Hodgson v Marks [1971] 1 Ch 933

Facts

• Mrs. Hodgson, an elderly widow, transferred the legal title of her home to her lodger, Mr. Evans, intending to retain the beneficial ownership.
• The transfer was made to avoid potential disputes with her nephew, but there was no written declaration of trust or formal legal instrument documenting Mrs. Hodgson’s intentions.
• Mr. Evans later sold the property to Mr. Marks, who was a purchaser for value; he claimed to have acquired the property without notice of Mrs. Hodgson’s equitable interest.
• Mrs. Hodgson sought to reclaim the property, arguing that she did not intend to confer beneficial ownership on Mr. Evans and that her rights as beneficiary should be recognized.
• The court was required to consider whether Mrs. Hodgson retained an equitable interest in the property despite the absence of formal trust documentation and whether Mr. Marks was bound by any such interest.

Issues

1. Whether the transfer of legal title from Mrs. Hodgson to Mr. Evans, absent written documentation or an express declaration, gave rise to a resulting trust in favour of Mrs. Hodgson.
2. Whether Mrs. Hodgson’s intention not to make an outright gift but to retain the beneficial interest could be established by the surrounding circumstances.
3. Whether Mr. Marks, as a purchaser for value, was protected as a bona fide purchaser without notice of Mrs. Hodgson’s interest.
4. To what extent the doctrine of constructive notice applied to Mr. Marks in relation to Mrs. Hodgson’s equitable interest.

Decision

• The court held that the transfer from Mrs. Hodgson to Mr. Evans gave rise to a resulting trust in favour of Mrs. Hodgson, as there was no intention to benefit Mr. Evans with the beneficial ownership.
• The absence of a formal trust arrangement did not prevent the court from finding a resulting trust, as the facts demonstrated Mrs. Hodgson’s intention to retain the beneficial interest.
• The court found that Mr. Marks was not a bona fide purchaser for value without notice because he had constructive notice of Mrs. Hodgson’s interest; the circumstances required further inquiry by Mr. Marks.
• It was determined that, as a result, Mrs. Hodgson’s beneficial interest was enforceable against Mr. Marks.

Legal Principles

• A resulting trust arises when property is transferred but the transferor does not intend to confer the beneficial interest on the transferee.
• The law implies a resulting trust to prevent unjust enrichment and to reflect the true intentions of the parties, even if no formal trust is declared.
• There are two primary types of resulting trusts: automatic, where not all beneficial interests are disposed of, and presumed, where no consideration is given and there is no evidence of intent to gift.
• An express trust requires clear intention and usually formal documentation, but the court may imply a resulting trust based on evidence of retained beneficial interest.
• The doctrine of bona fide purchaser for value without notice protects purchasers from prior equitable interests, but this protection can be lost if the purchaser had constructive notice—knowledge of circumstances that would prompt a reasonable person to inquire further.
• The absence of formal trust arrangements in property transactions increases the risk of disputes regarding beneficial ownership.

Conclusion

Hodgson v Marks established that a resulting trust arises where property is transferred without intent to gift the beneficial interest, and clarified that equitable interests may bind subsequent purchasers who have constructive notice, underscoring the importance of intention and due diligence in property transactions.