Tinsley v Milligan: resulting trusts arising out of unlawful schemes

In Tinsley v Milligan ([1994] 1 A.C. 340, HL) T and M carried on a joint business. A property was acquired with all of the funds needed for the down payment and mortgage instalments coming from the profits of the business. Title to the property went into T’s name alone to facilitate M’s purpose of making fraudulent social security claims. When T and M fell out, T sought an order for possession. M claimed a share under a resulting trust. The question was whether she could make this claim given the unlawful purpose that led to title being in T’s name.

The majority of the House of Lords (Lord Goff dissenting) held that she was entitled to claim an interest under a resulting trust since she did not need to plead her unlawful purpose. Lord Browne-Wilkinson said:

‘A party to an illegality can recover by virtue of a legal or equitable property interest if, but only if, he can establish his title without relying on his own illegality. In cases where the presumption of advancement applies, the plaintiff is faced with the presumption of gift and therefore cannot claim under a resulting trust unless and until he has rebutted that presumption of gift: for those purposes the plaintiff does have to rely on the underlying illegality and therefore fails.’ (at 375)

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