Implied trusts

Question 1

What are the two kinds of implied trusts?

Answer 1

• Resulting trusts
• Constructive trusts

These arise by operation of law.

Question 2

What are the scenarios in which a resulting trust can arise?

Answer 2

1. Where a transfer on trust wholly or partially fails but the property has been transferred to the trustee
2. Where a person gratuitously transfers property to another person
3. Where a person pays all or part of the purchase price for an asset

Question 3

What is a resulting trust?

Answer 3

A resulting trust is where the property is held on trust for the person who transferred it or contributed to its acquisition. The equitable interest ‘results’ back to the transferor or contributor.

Question 4

What is an automatic resulting trust?

Answer 4

Automatic resulting trusts arise where there has been some sort of failure in the creation of a transfer on trust.

They are effectively a default position which returns the beneficial interest to the settlor, giving them Saunders V Vautier rights and thus the ability to collapse the trust and either retain the property or re-attempt the intended express trust.

Not if trust fails for lack of constitution.

Question 5

What is a presumed resulting trust?

Answer 5

Arises in situations where a transfer is gratuitous and there is no evidence that the transferor intended the recipient to receive the property as a gift. They arise by way of presumption that the transferor or contributor intended to create a trust.

This can be rebutted by evidence that the transferor or contributor’s actual intention is inconsistent with the creation of a trust.

Question 6

Resulting trust: land

Answer 6

May arise where legal ownership of land does not reflect intended beneficial ownership.

If unequal contributions a presumed resulting trust will determine equitable interest - only for business relationships (ie land as an investment).

Question 7

How can legal title be held to land?

Answer 7

1. Sole legal owner
2. Joint tenants

Question 8

What is the presumption of TR1 form specifying equitable ownership is blank?

Answer 8

Presumed that the beneficial ownership of the land mirrors the legal ownership.

Question 9

What type of implied trusts arise for the family home?

Answer 9

Common intention constructive trusts.

• Allow the court to take into account a wider range of factors than simple monetary contributions to the home.

Question 10

How do you establish a common intention constructive trust?

Answer 10

Sole legal owner: (i) A common intention that they should have a beneficial interest and (ii) Detrimental reliance upon that intention

Joint legal ownership: an individual seeking to establish that they are not beneficial joint tenants will need to rebut the presumption with (i) reference to common intention of the parties and (ii) they acted to their detriment in reliance on that common intention.

• 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’
• Intention can be ambulatory, meaning a beneficial interest can be established or the presumption of joint tenancy rebutted after acquisition (if circumstances change). - intention can change over time

Question 11

If a couple own a house as legal joint tenants what is the presumption in equity?

Answer 11

That they hold as equitable joint tenants.

Question 12

On divorce/dissolution what powers does the court have in regards to shares of the family home?

Answer 12

On the dissolution of a civil partnership the court can exercise its’ discretion under the Civil Partnership Act 2004 to divide ownership of the property between the parties.

Question 13

What is the two step approach regarding joint legal ownership cases for CICTs?

Answer 13

1. Rebutting the presumption: did the parties have a common intention to hold the property other than as joint tenants? And did the claimant act to their detriment in reliance on that common intention?
2. Quantification: if the parties are not joint tenants, they must be tenants in common. But in what proportions? Court can impute at quantification stage but not when rebutting the presumption of joint tenancy.

Question 14

What are the factors taken into account when looking at the whole course of conduct?

Answer 14

• Advice or discussions the parties had which may indicate their intention - Best evidence
• 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

Question 15

True or false: When a couple acquire property as legal joint tenants, it is only possible to rebut the presumption of joint tenancy if it can be proved that they had a different common intention when they purchased the property.

Answer 15

False: Jones v Kernott confirmed that intention could be ambulatory.

Question 16

What is the two step process to establishing a common intention constructive trust?

Answer 16

Step 1: Establishing an interest
(i) Did the parties have a common intention for the non-legal owner to acquire a beneficial interest?
(ii) Has that person relied on this to their detriment?

Step 2: Quantification
If the non-legal owner can establish an interest, what is quantum of that interest as a proportion of the property?

Question 17

How do you establish an interest using express intention?

Answer 17

• 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 was established, a relatively wide range of conduct would satisfy the requirement of detrimental reliance.

Question 18

How do you establish an interest using inferred intention?

Answer 18

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 would be sufficient - however Stack indicates differently and court should consider ‘whole course of conduct’.

Question 19

What is the best evidence of common intention?

Answer 19

The best evidence of common intention is an express agreement or discussions regarding the ownership of the house.

• when assessing common intention statements should be about shared ownership not merely 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 - but not too readily

Question 20

What words indicate ownership v occupation?

Answer 20

Ownership: “half yours”, “50:50”

Insufficient for ownership: “family home”, “benefit for both of us”, “you will be looked after”

Question 21

What conduct amounts to common intention?

Answer 21

• some decisions indicate common intention when some small contributions to household + domestic labour - but others not
• some indicate indirect financial contributions enabling other to pay mortgage may indicate but others not
• Suggested substantial improvements to value of the property may be capable of creating an interest

Question 22

Examples of detrimental reliance

Answer 22

Does show:
- Heavy DIY
- Housing renovations
- payment of substantial expenses including mortgage

Does not:
- Decorating
- Giving up work to look after children
- House wife

Question 23

What do the courts consider when deciding on shares of the property?

Answer 23

“Fair shares” must be ascertained in light only of the parties’ dealings with the property.

Not the role of the court to reallocate property rights based on other matters (eg domestic violence in the relationship), which have no link to the acquisition of the property.

Question 24

What is proprietary estoppel?

Answer 24

An equitable doctrine which enables a person to informally acquire property (or personal) rights. Its objective is to prevent unconscionable conduct. It enables a court to do justice by modifying the parties’ strict legal rights. Very flexible.

Not simply a defence, is also a cause of action.

A successful claim gives rise to an equity. Court determines how to satisfy the equity - and has a broad discretion. It can satisfy the equity by awarding the claimant a personal right or a property right.

Question 25

What are the two situations most common to proprietary estoppel?

Answer 25

1. Assurance Case: B assures A they have or will acquire a right in relation to B’s property and in reliance on that assurance, A acts to their detriment.
2. Acquiescence case: A mistakenly believes they have a right in land owned by B. In reliance on that belief they act to their detriment in circumstances where B is aware of their mistake but does not attempt to correct or prevent them acting to their detriment.

Question 26

What are the elements of proprietary estoppel

Answer 26

1. An assurance made to the claimant
2. Reliance by the claimant on the assurance
3. Detriment to the claimant in consequence of their reliance

Claimant must also demonstrate that it would be unconscionable for the defendant to resile from the assurance.

Question 27

Proprietary estoppel: assurance

Answer 27

First element - an assurance made by the defendant to the claimant that the claimant has or will acquire a right in property owned by the defendant.

• Assurance need not be explicit - it can be inferred from indirect statements
• Relevant assurance must be clear enough and whether it is clear enough is hugely dependent on context.
• Task of the court is to ascertain how the defendant’s words would have been reasonably understood by the claimant in the context in which they were spoken.

Question 28

Proprietary estoppel: Reliance

Answer 28

Law on reliance is not clear.

If claimant acts to their detriment - reliance is presumed, but is rebuttable (defendant must prove that the claimant did not rely on the assurance.

Question 29

Proprietary estoppel: Detriment

Answer 29

• Not narrow or technical - must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable.
• Can be obvious such as expenditure or unpaid service, or passes up opportunities to better themselves or live a better life, or fail to make provisions such as pension.

Question 30

Proprietary estoppel: Unconscionability

Answer 30

Involves an ‘objective value judgment’ of the defendant’s behaviour by the court.

Only succeed if the defendant’s behaviour ‘shocks the conscience of the court’ - gives court discretion even where other elements are satisfied.

Question 31

Proprietary estoppel: Remedy

Answer 31

Range of remedies which include orders to:
- transfer ownership of property to the claimant
- hold property on trust for the claimant
- grant the claimant a property right over their property (eg easement)
- grant the claimant a personal right over their property (eg licence)
- pay a sum of money to the claimant

Guide:
- Should never exceed expectations
- Starting point: should hold the promisor to the promise
- If above inappropriate: must award a remedy which does justice between the parties
- If more than one appropriate remedy, court should allow the defendant to chose which one should be awarded to the claimant