Trust Law

Resulting trust cases

Tinsley v Milligan [1993] UKHL 3

Key Point

• The House of Lords here rejected the application of a public policy test for the illegality defence in the context of resulting trusts and stuck with the old reliance test.
• However, the public policy test was later adopted by the Supreme Court in cases Patel v Mirza [2016] UKSC 42 and Stoffel & Co. v Grondona [2020] UKSC 42 throughout civil law.

Facts

Background

• T and N were a cohabiting couple
• The property was in the sole name of T although M also contributed to the purchase so that more social security payments could be fraudulently claimed by M, with T being in the know
• The couple fell out and T sought sole possession

Arguments and Proceedings

• M argued that she should have equal beneficial share by way of presumed resulting trust
• T rebutted that M could not rely on presumed resulting trust under the maxim 'he who comes into equity must come with clean hands', given that original transaction was for a fraudulent purpose
• The Court of Appeal held in favour of T, rejecting the old reliance test for illegality as too rigid and applying a public conscience test to the illegality defence, as stated by Nicholls LJ ". . . the underlying principle is the so-called public conscience test. The court must weigh, or balance, the adverse consequences of granting relief against the adverse consequences of refusing relief. The ultimate decision calls for a value judgment."

Issue

Did the illegality defence apply?

• If the wider public conscience test applied as in the Court of Appeal, then T could possibly have the illegality defence
• However, if the stricter reliance test of illegality applied, then T would not have the illegality defence since M can rely on the presumed resulting trust and not on her fraudulent intention to prove her claim