Learning Outcomes
This article examines the equitable presumption of advancement within the context of implied trusts, particularly concerning contributions to property. It outlines the historical application of the presumption, the modern approach influenced by equality principles, and the methods required to rebut it. For the SQE1 assessments, you will need to understand when the presumption applies, the evidence needed to challenge it, and its relationship with resulting trusts. This knowledge will enable you to analyse scenarios involving property transfers between family members and apply the relevant legal principles to SQE1-style questions.
SQE1 Syllabus
For SQE1, you are required to understand the principles governing implied trusts, including resulting trusts and the presumptions that arise in equity concerning property transfers. This includes the presumption of advancement and how it may be rebutted. Your understanding should include:
- The nature and effect of the presumption of advancement.
- The specific relationships where the presumption traditionally applies (eg, father to child, husband to wife).
- The requirements and methods for rebutting the presumption of advancement, focusing on evidence of contrary intention.
- The consequences of successfully rebutting the presumption, often leading to a resulting trust.
- The modern judicial approach and the impact of equality legislation on the application of the presumption.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
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In which of the following relationships does the presumption of advancement traditionally NOT apply?
- Father to child
- Husband to wife
- Mother to child
- Person in loco parentis to child
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What is the primary effect of successfully rebutting the presumption of advancement?
- The property automatically reverts to the transferor's estate.
- A constructive trust arises in favour of the recipient.
- The transfer is deemed void ab initio.
- A resulting trust is often presumed in favour of the transferor.
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Which of the following is essential for rebutting the presumption of advancement?
- Proof of the transferor's insolvency.
- Evidence demonstrating the transferor's intention not to make a gift at the time of the transfer.
- Evidence that the recipient acknowledged the transfer as a loan after receiving it.
- Proof that the relationship giving rise to the presumption has broken down.
Introduction
When property is transferred from one person to another without consideration, equity may impose a trust. One key factor influencing this is the relationship between the transferor and transferee. In certain relationships, equity presumes the transfer was intended as a gift, displacing the usual presumption of a resulting trust. This is known as the presumption of advancement. This article explores this presumption, its traditional scope, and importantly for the SQE1 exam, how it can be rebutted with evidence.
The Presumption of Advancement
Equity presumes bargains, not gifts. Therefore, if property is transferred voluntarily (ie, without payment), or if money is provided to purchase property placed in another's name, the starting point is often that the recipient holds the property on a resulting trust for the provider. However, this presumption is reversed in specific relationships where the provider is deemed to have a natural obligation to provide for the recipient.
Key Term: Presumption of Advancement An equitable presumption that, in certain relationships (historically father to child, husband to wife), a transfer of property without consideration is intended as an outright gift (an 'advancement'), rather than creating a resulting trust.
The presumption arises from the historical societal view of certain relationships carrying an obligation to provide support. Consequently, the law presumed that a transfer in these contexts was intended to fulfil that obligation by way of a gift.
Traditional Application
Historically, the presumption of advancement applied primarily where:
- A father transferred property to his child (whether minor or adult).
- A person standing in loco parentis (in the place of a parent) transferred property to a child under their care.
- A husband transferred property to his wife.
- A man transferred property to his fiancée, provided the marriage subsequently took place.
Notably, the presumption did not traditionally apply to transfers from a mother to her child or from a wife to her husband. In these scenarios, the default presumption of a resulting trust would apply unless rebutted.
Modern Context and Relevance
The traditional basis for the presumption is widely regarded as outdated and potentially discriminatory, reflecting past social norms rather than contemporary family structures and gender equality principles. While the presumption has not been formally abolished (s 199 of the Equality Act 2010, which would abolish it, is not yet in force), courts now apply it with caution and consider it relatively easy to rebut with evidence of the transferor's actual intention. Its significance has diminished, particularly in disputes concerning the family home where common intention constructive trusts often provide a more flexible approach (see Stack v Dowden [2007] UKHL 17). However, it remains a principle you must understand for SQE1.
Rebutting the Presumption of Advancement
The presumption of advancement, like the presumption of a resulting trust, is merely a starting point and can be rebutted by evidence showing that the transferor did not intend to make a gift at the time of the transfer.
Key Term: Contrary Intention An intention held by the transferor at the time of the property transfer that is inconsistent with the intention presumed by law (ie, inconsistent with making a gift where the presumption of advancement applies, or inconsistent with retaining a beneficial interest where a resulting trust is presumed).
The burden of proof lies on the person seeking to rebut the presumption (usually the transferor or someone claiming through their estate) to demonstrate, on the balance of probabilities, that a gift was not intended.
Evidence for Rebuttal
Evidence admissible to rebut the presumption must relate to the intention of the transferor at the time of the transaction or immediately thereafter as part of the same transaction. Subsequent declarations or acts by the transferor suggesting they did not intend a gift are generally inadmissible in their own favour but may be admissible against them.
Relevant evidence includes:
- Express agreements: Written or clear oral evidence that the transfer was a loan or that the property was to be held on trust.
- Conduct of the parties: Actions taken at the time of the transfer that are inconsistent with a gift (e.g., the transferor retaining title deeds or exercising control over the property).
- Contextual circumstances: The nature of the relationship, financial circumstances, and the purpose of the transfer may clarify the true intention.
Worked Example 1.1
A father purchases shares but registers them in his daughter's name. The daughter is an adult and financially independent. There is no other evidence regarding the father's intention at the time of purchase. What is the likely starting position in equity?
Answer: The relationship is father to child, one where the presumption of advancement traditionally applies. Therefore, the starting presumption is that the father intended the shares as an outright gift to his daughter. The daughter holds both legal and equitable title unless the father (or his estate) can provide evidence to rebut this presumption.
Worked Example 1.2
A husband transfers £50,000 into a bank account held in the sole name of his wife. He tells her at the time, "This is to keep safe for our future, we'll decide how to invest it later." The wife later claims the money was a gift. Can the husband rebut the presumption of advancement?
Answer: Yes, likely. The presumption of advancement arises (husband to wife). However, the husband's statement at the time of the transfer indicates a contrary intention – that the money was not an outright gift but was intended for their joint future benefit and subject to a later decision. This contemporaneous declaration serves as evidence to rebut the presumption of advancement. A resulting trust in favour of the husband (or potentially both parties) might be argued.
Illegality and Rebuttal
Difficulties arise if the reason for the transfer rebutting the presumption involves an illegal purpose (e.g., transferring property to avoid creditors). Historically, the courts were reluctant to allow a party to rely on their own illegal conduct to rebut a presumption (Tinsley v Milligan [1994] 1 AC 340 focused on whether the claimant needed to plead the illegality).
However, the Supreme Court in Patel v Mirza [2016] UKSC 42 established a new approach based on public policy. The court will consider:
- The fundamental purpose of the prohibition transgressed.
- Any other relevant public policies which may be affected by denial of the claim.
- Whether denial of the claim would be a proportionate response to the illegality.
This allows a more flexible, discretionary assessment based on the specific facts, rather than a strict rule based on reliance.
Exam Warning
Be mindful that while the presumption of advancement still exists formally, its application is viewed critically by modern courts. In exam scenarios, focus on the evidence presented regarding the transferor's intention at the time of the transfer, as this is usually decisive in rebutting the presumption. The Patel v Mirza approach to illegality is also important if relevant facts arise.
Consequences of Rebuttal
If the presumption of advancement is successfully rebutted, equity reverts to the default position. This usually means that a resulting trust is presumed.
Key Term: Resulting Trust An implied trust arising where property is transferred to someone who pays nothing for it, and it is implied that the transferor intended to retain the beneficial interest (or a proportionate share if they contributed to the purchase price).
Therefore, if evidence shows the transferor did not intend a gift in a relationship where advancement is presumed, the transferee will typically hold the legal title on resulting trust for the transferor (or for both parties proportionately if it was a contribution to purchase).
Key Point Checklist
This article has covered the following key knowledge points:
- The presumption of advancement operates in specific relationships (historically, father-child, husband-wife) to presume a transfer of property is a gift.
- It is an exception to the general presumption of a resulting trust in voluntary transfers.
- The presumption is rebuttable by evidence showing the transferor lacked the intention to make a gift at the time of the transfer.
- Relevant evidence includes contemporaneous declarations, subsequent conduct (viewed cautiously), and the overall circumstances.
- The burden of proof rests on the party seeking to rebut the presumption.
- Successful rebuttal usually leads to a resulting trust being presumed.
- The relevance of the presumption is declining due to equality principles, but it remains part of the law.
- Illegality affecting the transaction is assessed based on public policy considerations (Patel v Mirza).
Key Terms and Concepts
- Presumption of Advancement
- Contrary Intention
- Resulting Trust
