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Privy Council considers law applicable to beneficial ownership of joint bank accounts

Money in a bank account subject to same principles as other property

The Privy Council has considered the law applicable to the beneficial ownership of joint bank accounts from 'first principles'.

In Whitlock v Moree [2017] UKPC 44, the Privy Council had to decide whether, upon the death of one of two account holders of a joint bank account, the beneficial interest in the account passed to the other account holder by survivorship, or whether it formed part of the deceased's estate by reason of the operation of the equitable doctrine of resulting trust (as the deceased had provided all the money – $190,000 – in the account).

When they set up the joint account, Mr Lennard, who later died, and Mr Moree signed a form containing a standard provision which said:

"JOINT TENANCY: Unless otherwise agreed in writing, all money which is now or may later be credited to the Account (including all interest) is our joint property with the right of survivorship. That means that if one of us dies, all money in the Account automatically becomes the property of the other account holder(s). In order to make this legally effective, we each assign such money to the other account holder (or the others jointly if there is more than one other account holder)."

Lord Briggs gave the majority judgment (Lady Hale and Lord Sumption agreed). He concluded at paragraph 26:

"There is no reason why property which is, slightly misleadingly, described as money in a bank account should be subject to any different principles when the court is called upon to resolve a dispute about its beneficial ownership."

Lord Briggs set out his conclusion as follows (paragraph [29]):

"…where two or more holders of a joint account all sign an account opening document (or separately sign identical documents) which, on their true construction, declare or set out their respective beneficial interests in the property constituted by the account (loosely, the money in the account), then those are the beneficial interests of the account holders, pending any subsequent variation of them by agreement or otherwise, and an examination of the subjective intentions of the account holders, or of those of them who place money in the joint account, is neither relevant nor permissible. Still less is recourse to the doctrine of presumed resulting trusts permissible, because the potential beneficial owners have declared what are their beneficial interests by signed writing."

Three fundamental consequences flowed from this conclusion: (1) whether or not the attention of the account holder was drawn to the terms of the declaration (i.e. the intention of the settlor) would be irrelevant in principle, unless challenging the document on the basis of mistake, fraud, duress, undue influence etc; [29-30] (2) there was no room for the doctrine of presumed resulting trusts [31]; (3) where the document on its true construction did deal with the account holders' beneficial interests, then the quantification of those interests was a question of law, not fact [32].

His Lordship held that there was indeed an express declaration as to the beneficial ownership of the money in the account. The appeal was dismissed; Mr Lennard's beneficial interest in the money had passed to Mr Moree by way of survivorship.

Lord Carnwath (with whom Lord Wilson agreed) dissented from the majority. In very general terms, His Lordship disagreed that it was appropriate to place emphasis on authorities from other property contexts. In the context of bank accounts, from the point of view of the customer, there was an inherent lack of permanency in a transfer into a bank account:

"The ordinary expectation is that, rather than being intended to effect a permanent transfer of value from one customer to the other, it is intended as no more than a convenient vehicle for their co-operation (for whatever reasons) in handling funds for the time-being. Issues of construction should be approached against that background." [55]

For the judgment, prefaced by a summary by Thomas Dance of 1 King's Bench Walk (of which this item is a shortened version, please click here.

21/1/18