Stewart & Ors v Watkin

A resulting trust requires proof that the alleged beneficiary was the purchaser and provided value towards the acquisition. A person who merely guarantees or facilitates mortgage finance does not necessarily contribute to the purchase price or acquire a beneficial interest. Where a parent provides value for property acquired in an adult child’s name, the presumption of advancement remains part of English law. Financial dependence may affect its strength, but is not a condition of its existence. The presumption is rebutted by the evidence of intention viewed in context. A transaction under section 423 of the Insolvency Act 1986 requires proof of the debtor’s prohibited purpose. The application failed because the trustees did not prove either beneficial ownership, the statutory purpose, or an undervalue.

Joint trustees in bankruptcy applied for declarations that three properties registered in the respondent’s sole name formed part of the bankrupt’s estate. They alleged that the bankrupt was the sole beneficial owner on resulting trust principles. Alternatively, they alleged transactions defrauding creditors under section 423 of the Insolvency Act 1986. They also challenged the respondent’s retention of part of a remortgage balance under section 339.

The properties had been acquired with combinations of mortgage finance, payments from a joint parental account and, for one property, a payment from a family friend. The central issues were the beneficial ownership of the properties, the treatment of parental contributions and guarantees, whether any presumption of advancement had been rebutted, and whether the statutory claims were established.

1. Application dismissed. The trustees failed to establish that the bankrupt was beneficially entitled to any of the three properties or their proceeds. The claims under sections 283, 284 and 306 of the Insolvency Act 1986 therefore failed.
2. A resulting trust could arise only to the extent that the bankrupt was the purchaser and had provided value. The payments from the joint account were attributable equally to the bankrupt and his wife. The mortgage advances were not contributions by the bankrupt. In particular, his role in relation to one property was limited to guaranteeing or facilitating the mortgage. Such assistance did not make him a purchaser or give him a beneficial interest.
3. Where the bankrupt contributed to the first two purchases, the presumption of advancement in favour of his daughter arose. It applies to an adult child, although it may be weaker where the child is financially independent. Financial dependence is a relevant factor, not a precondition. The presumption was not rebutted. The circumstances showed parental provision for the daughter, including her use of the properties as homes and the family’s established arrangements for supporting its children.
4. The third property was acquired as part of a contemporaneous plan to create an investment portfolio for the children. The evidence showed that the parents intended to retain no beneficial interest. Any contribution to refurbishment was consistent with that plan and did not establish a retained interest.
5. Later rental arrangements, the timing of sales and payments made to the daughter’s mother did not rebut the presumption or alter the beneficial ownership findings. The trustees’ evidence was materially incomplete, particularly regarding bank statements and other primary documents.
6. For section 423, the trustees had to prove that the debtor entered into the transactions for the prohibited purpose of putting assets beyond creditors’ reach or prejudicing their interests. They produced no direct or persuasive circumstantial evidence of that purpose. The claim therefore failed.
7. The claim under section 339 also failed. No undervalue was established, and the evidence supported the conclusion that the bankrupt was solvent at the relevant time. The court would in any event have declined relief as a matter of discretion.