Family Homes Flashcards
Is there an express trust?
Ideally, the legal owners of land will declare an express trust over it, putting the question of beneficial ownership beyond doubt.
* If there is written evidence of an express trust which satisfies s 53(1)(b) LPA 1925 this will determine the beneficial interests in the property (Pettitt v Pettitt [1970] AC 777).
* The Land Registry TR1 form (which is needed to transfer legal title to land) includes provision for specifying equitable ownership. Completing this satisfies s 53(1)(b) LPA 1925. The problem is that this section of the form is not compulsory and many people do not complete it. It is
therefore presumed that the beneficial ownership of the land mirrors the legal ownership (Stack v Dowden [2007] UKHL 17).
When is a common intention established
(a) The starting point is that equitable title reflects legal title. In other words:
- A sole legal owner is presumed to be the sole beneficial owner
- Joint legal owners are presumed to be equitable joint tenants
(b) In sole legal ownership cases, an individual seeking to establish a beneficial interest will need to establish that they have acquired an interest under a common intention constructive trust.
This requires proof of:
(i) A common intention that they should have a beneficial interest; and
(ii) Detrimental reliance upon that intention
(c) In joint legal ownership cases, an individual seeking to establish that they are not beneficial joint tenants will need to rebut the presumption with reference to the common intention of the parties. There is no need to show detrimental reliance.
(d) In both cases the court is seeking to establish the actual intention of the parties, whether express or inferred based on the ‘whole course of conduct’.
(e) Intention can be ambulatory, meaning a beneficial interest can be established, or the
presumption of joint tenancy rebutted, after acquisition (if circumstances change).
How are the interests of parties quantified?
(a) If an express intention as to quantification can be established, the court will give effect to that intention.
(b) If an express intention cannot be established, the court will attempt to infer an intention based on the conduct of the parties.
(c) As a last resort, if it is not possible to ascertain the actual intention of the parties as to quantification of their shares, the court will impute an intention for ‘fair shares’ based on all the ‘whole course of conduct’.
What is the presumption under joint legal ownership?
- If land is owned by more than one party, the legal title can only be held as a joint tenancy.
- In the absence of an express trust, it is presumed that equitable title is also held as a joint tenancy.
What is the two step approach in joint legal ownership cases?
(a) Rebutting the presumption: Did the parties have a common intention to hold the property other than as joint tenants?
(b) Quantification: If the parties are not joint tenants, they must be tenants in common. But in what proportions?
Step 1: Rebutting the presumption
To establish that legal title does not reflect beneficial ownership of the home, it is necessary to rebut the presumption that equity follows the law. There are two broad scenarios to consider:
(a) The person seeking to rebut the presumption may simply argue for a beneficial tenancy in common in equal shares. This is most likely in cases involving a dispute about beneficial ownership of the land after the death of one of the legal owners. If the property was held as
joint tenants, it will pass to the other owner(s) by survivorship. For a share of the property to pass to the deceased person’s estate, it is necessary to demonstrate that they were tenants in common.
(b) More often, the person seeking to rebut the presumption will be seeking to argue that the parties are beneficial tenants in common in unequal shares. This will often be the case where the couple have separated and are disputing their respective entitlements to the home, with
one (or both) arguing for a greater than 50% share
‘Whole course of conduct’
As the starting point is just a presumption, it is possible to rebut it by adducing evidence that the parties were not intended to be equitable joint tenants.
Lady Hale in Stack v Dowden concluded that the presumption could be rebutted by evidence of the parties’ shared intention, which may be ascertained in the light of the whole course of conduct (known as the ‘holistic’ approach).
Lady Hale produced a non-exhaustive list of factors that may be taken into account when carrying out this exercise.
* Advice or discussions the parties had which may indicate their intention
* The reason legal title was registered in particular names
* The purpose for which the parties acquired the house
* The nature of the relationship
* Whether the parties have children
* How the house was financed
* How the parties arranged other finances and divided responsibility for household expenses
Applying the Stack factors
Lady Hale made clear in Stack that the presumption will not be rebutted lightly in cases of joint
legal ownership. It is for the party seeking to rebut the presumption to adduce the relevant
evidence, which is a ‘heavy burden’ requiring ‘unusual facts’.
Although she did not indicate the weight to be attributed to any of the individual factors, it is clear
from the subsequent case of Jones v Kernott that the court is looking for the actual intention of
the parties. The best evidence of that intention will therefore be evidence relating to express
agreements or discussions as to beneficial ownership.
In the absence of any such express discussions, it seems clear from Stack itself that financial
factors are of particular importance to this exercise. (Indeed, financial considerations were so
essential to the analysis in Stack itself that Lord Neuberger, dissenting, reached the same
conclusion as the majority by applying a resulting trust analysis.)
Step 2: Quantification
Once common intention has been established, it is necessary to quantify the interests of the
parties. Again, this involves taking into account ‘the whole course of conduct’.
As with Step 1, the primary search is for the actual intention of the parties (whether express or
inferred). The court’s aim is to determine the proportions in which the parties actually intended to
hold the land.
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However, as a last resort, the court will impute an intention for ‘fair shares’ based on the ‘whole
course of conduct’.
The same factors are taken into account at this stage of the process. Clearly, an express
agreement or discussion as to the parties’ respective shares is the best evidence of what they
intended. If there is such evidence, this is how the shares will be quantified.
In the absence of an express agreement as to quantification, the case law again indicates that
financial factors will carry the greatest weight.
Rebutting the Presumption
The court confirmed the following principles:
(a) The starting point is that equity is presumed to follow the law.
(b) This presumption can be displaced by evidence that:
(i) The common intention was different at the time of acquisition; or
(ii) Although the presumption could not be rebutted at the time of acquisition, the parties
later formed a different common intention.
(c) Common intention is deduced objectively from conduct. The court should consider what each
party would reasonably have understood to be the actual intention of the other, based on
such conduct
Sole legal ownership
4 Step 1: Establishing an interest
There are two traditional routes to a common intention constructive trust:
(a) Evidence of an express common intention as to the shared ownership of the property,
followed by detrimental reliance by the non-legal owner. Once an express common intention
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was established, a relatively wide range of conduct would satisfy the requirement of
detrimental reliance.
(b) In the absence of an express common intention, the court could also infer common intention
from the parties’ conduct, again followed by detrimental reliance. In such cases, detrimental
reliance would typically be inferred from the same conduct as the common intention. It was
generally considered that only financial contributions (to the purchase, mortgage or
household) would be sufficient for such purposes. In Stack, Lady Hale indicated that the
court should not take such a restrictive approach and should consider the ‘whole course of
conduct’. While earlier case law remains useful, it must be considered in light of Stack.
‘Whole course of conduct’
In order to establish an equitable interest, the non-legal owner will need to demonstrate common
intention for them to acquire an interest in the land.
As noted above in relation to joint legal ownership cases, Lady Hale in Stack v Dowden indicated
that common intention should be ascertained in the light of the whole course of conduct (known
as the ‘holistic’ approach).
Although the extension of this principle to sole legal owner cases was obiter in Stack itself, it is now
very clear that this approach also applies to such cases. Lady Hale’s non-exhaustive list of factors
is therefore also informative when considering sole legal ownership cases.
Express common intention
Although the holistic approach means that the court is now required to take into account a wider
range of factors, the best evidence of common intention will still be express agreement or
discussions regarding the ownership of the house.
The following principles (emanating from pre-Stack case law) remain useful when considering
express discussions the parties had about the property:
* When assessing common intention, statements should be about shared ownership not merely
about shared occupation.
* Common intention to share ownership may be evidenced by the legal owner providing an
excuse as to why their partner may not be jointly registered as the legal owner.
Excuses
As we have already seen, common intention may also be evidenced by the legal owner providing
an excuse as to why their partner may not be jointly registered as legal owner.
* ‘you’re too young’: In Eves v Eves [1975] 1 WLR 1338 an excuse was made that the partner
couldn’t own property because she was under 21.
* ‘[…] it’s your divorce’: In Grant v Edwards [1986] Ch 638 it was suggested that sharing legal
ownership would prejudice the partner’s divorce.
However, recent case law suggests that inferences should not be drawn too readily from an
excuse. In Curran v Collins [2015] EWCA Civ 40, the Court of Appeal concluded that a common
intention to share the beneficial ownership could not be inferred where the legal owner had made
an excuse in order to avoid having an argument, rather than to prevent their partner obtaining an
intended interest in the shared home.
Inferred common intention
Although Stack v Dowden is the seminal case in this area, the groundwork for the decision was
laid by the Court of Appeal in Oxley v Hiscock [2004] EWCA Civ 546. In this case (which related to
sole legal ownership) the court suggested that the court could determine shares of the property
based on what it considered fair in light of the parties’ ‘whole course of dealing’ in relation to the
property.
Lady Hale, drew on this case in her landmark judgment in Stack, endorsing Lord Walker’s view
that the ‘law has moved on’ from a focus on financial contributions.
The application of the Stack holistic approach to inferring intention in sole ownership cases was
confirmed by the Privy Council in the sole ownership case of Abbott v Abbott [2007] UKPC53, in
which Lady Hale reiterated that the law had ‘substantially moved on’.
So how does the court apply the holistic approach to inferring common intention in sole legal
ownership cases?
Many of the cases decided before Stack rejected the relevance of factors such as the
performance of household duties, staying at home to look after children, contributions to utility
bills or doing repair and maintenance jobs around the house.
Although Stack seemed to widen the factors that could be taken into account, a series of cases
decided shortly after it still seemed to take quite a restrictive approach to inferring common
intention.
The court’s view in these cases seemed to be that what was done was because the parties were
making their lives together and was not referable to a common intention as to ownership of the
property.
See Thomson v Humphrey in which the court declined to infer common intention as a result of an
individual caring for family, Walsh v Singh [2009] EWCA 3219 (Ch) where a woman gave up her
career or Morris v Morris [2008] EWCA Civ 257 where a woman worked without pay.
In contrast, in Graham-York v York [2015] EWCA Civ 72, a woman lived in an abusive and
controlling relationship with her partner. The judge held that during the 33 years she lived with
him her financial contributions to the household did ‘not amount to much’ although she did cook
all the family meals and cared for their daughter. Inferred common intention was found and she
was awarded a 25% share in the property.
Prior to Stack (see eg Burns v Burns [1984] 1 All ER and Le Foe v Le Foe [2001] 2 FLR 970) it was
suggested that indirect financial contributions such as paying substantial contributions to family
expenses to enable the other party to pay the mortgage, should be taken into account.
However in James v Thomas (decided shortly after Stack) a woman had made very substantial
improvements to the property (including heavy labour) and gave up her job to work for the man’s
business, thereby making it easier for him to make mortgage payments (which came from their
joint account). Despite this, common intention was not inferred.
Both Lord Walker and Lady Hale suggested in obiter in Stack that making substantial
improvements which significantly added value to the property would be capable of creating an
interest.
This was applied by the High Court in Leeds in Aspden v Elvy [2012] EWHC 1387 (Ch). Common
intention was inferred by a man’s substantial contributions in work and money (around £65,000-
£70,000) in converting a barn which substantially increased the land’s value.
The weight given to each of the factors (ie the work and the financial contribution) by the court in
Aspden was unclear
The meaning of detrimental reliance
(a) Conduct inexplicable?
If the claimant is able to establish the relevant common intention, they must also establish
detrimental reliance. In Grant v Edwards Nourse LJ considered that amounted to conduct
which is ‘otherwise inexplicable’. He noted that there was a clear distinction between conduct
such as merely moving into a house and a small woman wielding a 14 lb sledgehammer (the
conduct of the successful claimant in Eves v Eves). The latter involved conduct which the
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‘[claimant] could not reasonably have been expected to embark unless [s]he was to have an
interest in the house’.
(b) Conduct relating to joint lives?
Browne-Wilkinson LJ provided a more expansive definition, considering that once common
intention is established ‘any act done by her to her detriment relating to the joint lives of the
parties is […] sufficient’.
The case predates Stack v Dowden and it might be argued that this wider interpretation is
more consistent with the holistic approach of Lady Hale. His judgment was referred to with
approval by the Court of Appeal in Parris v Williams [2008] EWCA Civ 1147.
Examples of cases where the court found detrimental reliance
* In Eves v Eves (1975) heavy DIY was considered to amount to detrimental reliance.
* Similarly in Clough v Killey (1996) renovations to the house counted.
* In Grant v Edwards (1986) payment of substantial expenses (including payment of the
mortgage) was conduct which the women would not otherwise have embarked upon without
an interest in the home.
Examples of cases where no detrimental reliance was found
* In Lloyds Bank v Rosset (1991) decorating did not amount to detrimental reliance.
* In Burns v Burns (1983) giving up work and to look after children was not enough.
* In Thomson v Humphrey (2009) looking after the family and playing the ‘traditional wife’ was
not enough.
Step 2: Quantification
As we have seen, once a common intention constructive trust is established, the court is required
to quantify the size of the non-legal owner’s interest, using the following framework:
(a) If there is evidence of express common intention as to the shares this ought to be conclusive
(b) In the absence of such an intention, the same approach is taken as in joint ownership cases;
the court ought to strive to infer the common intention
(c) If this is not possible they may impute an intention for ‘fair shares’ in light of the ‘whole
course of dealing’
Although early post-Stack cases on sole ownership did not clearly differentiate between the
acquisition and quantification stages, it is now very clear from cases such as Capehorn v Harris
[2015] EWCA Civ 955 that the two stages are distinct.
Likewise any uncertainty as to whether and when the court may impute an intention to the
parties has been clarified by the Court of Appeal in Barnes v Phillips [2015] ECWA Civ 1056,
confirming that imputation is only permissible at quantification stage.
The question of when imputation is permissible remains controversial, especially as the lower
courts seemed quick to impute shares in the early cases following Jones v Kernott.
The willingness of lower courts to impute shares at the quantification stage has given rise to
concerns (as expressed by Lord Neuberger in his dissent in Stack v Dowden) that the process has
become unprincipled, and arguably a smokescreen for judicial discretion.
