Which type of resulting trust arises where a person contributes to the purchase price of property but legal title is conveyed into another's name?
- Automatic resulting trust
- Presumed resulting trust (Correct answer)
- Institutional resulting trust
- Constructive resulting trust
Correct answer: Presumed resulting trust
A presumed resulting trust arises from circumstances giving rise to a presumption — such as a purchase price contribution — that the legal owner holds on trust for the contributor.
Question 2: In Stack v Dowden [2007], the House of Lords held that where unmarried cohabitants hold the legal title to a family home jointly, the starting presumption is that:
- Beneficial interests must always be equal regardless of contributions
- Beneficial interests are presumed equal but this can be rebutted by the whole course of dealing between the parties (Correct answer)
- The beneficial interest follows financial contributions only
- Legal and beneficial interests always mirror each other
Correct answer: Beneficial interests are presumed equal but this can be rebutted by the whole course of dealing between the parties
Stack v Dowden established a strong presumption of equal beneficial ownership for jointly-held property, but this presumption can be displaced by examining the whole course of dealing including non-financial factors.
Question 3: How does English law characterise the constructive trust, in contrast to jurisdictions such as Canada?
- As a remedial trust awarded at the court's discretion to reverse unjust enrichment
- As an institutional trust arising automatically by operation of law (Correct answer)
- As a statutory trust governed by the Trusts of Land and Appointment of Trustees Act 1996
- As a resulting trust based on implied intention
Correct answer: As an institutional trust arising automatically by operation of law
English law treats the constructive trust as institutional — it arises automatically by operation of law on the occurrence of certain events — rather than as a discretionary remedy.
Question 4: In Lloyds Bank plc v Rosset [1991], Lord Bridge identified two bases on which a common intention constructive trust can arise. Which answer correctly states both?
- Express common intention plus detrimental reliance, or direct financial contributions to the purchase price implying common intention (Correct answer)
- Express declaration of trust, or conduct after acquisition of the property
- Financial contributions at any stage, or unilateral declarations by one party
- Written agreement, or registered interest at the Land Registry
Correct answer: Express common intention plus detrimental reliance, or direct financial contributions to the purchase price implying common intention
Lord Bridge held that a common intention constructive trust arises either from an express common intention accompanied by detrimental reliance, or from direct financial contributions to the purchase price which imply a common intention.
Question 5: A Quistclose trust (Barclays Bank Ltd v Quistclose Investments Ltd [1970]) arises in which of the following circumstances?
- Money is lent for a specific purpose and that purpose fails, leaving it on resulting trust for the lender (Correct answer)
- A company becomes insolvent with insufficient assets to pay creditors
- A bank retains money in a suspense account pending verification
- A trustee misappropriates trust funds and mixes them with personal assets
Correct answer: Money is lent for a specific purpose and that purpose fails, leaving it on resulting trust for the lender
A Quistclose trust arises where money is advanced for a specific purpose; if that purpose fails or cannot be carried out, the money is held on resulting trust for the lender rather than being available to general creditors.
Question 6: Which three elements must be established to found a claim in proprietary estoppel, as confirmed in Thorner v Major [2009]?
- Assurance, reliance, and detriment (Correct answer)
- Writing, reliance, and registration
- Offer, acceptance, and consideration
- Intention, certainty, and capacity
Correct answer: Assurance, reliance, and detriment
Proprietary estoppel requires an assurance (representation about property rights), reliance on that assurance by the claimant, and detriment suffered by the claimant as a result of that reliance.
Question 7: How does a half-secret trust differ from a fully secret trust?
- In a half-secret trust, the will discloses the existence of the trust but not its terms; in a fully secret trust, the will appears to make an outright gift with no mention of a trust (Correct answer)
- In a half-secret trust, only half the property passes under the trust terms
- In a fully secret trust, the trustee is unaware of their role until after probate
- In a half-secret trust, the trust terms are disclosed to the court but not the public
Correct answer: In a half-secret trust, the will discloses the existence of the trust but not its terms; in a fully secret trust, the will appears to make an outright gift with no mention of a trust
A half-secret trust is one where the will reveals that the legatee takes as trustee but does not reveal the terms, whereas a fully secret trust appears on the face of the will as an absolute gift with the trust obligation communicated only outside the will.
SQE1 Equity & Trusts 2
Which type of resulting trust arises where a person contributes to the purchase price of property but legal title is conveyed into another's name?