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Resulting trusts and the consequences of disorganisation - Provincial Equity Finance Limited v Dines

Posted on 7 February 2023

Provincial Equity Finance Limited v Dines was an inheritance dispute essentially between two sides of the deceased's family. On one side were the children, Elliott and Louise, from Graham Dines' first marriage (the holders of the controlling shareholding in the claimant company Provincial Equity Finance Limited ("PEF") following Graham's death); on the other was Helen, his second wife. The dispute related to the ownership of a number of properties in Bournemouth.

The disputed buy-to-let properties, valued at over £1 million, were registered in Helen's name and PEF sought a declaration that they were held on trust for PEF as beneficial owners. There was also a claim for an account/equitable compensation in respect of the sum of £130,000 Helen had transferred from a bank account owned by Graham, which PEF claimed was its money. Helen stated that this was the proceeds of the sale of their former matrimonial home.

The sole basis of the beneficial ownership claim was that PEF provided the purchase monies for the properties and that they were therefore held on resulting trust. As detailed in the judgment, the relevant authority for establishing a resulting trust is set out in the 1996 case of Westdeutsche Landesbank Girozentrale v Islington LBC. A presumed resulting trust arises when an owner transfers title to another voluntarily and without consideration. The recipient is deemed to hold the property on resulting trust for the original owner. There were no claims advanced by PEF on the basis of any wider constructive trust or estoppel basis. This meant that Graham's intentions in relation to the properties and the disputed funds were not relevant.

The burden fell on PEF to prove that it alone provided the purchase monies and that Graham, therefore, held the properties as resulting trustee for PEF. PEF did not have its own bank account and the funds to purchase the properties came from bank accounts in Graham's name. The accounts were used by Graham in his personal capacity, as well as for PEF's business activities. It was therefore held that PEF had failed to establish that it, not Graham, had provided the purchase monies for the properties. The claim made by PEF that it was the beneficial owner of the properties based on a resulting trust therefore failed. The claim in relation to the disputed £130,000 similarly failed.

The case confirms the high evidential burden of proof if a presumption of a resulting trust is to succeed and in this case, the claimant fell short. In a stark reminder about the importance of proper financial management, Andrew Lenon KC (sitting as a Deputy High Court Judge) noted: "I appreciate that my decision with regard to the ownership of the properties and the £130,000 may come as a great disappointment to Elliott and Louise who may feel that it is not the outcome of the case that Graham would have wished for. If the outcome differs from what Graham would have wished for, that may be seen as a consequence of .... Graham’s hopeless disorganisation when dealing with paperwork and his failure over many years to organise and document his business finances and transactions with greater rigour."

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