Constructive Trusts Flashcards
To establish a CT, there must be:
(i) an intention between the parties that the non-owner is to have an equitable interest;
(ii) that it would be inequitable for the owner to deny such an intention because the non-owner has: (iii) relied on that intention and acted to his/her detriment. (some sort of sacrifices done by the claimant)
Gissing v. Gissing:
Facts:
H and W were married and they BOTH worked. A house was bought in H’s sole name. The purchase money came from:
a mortgage on the house;
a loan from H’s boss; and
H’s savings.
W spent £220 laying the lawn (quite significant in 1960); and providing furniture for the house.
W continued to work and used her earnings to purchase:
clothes for herself and her child; and
adding to the housekeeping money provided by H.
(purchase price of house is all from H) H paid all the mortgage instalments; other outgoings of the home.
In 1960, after 25 years of marriage, H left to live with a younger woman.
W remained in the house and was granted a divorce in 1966.
(W wants to claim equitable share from H who has legal title owner) W sought a declaration that she was beneficially entitled to the house.
Judgment: W’s claim failed :(
The HL HELD that H was absolutely entitled to the house and W had NO interest in it by way of a trust.
W’s contributions, such as household expenses and improvement of the property were NOT referable to a prior common intention that she would acquire a beneficial interest in the home.
wife’s contribution to family welfare - difficult to prove prior common intention
Gissing’s Analysis (1): Main reason for denial
There was NO CONDUCT from which it could be inferred that the parties had a common intention that W was to be entitled to a share of the house.
Lord Diplock stated the general principles upon which a CT would be inferred by the court:
“… And he (trustee) will be held so to have conducted himself if by his words or conduct he has induced the [beneficiary] to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land.” (needs to show proof)
in what occasion the husband induced the wife to act to her own detriment, thus acquiring beneficial interest?
mere contribution is insufficient
2 factors are required to establish a constructive trust:-
(i) Inducement
The legal owner had in some way induced the claimant to believe that he/she would be entitled to a share of the ownership of the property.
an EXPRESS agreement; OR
an inference from the parties’ CONDUCT that there was an intention of the parties that the non-owner would acquire an equitable interest in the property.
(ii) Detriment
The person claiming an interest in the property must have acted to his/her detriment in some way by contributing to the purchase of the property.
Gissing’s Analysis (2) - if the 2 factors are satisfied:
if two mentioned factors were present, the court would NOT allow the legal owner to enjoy the absolute ownership of the property FREE from the contributor’s interest.
Mrs. Gissing was held NOT to have any interest in the property BECAUSE
there was NO express agreement; and
the HL felt that her contributions were NOT of such a type as would entitle the court to INFER from them a common intention between the parties that wife would be entitled to an equitable share of the property.
Lord Diplock explained:
“ … The court is NOT entitled to infer a common intention to this effect from the mere fact that she provided chattels for joint use in the new matrimonial home; and there is nothing else in the CONDUCT of the parties at the time of the purchase or thereafter which supports such an inference.
…The picture presented by the evidence is one of husband and wife retaining their separate proprietary interests in the property whether real or personal purchased with their separate savings and is inconsistent with any COMMON intention at the time of the purchase of the matrimonial home that the wife, who neither then nor thereafter contributed anything to its purchase price or assumed any liability for it, should nevertheless be entitled to a beneficial interest in it.”
court rather conservative (thinks that what wife has done is what she ought to do for a normal family, nothing special)
Gissing’s Analysis (3):
The essence of CT is that the court’s role is merely to FULFIL the intention of the parties, which has already been formed by the time the case went to court, that they should SHARE the ownership of the land.
Lloyd’s Bank PLC v. Rosset (1991) 1 AC 107 # Facts
Facts:
H and W married in 1972.
H and W decided to buy a house, which was in a semi-derelict state, and renovated it. W’s contributions – helped with the decoration work + supervised and encouraged the builders
W claimed that she was entitled to a share of the ownership of the house by way of a constructive trust, which would be binding on the bank as an overriding interest under s.70(1)(g) of the Land Registration Act 1925.
even if only a small amount of equitable shares - as long established - can defeat claim from 3rd party
→ whether the wife has acquired a share → bank cannot exercise its right? W has NOT acquired :(
Lloyd’s Bank PLC v. Rosset (1991) #Reasoning
Judgment:
The HL held that W was NOT entitled to a share of the equitable ownership of the house because NO trust had arisen.
Lord Bridge – 2 ways to give rise to a common intention
(1) Express Intention – expressly articulated between the parties
- where there was evidence of an express intention which was expressly articulated between the parties that they were to share the ownership of the property; and
(2) Inferred Intention – inferred from the parties’ conduct - where there was NO evidence of an express intention BUT, an intention to share could be inferred from the CONDUCT of the parties.
Brief introduction
- Impossible to find a coherent and unifying definition of a CT
- A CT should only be imposed upon the occurrence of certain events that make it UNCONSCIONABLE for the legal owner of property to deny the beneficial interest to a non-owner.
- such a trust is imposed on a person by “reason of his unconscionable conduct”
-Difficult to define
Different Types of Constructive Trust
Hard to unify the circumstances where the trust is imposed
Best to examine it in the various contexts where it operates?
Institutional or Remedial?
Altering substantially pre-existing property rights?
According to S 6 of the MATRIMONIAL PROCEEDINGS AND PROPERTY ORDINANCE (Cap 192) and Section 9 of the Matrimonial Causes Ordinance (Cap 179)…..
upon the divorce of married couples, the court has power to VARY their property rights by taking into account the CONTRIBUTIONS (non-financial/ indirect contributions) made by each party to the welfare of the family, e.g. looking after the home; and caring for the family.
Why CT? –The Limitations of a RT
The need for a financial contribution reduces the effectiveness of a resulting trust as a REMEDY for a spouse or an unmarried partner who has made NO financial contributions.
RT very rigid - only focus on financial contributions
CT created in favor of claimant - also consider non-financial contribution
What kind of remedy is available if, in view of his/her mainly NON-FINANCIAL CONTRIBUTIONS, such as
doing the housework; or
giving up a well-paid job to stay at home to look after the children of the union to enable her/her spouse or his/her partner to concentrate on developing her/his career.
A CT arises where a claimant is able to acquire an equitable interest in a property NOT merely on the basis of a financial contribution BUT in FULFILMENT of some common intention between the claimant.
Key cases of CT
- Gissing v. Gissing
- Lloyd’s Bank PLC v. Rosset (1991) 1 AC 107 #Common Intention
Express Common Intention
WHAT a party must be able to demonstrate in order to establish an express COMMON intention:
“The first and fundamental question which must always be resolved is whether … there has at any time prior to the acquisition, or exceptionally at any later date, been any agreement, arrangement or understanding reached between them that the property is to be SHARED beneficially.”
It was emphasised that to establish that the parties had “entered into an agreement, made an arrangement, reached an understanding or formed a common intention that the beneficial interest in the property would be jointly owned,” VERY CLEAR evidence was required.
懶人包
What? - any agreement, arrangement or understanding reached between the parties that the property is to be shared beneficially
When? – at any time prior to the acquisition or, exceptionally, at any later time
Standard of evidence? – evidence of express discussions between the parties, however imperfectly remembered and however imprecise their terms may have been
Lloyd’s Bank PLC v. Rosset
Grant v. Edwards (1986) Ch 638 (Express common intention:) )
Facts:
Mrs. G and Mr. E decided to live together after the birth of their first child. A house was purchased in the name of E and his brother.
G was told that if the house was held in their joint names, it could prejudice her divorce proceedings. The purchase price was met by two mortgages + the balance by E.
Initially, G:
made only a SMALL contribution to the household expenses; BUT
after the birth of the second child, she returned to work; and
made substantial contributions to joint household expenses; which enabled E to use his earnings to pay the mortgage instalments.
After a fire at the property, the family moved into public housing - they used the insurance monies to repair the property, which was let, and the balance was paid into a joint savings account.
On the break-up of the relationship, G claimed a share of the house.
Judgment:
HELD that Mrs. G was entitled to a HALF share in the house
Mr. E TOLD Mrs. G that he was purchasing the house they shared in his name ONLY instead of in their joint names so as NOT to prejudice her divorce proceedings.
Inferred Common Intention
even if Express intention cannot be proved, the court would continue to look at the CONDUCT of the parties → to see whether common intention could be INFERRED
The courts have always been reluctant to INFER a common intention MERELY from the facts that the parties are involved in a relationship (simply they are co-habitatees/ couples etc. insufficient),
- distinction should be drawn between the ownership of the property and the right of occupation
Because ownership of property is a much MORE important entitlement than the mere right of occupation, the courts expect the kind of CONDUCT relied on by the claimant of an equitable interest to go far BEYOND the ordinary course of human relationships.
“entire course of conduct together” approach
Pettitt v. Pettitt (1970) AC 777 #example of what is insufficient for common intention
Lord Diplock stressed that a common intention of joint ownership is not to be inferred from the mere fact that the parties have done what spouses or partners would ordinarily do:
“It is common enough nowadays for husbands and wives to decorate and to make improvements in the family home themselves, with NO other intention than to indulge in what is now a popular hobby, and to make the home pleasanter for their common use and enjoyment.
If the husband likes to occupy his leisure by laying a new lawn in the garden or building a fitted wardrobe in the bedroom while the wife does the shopping, cooks the family dinner or bathes the children, I, for my part, find it quite impossible to impute to them as reasonable husband and wife any COMMON intention that these domestic activities or any of them are to have any effect upon the existing proprietary rights in the family on which they are undertaken.“
These sentiments may reflect a more traditional concept of the family. But is this view outdated given the changing social and economic conditions of the society? (observing Stack v Dowden reasoning)
ONLY certain conduct by a party will give rise to an inference of a common intention.
