Question 7: Presumption of Advancement - Ponniah v Sivalingam & Ors [1991] 3 MLJ 190

The nature of resulting trust is if property is transferred to trustees, a resulting trust arises in circumstances where the beneficial interest results back (springs back) to the settlor. Put simply, a resulting trust may arise in two situations: (i) where property is transferred in the name of another; or (ii) property is purchased and having it transferred into the name of another The leading case on resulting trusts is Bull v Bull 1 QB 23, a case where a mother and son purchased a property jointly but the son was the sole legal owner. The court held that the son has legal title but both the mother and son has equitable interest in the house according to their contribution. In the case of Re Vinogradoff [1935] WN 68, it is a settled law that where a resulting trust is presumed to arise, the transferee will hold the property on trust for the settlor. In considering whether a resulting trust was created, the Court will look at all the circumstances surrounding the case; in particular, at the totality of the evidence introduced at the trial, the demeanour of the witnesses and the inherent probabilities or improbabilities or inferences arising from the facts. In some circumstances, for example in the case of Ponniah v Sivalingam & Ors [1991] 3 MLJ 190 where a person voluntarily transfers property into the name of another, or contributes to its purchase, the law presumes that a gift was intended and that the settlor did not intend to retain any interest in the property concerned. The range of relationships where equity recognises a presumption of advancement reflects a nineteenth-century understanding of family responsibility. This presumption, known as the presumption of advancement, displaces the presumption of resulting trust. The presumption of advancement arises as a consequence of a pre-existing relationship between the parties to the transfer or acquisition, where the settlor is regarded as morally obliged to provide for the person benefiting. In the case of Ponniah v Sivalingam, P (Plaintiff) was the natural and lawful father of the 1st -7th D (Defendant) and lawful husband of the 8th D. P transferred all his rights, titles and interest in his business to 2 companies (SFM and SSB) in consideration of the 2 companies issuing 2,000 and 775,003 fully paid up shares respectively to him. Upon issuance, P allotted in the names of the 1st - 6th D, 300 shares each of SFM and 125,500 shares each of SSB. Of the remaining shares in SFM, P and 8thD were allotted 50 shares each and the 7th D allotted 100 shares. Of the remaining SSB shares, P and 1st D were allotted 5,001 shares each and the 1st D had an extra share. None of 1st - 8th D paid any consideration for the shares which was solely contributed by P. P alleged that it was not his intention to allot the shares as an advance or a gift but they were allotted on condition that the 1st - 7th D held the shares in absolute trust for P during his lifetime and thereafter in trust for 8th D for her lifetime and thereafter to the childrens respective benefits in proportion to their shareholding. P was at all material times in physical possession of all the share certificates and was also the chairman and managing director of the 2 companies. The 4th - 6th and 8th - 10th D denied that the shares were allotted to them as trustees. Further they contended that valuable consideration was given at the time of allotment. 1st D contended that P had formed the companies for the purpose of tax benefits and to retain the profits of SFM to buy more assets in SSB. He claimed that he had paid $30,000 for the shares.

The High Court found that all the share certificates were kept by P and he never gave those certificates to any of D. No consideration was given for the shares and P was in full control of the 2 companies. It was the intention of P to retain the beneficial interest of the shares allotted to the Ds during his lifetime. Therefore, the Court held that D held the shares on trust for P. The rule of law that can be deduced from this case is the presumption of advancement is rebuttable by the evidence of the true intentions of the transferor as regards the beneficial interest of the impugned property. The decision of the court in Ponniah followed the traditional case of Re Roberts [1946] Ch 1. Evershed J held that the presumption of advancement applied where a father had made payments on a policy of assurance taken out on his sons life. He said that: It is well established that a father making payments on behalf of his son prima facie, and in the absence of contrary evidence, is to be taken to be making and intending an advance in favour of the son and for his benefit. In addition, the principle presumption of advancement as can be seen from Ponniah case also operate between husband and wife. In Re Eykyn's Trusts (1877) 6 Ch.D. 115 Mallins VC said that it is perfectly settled that when the husband transfer his money or other property to his wifes name, then there is a presumption that he intended it as a gift or advancement to his wife absolutely, subject to marital control as he may exercise. This includes if he purchased in the property in their joint names or in her name alone.