Intention, natural obligations and resulting trusts

Tue 16 January 2018, Philippe Ropenga Forced heirship

Interpersonal relationships are not only based on legal obligations. This complexity can transform benevolent behaviour into legally binding obligations. Two cases, one decided by the Cour de cassation, the other decided by the Privy council remind the practitioner to look closely at the context surrounding a relationship before giving any advice regarding the stakeholders' obligations to each other. The law is clear about obligations in tight relationships while it requires to pay a greater attention to intention in loose relationships.

1 Tight relationships

Tight relationships are those where stakeholders are engaged in a special relationship such as father and child, or husband and wife. It does not mean that the relationships are pleasant. French law has a straightforward answer to issues regarding obligations in tight relationships. It is obvious in a succession context. Let's see what the civil code has to say on the matter (1.1). Similar issues will then be considered under an English perspective (1.2).

1.1 The French perspective

The civil code imposes a maintenance obligation on parents and children to each other¹. The traditional approach sees forced heirship as the counterpart to maintenance obligations. Since a child is obliged to look after a parent or vice versa during his lifetime, he is entitled by law to a share of the estate of this parent as forced heir, and cannot be deprived of his share². Parents are not forced heirs of their children anymore³. Nevertheless, children still have to support their parents. When it comes to succession, intention only plays a limited role between forced heirs. The forced heir is given his share notwithstanding the intention of the deceased; the rest is distributed according to the will or the rules regarding succession in the civil code, if there is no valid will.

The English approach is slightly less straightforward.

1.2 The English perspective

There is some debate as to how Equity treats gifts. It is commonly held that it is suspicious about them and presumes that any voluntary conveyance is not a gift but a transfer of property to be held on trust by the transferee for the transferor. Such a trust is known as a presumed resulting trust. There also is a debate as to wether this presumption really is a presumption. It will not be dealt here with these interesting theoretical issues since they do not influence the conclusion of this post.

Jessel MR explains in Bennet v Bennet that Equity assumes that in certain types or relationship between two people, e.g. from father to child, one person is in fact obliged to the other⁴. Equity does not see transfers made in these circumstances as presumed resulting trusts but presumes that they are gifts. This presumption deprives the presumption of resulting trust of any effect. French and English follow a completely different reasoning, and a proper comparative approach would certainly highlight significant differences of perception on each side of the English Channel. Nevertheless, the law regarding tight relationships is clear. Following Bennet v Bennet, a transfer of property from father to child, or parent to child⁵ is a presumed gift. In French law, the estate is divided among forced heirs following forced heirship rules anyway. Beyond the forced share, usual principles of the law of obligations apply. The most difficult part in practice is evidence, especially in a succession context. it can be difficult to prove for instance that a transfer of a sum of money was not a gift but a loan.

Things are less clear when it comes to loose relationships.

2 Loose relationships

Let's see what French court do before crossing the Channel.

2.1 The French perspective

One of the most common pitfall a common law practitioner may fall into is to think that when there is nothing in the civil code, there is no obligation at all, and therefore anyone may do whatever he wants. It is worth bearing in mind that until recently important parts of the law of obligations were already in force in 1804, when the first edition of the civil code was released. The law and the society have evolved since 1804. If black letter law does not change, case law has to interpret the existing provisions in order to address the needs of a given time. Case law therefore is important since it reveals the state of the law. In cases of voluntary conveyance, the judge often relies on natural obligations. What are they ?

They are not based on codified provisions but on conscience⁶. There often are used to dismiss unjustified enrichment claims⁷. If a person has done something that he was not obliged to do by law and did it to fulfil a moral obligation imposed by his own conscience and is poorer as a result, he cannot claim anything back.

Natural obligations can also be converted in civil obligations in order not to avoid given back something that has been given without any legal obligation but to pursue forced execution of something that has not been done. One needs to prove that someone has intended to do something to fulfil a moral obligation that burdened his conscience.

A testator who had two daughters wrote a will that ignored a son. He later has recognised this son but has excluded him from his succession regarding assets situated in Canada. The other heirs, two daughters, of the testator felt at some point morally obliged to repair this injustice and expressed her will to divide the testator's assets in three equal shares between the two daughters and the disadvantaged son. The son accepted the principle of division. The daughters' will and the son's acceptance have been recorded in writing in front of a French notary. The daughters later tried to challenge this deed by arguing inter alia that this deed did not record any obligation based on conscience but an incomplete gift that as such could not create any obligation. The Cour de cassation observed that the Court of Appeal has examined the facts and concluded that the wording of the deed expressed a moral obligation to do justice⁸. Please remember that the Cour de cassation is not a higher court of appeal in the sense that it does not reexamine facts but only makes sure that the law has been correctly applied to a given set of facts. In this case, the deed has not been performed at all and this was not because of the administrative failure of a third party to register a transfer of shares such as in Re Rose⁹.

This French case states that even an unperformed moral obligation is binding. A natural obligation can be expressed orally and arise in a commercial context¹⁰. The French testamentary case that has been presented could be seen as an easy one since the agreement has been recorded by a notary. It would be a rather simplistic approach since not every claim in this context is likely to be supported by a notary deed. This situation in fact is exceptional. Moreover, the natural obligation has surfaced during liquidation. This is why it has been recorded by the notary in charge of the formalities. It was not an ongoing dispute like in most cases where parties are unlikely to reveal any obligation that burdens their conscience. This means in practice that the lawyer will have to be careful while he examines pieces of evidence that may support a claim regarding a natural obligation. The notary indeed is a public officer and obviously cannot create pieces of evidence supporting a claim or the other while dealing with liquidation formalities. Ultimately, it is the lawyer assisting a party who will bear responsibility for evidence analysis and subsequent advice.

Let's now compare the French approach with the English one.

2.2 The English perspective

According to Marr v Collie, there is no opposition between investments and domestic relationships when it comes to resulting trusts, as one could have thought when reading Laskar v Laskar¹¹. Hence, everything here boils down to intention. Questions like: "If I give something am I obliged to anything?" or "If that person does not want to make a gift to me, can I have something anyway?" are more familiar to a lawyer educated in trusts than to a lawyer educated only in a civil law system. The law on incomplete gifts is well established since the judgement of Turner LJ in Milroy v Lord ¹². Moreover, the concept of resulting inspires the lawyer to consider relationships while preserving their factual and emotional integrity to determine what the intentions are in a given context. Usually, I tend to insist on differences to help lawyers to see a situation from a different perspective. Here, I just would like to say to my Anglo-Saxons colleagues educated in trusts : stay as you are!

To sum up, intentions are less problematic in tight relationships than in loose ones. The doctrine of natural obligations or resulting trusts require the lawyer to be extremely careful while reexamining evidence to determine what the intention is in a given case.

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