The law of Property Act 1925, s.60(3)

This post has been contributed by Professor Robert Chambers, Module Convenor for Equity and trusts.

According to s.60(3) of the Law of Property Act 1925:

“In a voluntary conveyance a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee.”

The effect of that subsection has been debated for years. In Lohia v Lohia (2000) 3 ITELR 117, [2001] WTLR 101, Nicholas Strauss QC (sitting as a judge in the Queen’s Bench Division) decided that it meant that the presumption of resulting trust does not apply to gratuitous transfers of land. His judgment was affirmed by the Court of Appeal, [2001] EWCA Civ 1691, but Mummery LJ said at [26]:

“On the point whether the effect of the 1925 Act is to abolish the presumption of a resulting trust arising from a voluntary conveyance, I would prefer to express no concluded view, as it is unnecessary to do so for the disposition of this appeal.”

In Ali v Khan [2002] EWCA Civ 974 at [24], Sir Andrew Morritt V-C said:

“I should also refer to Lohia v Lohia [2001] WTLR 101, 113. This case establishes that the presumption of a resulting trust on a voluntary conveyance of land has been abolished by s.60(3) Law of Property Act 1925.”

In Prest v Petrodel Resources Ltd [2013] UKSC 34 at [49], [2013] 2 AC 415 at 495, Lord Sumption JSC assumed that the presumption of resulting trust applied to gratuitous transfers of land, but he did not refer to s.60(3):

“Since no explanation has been forthcoming for the gratuitous transfer of these properties to PRL, there is nothing to rebut the ordinary presumption of equity that PRL was not intended to acquire a beneficial interest in them.”

Recently, in National Crime Agency v Dong [2017] EWHC 3116 (Ch), Chief Master Marsh decided that s.60(3) did not affect the presumption of resulting trust, but was merely enacted to deal with technicalities in conveyancing that were no longer needed when the the Statute of Uses 1535 was repealed in 1925. He said at [26], [33], and [34]:

“The need for s.60(3) arises from the repeal of the Statute of Uses 1535 confirmed in s.207 and Schedule 7 of the LPA. Prior to its abolition, the convention was for a conveyance to include words to the effect that the property was conveyed for the use or benefit of the grantee. This may fairly be described as a technicality and the draftsman of the LPA was concerned to clarify the position arising from the repeal of the Statute of Uses. It would have been very easy for the draftsman to have said that the presumption to which the sub-section is addressed is abolished. After all the LPA consolidated the fundamental reforms to the way in which land was held and conveyed and is explicit about change where it needs to be. Instead the sub-section says a resulting trust is not to be implied ‘merely by reason of’ a failure to use a time-honoured conveyancing formula.

“… The point, after all, is one of statutory interpretation. A literal interpretation of s.60(3), even if that is the right approach, does not to my mind inevitably lead to the result that the presumption has disappeared. Due weight must be given to the words used in the sub-section and their context. S.60 appears in the LPA the part dealing with ‘Conveyances and other Instruments’ running from s.51 to s.75. As the heading suggests this part of the act is largely concerned with the nuts and bolts of conveying interests in land. Examples of the approach taken by the draftsman can be seen from sections 53 and 54 that are followed by the saving provisions of s.55. To my mind it is hard to escape from the conclusion that the heading to s.60 meant exactly what it said. This is borne out by sub-sections (1) and (2) of s.60 both of which deal with what may fairly be described as technicalities.

“Furthermore, it seems to me that the mischief towards which s.60(3) is aimed is the failure to include formula of words in a conveyance, namely the failure to say that the property is not expressed to be conveyed for the ‘use or benefit’ of the grantee. Put another way, if it had been the intention of the draftsman to do away with a presumption of law of long standing, it might have been expected that the Act would have said so in terms and it would be even more surprising for the presumption to have been abolished only in relation to land with a saving provision for chattels. Furthermore, there would be no good reason to abolish the presumption in this limited way given that the interest in land being conveyed without consideration might be worth very much less than the value of some types of chattel.”

This is a sensible reading of s.60(3), which avoids the inconsistency of treating gratuitous transfers of land differently from gifts of personal property or from gifts of land made by paying or contributing to the purchase price. However, like other judgments on this issue, the decision of Chief Master Marsh is an obiter dictum since it was unnecessary for the outcome of the case. There was sufficient evidence that the apparent donor did not intend to make a gift to the recipient.

It will be a rare case in which the application of the presumption of resulting trust actually determines the outcome. There will almost always be sufficient evidence to prove the intention of the apparent donor, even if it is only circumstantial evidence of what he or she probably intended: see Lohia v Lohia [2001] EWCA Civ 1691. The presumptions used to be important (and unfairly so) in cases where the apparent donor was not permitted to rely on evidence of her or his illegal purpose. However, evidence of illegal purposes is now admissible: see since Patel v Mirza [2016] UKSC 42, [2017] AC 467 (discussed in the blog post on resulting trusts and illegality in December 2016).