Ls 8, 9, 10 Trusts of Homes, Licence and Proprietary Estoppel Flashcards
Stack v Dowden [2007] 2 A.C. 432 (Baroness Hale) – must read case
• Concerns the division of interests in family property after the breakdown of a cohabitation relationship.
• Facts
o 1st Mrs Dowden had the house registered in her sole name but both bought the property, she paid the bills. After that they have four children.
o 2nd House – both of them were the beneficial owners.
o Beneficial interests
♣ Mrs – Her previous ownership in the house
♣ Mr – decorated and increase the value of the house which was sold.
o Mr Stack a self-employed builder and Ms Dowden, an electrical engineer had cohabited for almost 18 years and had four children. They then bought a house in both of their names, but they had not said what their respective shares were on the Land Registry Form. Usually, this was a presumption that they would share equally in the home. However, the purchase was funded by selling a house that was in Ms Dowden’s name, her savings and a joint loan so she had given 65% of the purchase price.
o Mr Stack had kept his finances separate but was living in the previous house and had done many improvements.
o They always, or almost always had had separate bank accounts, savings and investments. Nine years after purchasing the house, their relationship broke down.
• Claims at the HC
o Mr Stack sought a declaration that the house was held upon trust by the couple as tenants in common so claimed 50% and an order for its sale. The HC said they owned the property in equal shares – Ms Dowden appealed.
• CA
o CA overturned the HC and ordered the proceeds to be divided 65% to her and 35% to Mr Stack.
o The issues were whether the conveyance into joint names established a prima facie case of joint and equal beneficial interests. And whether the CA had been correct to overrule the HC.
o The case was highly unusual as there cannot be many unmarried couples in the parties’ situation who had kept their affairs so rigidly separate. That those factors strongly indicated that the parties had not intended their shares in the property to be equal, (This was also emphasised by Baroness Hale) accordingly Ms Dowden had made good her case for 65% of the beneficial interest.
• HL
o It was held that Ms Dowden owed a greater share than half the equity. Although they were both JT, Ms Stack was entitled to 65% interest.
• Judges
o Lord Hoffmann, Lord Hope agreeing with Baroness Hale. Lord Hope emphasised that departing from Lloyds Bank v Rosset, when deciding whether a constructive trust existed.
o Baroness Hale asked a key questions: ‘did the parties intend their beneficial interests to be different from their legal interests?’
♣ She was of the opinion that contrary to Lloyds Bank v Rosset, many factors other than financial contributions may be relevant to seeing the parties’ true intentions, such as discussions at the time of the transfer which cast light upon their intentions; the reasons why the home was acquired in their joint names; the nature of their relationship; how the purchase was financed; how the parties arranged their finances etc.[69] factors;…Children they had to provide for, parties individual characters etc.
o Lord Neuberger, dissenting in his reasoning, but not on the result of 65-35, advised against easy and frequent changes to the law especially by the judiciary rather than Parliament that might give rise to new unforeseen uncertainties and unfairness.
o He advocated the use of the resulting trust where evidence of factors other than direct financial contributions were absent.
o The law has moved on from Rosset in respect of social and economic conditions.
♣ She said that as a starting point we have:
♣ 1. ‘Equity follows the law’ you can only be JTs in law so of the legal and therefore of the beneficial interest which is 50-50 – the only form of legal ownership since 1925 is JT whereas before TC.
♣ 2. The burden is for the person to show that this was not the intention.
♣ [69] FACTORS – so she said that you can rebut the presumption that the beneficial interest was not 50-50 using the list in [69].
Now we shifted from Rosset – that when you have a property bought in both names, the beneficial interest is not the same despite being JTs, so you have a list of things to look at to understand the beneficial interest.
• Criticism – the judges are given too much discretion = so can they impute the intention of the parties?
• Lady Hale says that we can look at the intentions (so look at the actual intentions, inferred intentions, imputed intentions)
o Imputed intention – the court adds to. So the problem is that there is no intention HERE – the court imposes it. This is a common question.
o So imputed you imagine so – if you have turned your mind to it, what would have happened. This is problematic as this is different for each judge – different values.
o THE COURTS IN ENGLAND DO NOT HAVE ANY GUIDANCE to deal with cohabitees of how to deal in the division of beneficial interest, where this exists in other jurisdictions, such as Ireland, Switerland – so should we be more harsh on them? Depends on our view of the separation of powers.
Lord Neuberger – 107 – 108 READ HIS JUDGMENT:
• 1s how is the beneficial interest owned at the time of acquisition – relevant features -
• 2nd consider the date of the hearing – decide whether that justifies the altering of the position
• He can tolerate inferring but not imputing an intention for what is said above.
• He endorses Rosset to an extent.
Goodman v. Gallant [1986] FLR 106
- Baroness Hale in Stack v Dowden says -
- An express declaration of trust is conclusive unless varied by subsequent agreement or affected by proprietary estoppel.
- The case also establishes that severance of a beneficial joint tenancy results in a beneficial tenancy in common in equal shares.
Pankhania v Chandegra [2012] EWCA Civ 1438 (must read case)
• Where there is a valid declaration of trust, do not use the principles in Stack and Kernott to go behind that trust.
• Facts
o The claimant’s uncle wished to purchase a property but was not eligible for a mortgage. C aged 19, agreed to help purchase the house on behalf of his uncle. The uncle paid the deposit and the house was conveyed to the claimant and the defendant who was the uncle’s sister.
o The remainder of the purchase price was provided by mortgage taken out by the claimant and defendant.
o There was an express declaration of trust that C and D held the beneficial interest in equal shares as tenants in common.
o The intentions of the parties were that the uncle would eventually live in the property and they would sell their share to him.
o D married and lived in the property and paid the mortgage but this was not intended to be a long term arrangement. However, she later changed the locks and refused entry to C and to sell to the uncle. She claimed that it was always her intention to use the house as her matrimonial home.
o The uncle died and C started to make payments on the mortgage. C then sought an order for the sale of the property and division of the net proceeds for sale in equal shares.
• Held
o Trial judge found for D, and refused to make an order for sale. But did not look at the express declaration of trust.
o CA
♣ The transfer deed contained an express declaration of trust to both tenants in common in equal shares.
♣ Order for sale was granted and the division of the proceeds in equal shares was ordered.
♣ Mummery LJ
• ‘In the absence of a vitiating factor, such as fraud or mistake, as a ground for setting aside the express trust or as a ground for rectification of it, the court must give legal effect to the express trust declared in the transfer. In the absence of such claims the court cannot go behind that trust.’
Lloyds Bank v Rosset [1991] 1 AC 107 (must read case)
• The case establishes that contributing to the cost of running a house does not in itself create a beneficial interest. The opinion was later doubted in Stack v Dowden, where the HL said the ‘the law has moved on’.
• Facts
o Mr Rosset = sole legal owner.
o Mr and Mrs Rosset had bought a house with Mr Rosset’s family trust money. He had funded the cost of the renovations to the house. She made no financial contributions to the acquisition or renovations, but had done decorating and helped by assisting in the building works.
Mr and Mrs had an agreement – declaration of trust that she would have a declaration of trust – she said that she relied on that representation and therefore it was to her detriment. So if Mr would go back on his argument that would be to her detriment.
o So she relied on the representation by her detriments + that it would be unconscionable to rely on it – argument arsing under a CICT.
o Mrs Rosset was in possession of the house, but contracts were not exchanged. Mr Rosset took out a loan from Lloyd’s Bank and secured it with a mortgage on the home. The charge was executed, completed and registered without Mrs Rosset’s knowledge.
o Mr Rosset defaulted on the loan and the bank took possession of the home.
o Mrs Rosset argued that she had a right to stay because she had not consented to the mortgage, and she had an overriding interest in the property under LRA 1925. The bank contended that she had no PRs in the home because the work she had done was not enough to give her equitable PRs.
o They both went beyond their overdraft limit on the house – and Mr defaulted on repaying the loan.
• CA
o Mrs Rosset was in ‘actual occupation of her home’.
• HL
o There was no express agreement between Mr and Mrs Rosset that she would have a beneficial interest in the property and no express evidence or discussions to that effect. Mrs R’s work was insufficient to create the inference of ownership or creation of a CT.
o Mrs Rosset was held to be in occupation under LRA 1925 s70(1)(g), however, she did not have a beneficial interest in the property and what she did was not enough for a CT.
o Lord Bridge
♣ Held that there was no express agreement that she would have a share, nor any contributions to the purchase price, Mrs Rosset could establish not right in the home.
♣ Her contribution was so triffliing as to be almost de minimis = insufficient.
• So her work/ building and painting was a normal wife’s work.
o FORMULA FOR OBTAINING A BENEFICIAL INTEREST.
o Future Lord Bridge said:
♣ 1. Look for an express declaration of trust under Goodman v Gallant.
♣ 2. Need evidence of express discussions – (evidence of discussion would be ok) but must show that the party has changed his mind and caused a detriment.
♣ 3. If there is no evidence to find an agreement to share – the court has to rely entirely on the conduct.
• The conduct of the parties – so we look for direct or indirect contribution in the house – so the whole idea comes back again and need to analyse the contributions and what you expect.
• Lord Bridge’s judgment was critized later in Stack for failing to recognise that work might generate an equitable interest in a family home.
o Lord Walker in Stack
♣ ‘Whether or not Lord Bridge’s observation was justified in 1990, in my opinion the law has moved on, and your Lordships should move it a little more in the same direction, while bearing in mind that the Law Commission may soon come forward with proposals which, if enacted by Parliament, may recast the law in this area.’
• The framework here is not good, the court is not assessing/ taking into account whether one party in a dominant position and there are not enough financial contributions – and Rosset has been criticed for this – BUT THIS CASE HAS NOT BEEN EXPRESSLY OVERRULED WHERE YOU HAVE A SOLE LEGAL OWNER.
• Rosset principle regulates how sole legal ownership works.
Jones v Kernott [2011] UKSC 53; [2011] 3 WLR 1121 (must read case)
• Concerns the beneficial entitlement to a family home under a constructive trust.
• The issue was whether the shares of beneficial joint tenants of a property had changed over time since their separation.
•
• Facts
o A property was bought in the joint names of an unmarried couple. Both contributed financially. When the man left, he stopped contributing to the mortgage and outgoings. They agreed to divide the proceeds. The man later bought a property for himself.
o The County Court ruled that her share had increased to 90% because she had paid over 80% of the mortgage interest. The CA reversed this decision and the SC reversed back.
o The starting point was that they were joint tenants at law and in equity, but this could be displaced by showing that they later formed a common intention that their shares should change. Their common intention if not express was to be deduced objectively from their conduct.
o Lord Walker and Lady Hale concluded that the ‘whole course of dealing’ which the court would take into account, should be given a broad meaning, and that each case would turn on its own facts.
• There had been a huge inflation at the time. Mr K now realises that the property is worth more than what is was.
• The parties’ intentions had changed from 1993 – 2006 – crucial for the court.
• 1993
o They split up – so we have Stack v Dowden – equity follows the law – JT + 50-50 to displace it raise a contrary intention.
o In 1993 impossible for them to raise a contrary intention about their situation.
o They had not declared the extent of their beneficial interest.
o Lady hale in S v D said it was exceptional. Since then to 1993 to trial common intention has changed.
♣ At the outset was to buy a home for them and their family –
♣ IF it had been 1993 50-50% but their intentions had changed so that is why 10-90% applied – so
♣ This case confirmed S v D.
• Held
o SC overturning the CA, held that Mr Kernott and Ms Jones would hold the shares in the house on trust in a ration of 10% to 90%, to reflect their contributions to the home. Their lordships concurred on different grounds;
o Lord Walker, Lady Hale and Lord Collins concluded that there are situations where it would be permissible to impute common intention, while Lord Kerr and Lord Wilson preferred to base their opinions on the fact that the court had discretion to acknowledge constructive trust in such manner because it was fair.
o In line with Stack, where a property was purchased in the joint names of a married or unmarried couple for joint occupation, who were both responsible for any mortgage, and where there was no express declaration of their beneficial interests, there was a presumption that the beneficial interests coincided with the legal estate. That presumption could be rebutted by evidence of a contrary intention, which might more readily be shown where the parties had contributed to the acquisition of the property in unequal shares, but each case would turn on its own facts. It was for the court to ascertain the parties’ common intention as to what their shares in the property would be, in light of their course of conduct, Gissing v Gissing; Oxley v Hiscock.
Oxley v Hiscock [2004] EWCA Civ 546 (must read case)
• CA reviewed the relevant authorities.
• Facts
o An unmarried couple both made direct contributions to the acquisition of a house which was in the man’s name.
o There was evidence of an express common intention to share, but no evidence as to the size of their respective shares.
• Judges
o Chadwick LJ –
♣ Considered that the law has moved on from the mathematical resulting trust approach.
♣ In cases involving the family home, where the parties had an express common intention to share but had not discussed the size of their shares, or where their common intention was inferred from direct contributions, there is no necessary inference that their shares should be proportionate to their contributions.
♣ The court will therefore ‘supply or impute’ a common intention as to what their shares should be, on the basis of what is fair in the circumstances including later acts and conduct.
• Held
o The woman was entitled to 40% which slightly exceeded her contributions.
o Approach set
♣ That the court should have regard to the ‘whole course of dealing’ between the parties, but insofar as it suggested ‘fairness’ was the determinant factor above all considerations.
♣ Where property was purchased as a home for an unmarried couple to live together as man and wife with some financial contributions from each of them and registered in the name of one of them without any express declaration of trust,
• The first question to ask was whether there was evidence from which to infer a common intention, that each should have a beneficial share in the property
• The second question was the extent of the parties’ respective beneficial interests. Where there was no evidence of any such discussion between the parties the answer was that each was entitled to that share which the court considered fair having regard to the whole course of dealing between them.
Jones v Kernott [2011] UKSC 53
• ’At a high level of generality, there is of course one single regime the law of trusts…We recognise that a ‘common intention’ trust is of central importance to ‘joint names’ as well as ‘single names’ causes…Nevertheless it is important to point out that the starting point for analysis is different in these two situations. That is so even though it may be necessary to enquire into the varied circumstances and reasons why a house or flat has been acquired in a single name or joint names.’
- Williamson v Sheikh [2008] EWCA Civ 990) (based on express agreement)
• Facts
o The claimant contributed toward the deposit in the house. The property was in the sole name of the defendant. There was a declaration of trust regarding the respective shares but it was not executed.
o The claimant, claimed beneficial interest in the property after the parties separated – the judge found in the claimant’s favour.
• Held
o Where D purchased property solely in his name using the proceeds of the sale of a motorcycle and motor car, purchased by the claimant and her mother, and where a declaration of trust had been drafter but never executed, the judge had been correct in concluding that 10,000 had to be repaid to the claimant and that the balance of the proceeds of sale had to be divided 60:40 in her favour. The deed of declaration, although not executed, was powerful evidence of what the parties had actually intended, not what they had to be taken to have intended.
Ashburn Anstalt v Arnold [1989] Ch. 1 (a must-read-case).
• Establishes that in English law rent is not required for the creation of a tenancy. However, its judgement on the requirements on certainty of duration of a lease has been discredited by Prudential Assurance Residuary Body.
• Facts
o Arnold & Co had a lease of some business premises. It sold the lease to Matlodge Ltd who promised Arnold could remain for free in occupation as ‘licensees’ until redevelopment on a quarter’s notice in writing, and that on redevelopment that they should get a lease of a shop in a prime position.
o Then Cavendish Land Co Ltd acquired both the freehold and the lease, accepting the contractual duties to Arnold & Co. Then Cavendish was taken over by Legal & General Assurance Society Ltd, which accepted the contract. Then L & G sold its freehold to Ashburn Anstalt, which also took the freehold subject to Arnold contract. It sought possession.
o Arnold & Co argued that its interest bound Ashburn, as it was a lease, and thus overriding interest under LRA 1925 s 70. If it was a licence, it should bind any way under Errington v Errington or be a constructive trust.
• Held
o Fox LJ held that a lease bound Ashburn. Rent was not necessary to create a tenancy, the occupation agreement was certain enough, and it was thus an overriding interest, as they were in actual occupation.
o If they had only had a contractual licence, Arnold & Co could not have asserted its right against Ashburn. Any suggestion in Errington v Wood that a licence creates an interest in land was wrong, according to Thomas v Sorrell.
o A mere contractual licence could not bind as a CT without there being an express promise.
o In Errington v Woods, according to Lord Denning MR and Hodson LJ, a successor in title is different to a purchaser and the licence would be enforced against third parties. However, the authorities show that contractual licences are not ordinarily binding on third parties.
Binions v Evans [1972] Ch. 359 (must read case)
Concerns licences in land
Facts
Ms Evans was the widow of an employee of the Tredegar Estate. The trustees made an agreement with her, under which she would be allowed to reside in a cottage, free of rent and rates for life. She undertook to keep the cottage in repair.
Two years later the trustees sold the cottage to Mr and Mrs Binions, expressly agreeing that the purchase price would be reduced. The purchaser claimed possession of the cottage.
Lord Denning MR held that the purchasers were bound by Mrs Evans’ contractual licence and also by a constructive trust in her favour, whereas Megaw and Stephenson LJJ relied upon the agreement as creating a life interest rather than a contractual licence.
• Held
o Lord Denning MR held that Mrs Evans could assert her right to remain in the cottage against the Binions even though she had no legal or equitable property right as such.
♣ ‘Supposed…that the widow did not have an equitable interest at the outset, nevertheless it is quite plain that she obtained [when the cottage was sold]. They stipulated with the purchaser that he was to take the house ‘subject to’ the widow’s right under the agreement. They supplied the purchaser with a copy of the contracts and the purchaser paid less because her right to stay there. In these circumstances, this Court will impose on the purchaser a constructive trust for her benefit: for the simple reason that it would be inequitable for the purchaser to turn her widow out contrary to the stipulation subject to which he took the premises.’
• There is no support for the view that contractual licences are generally binding on third parties. Nevertheless, there is the proposition, that they are capable of binding a third party = Re Sharpe.
Re Sharpe [1980] 1 W.L.R. 219 – must read case (constructive trust found where aunt lent money to a nephew to buy a house on the agreement that the aunt would live there for the rest of her life)
Facts
An elderly aunt lent money to her nephew towards the purchase of a house on the understanding that she would live there with the nephew and his wife for the rest of her life. The nephew went bankrupt, and his trustee in bankruptcy contracted to sell the house to a purchaser.
Held
The trustee failed to get possession of the house from the aunt. Here rights were held to be more than merely contractual, and gave rise to a constructive trust binding upon the trustee in bankruptcy.
The purchaser was not a party to the action, and it was left open whether he would also be bound. However, as the aunt had sold her home and paid for improvements to the nephew’s house, a preferable basis for the decision might have been proprietary estoppel.
THIS POSITION WAS LATER CLARIFIED IN CA Ashburn Anstalt v Arnold.
Ashburn Anstalt v Arnold [1989] Ch. 1
CA
‘put the quietus to heresy that a mere licence creates an interest in land.’
King v David Allen = the correct principle was that a contractual licence could not normally bind a third party. However, the law must be free to develop, and the finding of a CT was considers a beneficial adaptation to old rules to new situations in appropriate circumstances.
Facts
The claimant purchaser sought possession against D, who was in occupation under an agreement with the purchaser’s predecessor in title. C had been aware of the agreement and had purchased expressly subject to its provisions ‘so far as the same are enforceable against the Vendor.’
Note that the constructive trust approach to licences only apply where the conscience of a third party/purchaser is affected, in which case it can fall under one of the category of constructive trusts examined above.
Re Basham [1987] 1 All ER 405 (must read case).
• CT has also been called upon to fill in some possible gaps in the estoppel doctrine.
• Facts
o The claimant’s mother married her stepfather when the claimant was 15. The claimant lived with them until her marriage, helping to run the business without pay on the understanding that she would inherit from her stepfather.
o He dissuaded her husband from taking a job with a tied cottage, saying he would help them to get a house.
o After the mother’s death the claimant and her husband helped her stepfather in his house and garden, prepared his meals, bought carpets for the house, and paid solicitors for advice over a boundary dispute. The stepfather constantly assured that the house would be hers, but he died intestate.
o C who did not benefit under the intestacy succeeded in her claim to the whole estate under the doctrine of PE.
• Held
o PE was not confined to a case where the claimant’s belief related to an existing right and specific assets. Where the belief related to a future right, a species of CT arose.
o The proper remedy was an award of the entire estate, to satisfy the expectations encouraged by the deceased.
Thorner v Major [2009] 1 WLR 776 (must read case)
• Case generally welcomed for restoring the flexibility of the doctrine, but it has not resolved every issue, the volume of litigation in this area is unlikely to diminish. The relationship between CT and PE will remain ‘subject of much discussion.’
• Facts
o David Thorner worked for Peter 20 years unpaid, as well as on his parents’ farm, where he got housing and money. He worked long hours and believed he would inherit the farm, encouraged by Peter’s conduct over 15 years, such as in 1990 giving a bonus relating to two assurance policies. But there was no explicit promise or assurance. Peter left the farm to David, and also money to others. But Peter destroyed the will and he fell out with the others and did not make a new will. So the property passed by statute to the others.
o David claimed PE.
• CA
o No PE claim because there was never a clear and unequivocal assurance.
• HL
o The only thing that mattered was whether a reasonable person could have relied on the conduct that looked like an assurance.
o Lord Hoffmann –
♣ Said that peaking in oblique and illusive terms does not matter if one could reasonably believe one was being given an assurance. What mattered was whether Peter’s conduct ‘would reasonably have been understood as intended to be taken seriously as an assurance which could be relied upon.’
o Lord Scott –
♣ Held that PE can only be used where the assurer believes they have or will have very soon acquired a right in someone’s land. He said though he would not disagree about proprietary estoppel, he would ‘find it easier and more comfortable to regard David’s equity as established via a remedial constructive trust.’ The elements of a claim are clear assurance, reasonable reliance, substantial detriment. Proprietary estoppel brings uncertain results, e.g. if Peter intended to give up the farm, but before then had wanted to use the farm as a home given his old age. Cases like Ramsden and Crabb can easily be understood as proprietary estoppel, but he finds inheritance cases easier to understand as being remedied through a remedial constructive trust, created by the parties’ common intention, since Gissing. Like Gillett.
o Lord Walker –
♣ Held the elements for PE are
• 1. A promise or representation by D that C has or will acquire some right in relation to D’s land
• 2. C’s reasonable reliance on this promise/ representation
• 3. Detriment suffered by C by reason of his reliance on that promise/representation.
o Lord Neuberger agreed with Lord Walker.
Jennings v Rice [2002] EWCA Civ 159 (must read case)
• Mr Jennings, a gardener, sued the administrator of his former employer, Mr Rice to have a large house conveyed to him on the grounds that he had been given an assurance he would get it.
• Mr Jennings had worked as her gardener, and had increasingly begun to care for her, doing washing, helping dressing, shopping and going to the toilet. She was running out of money and could not continue to pay him.
• She told him that ‘he would be alright’ and that ‘this will all be yours one day’.
• Held
o CA said proportionality was essential between expectation and detriment in deciding how to satisfy an equity based on PE. Although the detriment to Mr Jennings was more difficult to establish than his expectation, courts must consider inconscionability.
o Articles cited – Simon Gardner 1999 – and recited in Gillet v Holt.
o Robert Walker J 56 –
♣ ‘The essence of the doctrine of PE is to do what is necessary to avoid an unconscionable result, and a disproportionate remedy cannot be the right way of going about that.’
