Proprietary Estoppel and Constructive Trusts Flashcards
Yeomans Row v Cobbe [2008] UKHL 55
FACTS:
- Y owned a registered freehold of land and C was asked to redevelop the land on the following terms (oral arrangement):
(i) C would obtain planning permission at his own expense to demolish flats and build houses
(ii) upon obtaining this permission Y would sell the land to C for an upfront price of £12m
(iii) C would develop the property in accordance with planning permission
(iv) C would sell the houses and pay Y 50% of the amount (if any) by which the gross proceeds of sale exceeded £24m
- They were both experienced business people who knew that an oral contract would not suffice
- None-the-less C spent time/money obtaining planning permission, and Y later asked for £20m for the property
- The facts where not sufficient to allege breach of contract so C sought relief on the basis of proprietary estoppel, constructive trust, or unjust enrichment
- The CA and first instance agreed there was proprietary estoppel, however the HL rejected his claims for PE and CT and remedied him £150,000 for unjust enrichment due to the planning permission increasing the value of the property
LORD WALKER:
- A commercial person has access to legal advice and knows that they are expecting a contract; this differs from domestic situations
- Neither C nor Y regarded themselves as legally bound and this was implicit in the nature of the agreement: failed on this point
- C was taking a business risk
- Crab v Arun the situation was such that Mr Crabb had irretrievably altered his position, and it was clear that legal documents where to be retrieved and signed; this was a different case
- Ramsden v Dyson; “conscious reliance on honour alone will not give rise to an estoppel”; the court should not create uncertainty in commercial contracts by creating complicated equitable concepts
- Unconscionability is an objective value judgement of behaviour (not as Professor Birks criticizes it when being used as a descriptive state of mind) so plays an important role in the doctrine of equitable estoppel… “if the other elements appear to be present but the result does not shock the conscience of the court, the analysis needs to be looked at again”… in this case Y’s behaviour was unattractive but not unconscionable
LORD SCOTT:
- Unconscionability AND proprietary estoppel must be present
- C knew that the oral agreement would not be legally enforceable and his experience shows this
LECTURE NOTES:
Elements of PE affirmed;
1. Representation (or assurance or rights)
2. Reliance (or a change of position)
3. Detriment (or unconscionable disadvantage)
4. Overarching requirement inequity or unconscionability
Not “watertight compartments”
The representation;
- Must be clear (Pascoe v Turner)
- Explicit statement or acquiescence (Taylor Fashions v Trustees)
- Pre-contractual negotiations (Cobbe v YRM)
- Imperfect/testimony gift: what precisely was intended? (Inwards v Baker, Dillwyn v Llewellyn, Gillet v Holt)
Thorner v Major [2009] UKHL 18
FACTS:
- P owner a farm which D work at for 30 years without pay
- D believed that on P’s death he would inherit the farm, although there was no explicit assurance/promise; D had been encouraged by P’s conduct
> D was in P’s will before he destroyed it
> P gave D a bonus for “death duties”
- HL asked “is there an assurance capable of giving rise to proprietry estoppel?”; and “Was the land it related to adequately identified?”
LORD WALKER:
- “The doctrine is based on three main elements… a representation or assurance made to the claimant; reliance on it by the claimant; and detriment to the claimant in consequence of his (reasonable) reliance”
- Notes how his claim is not based on having made improvements or spent money on the farm
- Silence cannot be assurance, it must be clear assurance
- Quotes Hoffman LJ in Walton: “the promise must be unambiguous and must appear to have been intended to be taken seriously”
- Does not share CA worry that the floodgates may be opened as cases like this are fairly rare and trial judges good at scrutinizing evidence
- There must be an identified property which is why they are able to use it as a sword (although no certain and specific, retrospective analysis means that an identical property was intended to be inherited by D)
LORD NEUBERGER:
- Unambiguous assurance
- Although the extent of the farm would change over time it was clear that D would inherit the farm as it was at P’s death (may be facts that give rise to a different conclusion)
- In Cobbe there was uncertainty to the terms or nature of any benefit
- In Cobbe the circumstances where commercial and involved an experienced business man
LORD HOFFMAN:
- “The fact that Peter had actually intended David to inherit the farm was irrelevant. The question was whether his words and acts would reasonably have conveyed to David an assurance that he would do so.”
- Should take an objective approach
- Assurance need not be pinpointed, a day-to-day relationship can confirm it
LORD SCOTT:
- He finds it difficult as P may have sold the property to pay for health care in his old age…
- Feels PE more appropriate in cases of immediate remedy; however CT more appropriate for cases such as this where the benefit of an assurance is in the future
- CT are about common intention to a detriment per Gissing v Gissing; this doctrine is applicable to these cases
NOTES:
- Allowed a quantum merit in respect of his services
- MacFarlane & Robertson: a “dramatic reinterpretation of PE as it has come to be understood”; it “essential denies the existence of PE as a distinct doctrine. Its effect is that it does not exist as an independent means by which B can acquire a right against A”
- In Thorner v Major Lord Walker thinks M&R’s suggestion that PE has been virtually extinguished is incorrect
Jennings v Rice [2003] 1 P&CR 8
FACTS:
- J began working for R as a part time gardener in 1970, he later began to do more work for her
- R stopped paying J but provided him with £2000 towards the purchase of a house
- Eventually at R’s request, J began to stay overnight and care for R on the assurance she would “see him right”
- J claimed proprietary estoppel and that he was able to receiver her whole estate (£1.285m) or at least the value of her home (£435,000)
- J received £200,000
ALDOUS LJ:
- The first instance judge considered all the circumstances
> J did not know the value of R’s actual estate or the extent of R’s wealth
> Even the part known to J was out of proportion to what J might reasonably have charged for the services he provided free
> What would be equitable
> What would be proportional
> The house was not suitable for J to reside in alone
> R had no special obligations to her family
> The cost of full time nursing care
> £200,000 would fulfill the promise to see him right
- The courts ultimate aim would be to consider would be equitable and achieve justice
- The aim of PE is unconscionability (per Crabb’s case)
- The elements of PE are established as equity arises: this value depends on circumstances including the expectation and the detriment… the job of the court is to do justice… the most essential requirement is that there must be proportionality between the expectation and the detriment
- Flexible approach can lead to judicial discretion… but less flexible approach can lead to injustice
ROBERT WALKER LJ:
- Judges cannot have a completely unfettered discretion based on principles of there own, but flexibility is still required
- A variety of PE situations could arise
- Consider:
> The quality of the assurances
> The extent of the detrimental reliance
- When both of these elements make it unconscionable for the person give the assurances to go back on them there is proprietary estoppel
- Sometimes assurances and reliance only just fall short of a contract (non-compliance with s2 LP(MP)A 1989) and may be indistinguishable from a CT (Yaxley v Gox)
- PE can only appear where:
> The benefit is obviously disproportionate
> The claimant’s expectations may not be focused on any particular property
> The assurances may be vague or inconsistent
- You should use the claimant’s expectations as a starting point then analyse alongside the quality of the assurance and degree of the detriment to come to a conclusion (justified by Scarman’s LJ’s well known reference to ‘the minimum equity to do justice to the plaintiff’)
- Recognises how hard it is to quantify detriment
- The purpose of the doctrine of PE is to avoid an unconscionable result
NOTES:
- Essence is to do what is proportional
- Flexibility over certainty
Eve v Eves [1975] 1 WLR 1338
FACTS:
- P and D both lived together after both separating from their previous marriages
- D funded the purchase of their home partly from funds raised selling his previous property and partly by mortgage
- D told P the only reason she was not listed as a joint owned was because she was too young (incorrectly) and he told the court he had used this as an excuse
- The house was in a terrible condition at purchase; P did much of the work including some heavy work
- D then left P to marry another woman
- D didn’t pay requested maintenance for each child requested by the county court
- D tried to sell the house
- P applied for a share in the house but had to leave the property due to threats of violence
JUDGMENT:
- Lord Denning MR said a trust had been created because D had lead P to believe she was to have an interest in the property
- Browne LJ and Brightman J said there was a trust as the property had been acquired and maintained by the parties for their joint benefit and it could be inferred from the condition of the house and work that P did to the property was part of the bargain that she contributed her labour to its improvement
- P acquires a quarter interest in the property, and D held the legal estate held the legal estate on trust as to 3/4 for himself and 1/4 for P. D also had to make reasonable provisions for maintenance for the children
LORD DENNING MR:
- “She did much more than many wives would do”
> Stripped the wall paper
> Painted woodwork
> Painted cabinets
> Painted brickwork at the front of the house
> Broke up concrete in the front garden
> Carried these pieces to a skip
> She demolished a shed and put up a new shed
> She prepared the front garden for turfing
- Although she did not make financial contributions; it was bought intending it should be used for their joint benefit and with their joint efforts to maintain it
- He used a trick, so not a man of honour
- He should be judged by what he led her to believe and not by his own intent; Lord Diplock made this clear in Gissing v Gissing
- He notes that her work would have given her a good claim to have a share in a divorce
- It would be inequitable on the facts to deny her a share in the house; so the law must impute or impose a CT
- The parties may negotiate him buying out her lump sum; but if they cannot agree on one then they may postpone sale so long as reasonable payments of maintenence are made
BROWNE-WILKINSON:
- Is able to draw inference that there was a link between the under 21 statement and a common intention to have joint ownership… and therefore is allowed a 1/4 share
BRIGHTMAN J:
- The under 21 excuse creates a common intention; a clear understanding that she would have some sort of proprietary interest
- Consistent with the reasoning in Gissing v Gissing
- Does not believe she would have been “wielding the 14 lb sledge hammer” if she did not think she would get a share
- Doesn’t explain HOW he got to the 1/4 share
- P is not liable for occupation rent so long as he pays reasonable sums to support the children, when they are past the minor age then they must consider a sale or payment of her agreement
Lloyd’s Bank v Rosset [1991] 1 AC 107
FACTS:
- Mr R is the sole registered proprietor of a house which he and his wife were renovating with the intention for it to become their home
- Mr R funded the cost of renovations
- Mrs R was there almost daily, assisting in the deocrating while buiders undertook the work on the house
- Mr R mortgaged the house and defaulted on the repayments
- Mrs R argued she had a beneficial interest in the house that was enforceable against the bank
- The CA agreed she had a beneficial interest under a CT
COURT OF APPEAL (PURCHAS LJ):
- Whether she is in actual occupation per section 70(1)(g) depends on two things: (a) was she in actual occupation? and (b) would be appropriate inquires made by the bank have elicited the fact of her interest?
HOUSE OF LORDS (LORD BRIDGE):
- First it must be shown that there was an agreement, arrangement or understanding (prior to the time of acquisition or exceptionally at some time after) that the property will be shared beneficially
- It must be shown that they acted to their detriment or significantly altered their position on reliance on the agreement
- May gave rise to a CT or PE
- Where no express conference of joint beneficial ownership, it is likely that CT may only be shown where the party has made direct financial contributions to the purchase price; extremely doubtful anything less will do
Stack v Dowden [2007] UKHL 17
FACTS:
- S and D cohabited a property for nearly 20 years and had 4 children
- Their home was registered in their joint name but with no express declaration as to their respective beneficial shares
- The purchase had been funded by the proceeds of the sale of D’s home (which they had lived in jointly), money from her bank and a joint loan
- Both parties contributed to the discharge of the loan but D’s where higher
- D claimed to be entitled to 65% of the beneficial share
LORD NEUBERGER:
Resulting trusts;
- Not the appropriate case to consider whether mortgage contributions should be equivalent to cash
- When it is confusing/complex to determine that exact contributions, then analysis must be based on “Y%”… that is, when a contribution could not have been more/less than Y% then the beneficial interest should reflect this
Common intention;
- May not impute an intention, but can express or imply it
- An inferred intention is objectively deduced to be the subjective actual intention of the parties, based on actions and statements… this is what they actually intended
- Imputing is creating an intention that did not actually exist, just what they would have intended… this would be an uncertain, subjective and difficult discretion
BARONESS HALE:
Policy;
- Family disputes involve strong feelings which can lead to reinterpretation of the past in vengeful terms and cases can be far longer and more expensive than warranted for an unlikely change of result
Quantification;
- Gray and Gray summarise the law in Oxley v Hiscock as;
> If the question is of “common intention” they should use a “holistic approach” to quantification
> Undertake a survey of the whole course of dealings between the parties
- This emphasizes the search is for the result which reflects the parties intentions
- NOT what the court considers fair (as before Pettitt v Pettitt)
- Domestic context different from commercial context ‘context is everything’
- Many other factors must be more relevant in determining the parties’ true intentions:
> Any advice or discussions at the time of the transfer
> The reasons why the house was acquired in their joint name
> The reasons why (if it be the case) the survivor was authorised to give receipt of the capital moneys
> The purpose for which the home was acquired
> The nature of the parties’ relationship
> Whether they had children for whom they both had responsibility to provide a home
> How the purchase was financed, both initially and subsequently
> How the parties arranged their finances (whether separate or together)
> How they discharged the outgoings on the property and their other household expenses
> Not exhaustive list
- Where joint owners (not sole owner) the calculation of beneficial interest will be less arithmetical but should be drawn from the intentions that they would each contribute as much to the household as they reasonably should and they would share the benefit/burden equally
- Start the calculation as equal beneficial owners
- The parties individual characteristics and personalities may be relevant when determining intentions
- It is also unlikely that joint legal owners would have intended that the beneficial interest would be different from their legal interest at the time
Notes;
- Myth of the ‘common law marriage’
- Many couples do not consider the legal implications of marriage a priority
- The same transaction when applied to commercial men and couples would be unjust
- 4/5 decided resulting trusts are for commercial circumstances only where as Lord Neuberger disagreed
- Applies where (1) one named owner (2) joint ownership but no declaration of respective beneficial shares
- It assumed that the sole legal owner is the sole beneficial owner; the claimant may disprove this with evidence of RT/CT… the beneficial share must then be quantified
- Joint owners are assumed to have joint beneficial ownership
- Lord Walker: RT may apply when lived/worked together
- Lord Neuburger represents the difficulties of estimating a person’s benefit… he believes the quantification should begin by looking at the size of the contribution
Oxley v Hisock [2005] FLR 211, Court of Appeal
FACTS:
- Both parties where cohabitants of a home and provided cash contributions to its purchase (28% by 0; 48% by H approx)
- H was the sole legal owner
- Both parties contributed to household expenditure, including the discharge of the mortgage
- When the relationship broke down O claimed 50% of the beneficial interest on existence of CT
CHADWICK LJ:
Before Stack v Dowden quantification was tackled by looking at evidence of discussion to find what share they had; if no evidence then apply the quantification of shares which is seen as fair
NOTES:
- For a resulting trust their must be a direct contribution to the case purchase price OR a contribution to the initial deposit or legal expenses OR the contribution of a council’s tenant discount
Kernott v Jones [2011] UKSC 53
FACTS:
- J and K where an unmarried, cohabiting couple (10 years)
- The property was acquired in their joint names
- J paid the deposit for the purchase and the household expenditure was shared
- J had the sole responsibility of the household for 14 years after the relationship broke down
- First instance have J:K 90:10 share, CA gave equal share, SC allowed appeal
LORD WALKER AND BARONESS HALE:
Resulting trusts;
- Presumption of resulting trust in familial context made more sense when social and economic conditions where different
- Husbands where thought to be making a gift to their wives of a joint interest, imputing an intention which the parties did not have (presumption of advancement: is this discriminatory to women/men?)… more sensible to follow the law of CT
- There is a presumption that parties intended a joint tenancy both in law and in equity; but that assumption can be rebutted by evidence of contrary intention, which may be more readily shown where the parties did not share their financial resources
Inference or imputation;
- Notes that in Gissing v Gissing the Lordships speeches where unresponsive to one another, therefore the imputation v inference needs to be clarified
- Any area of law where intention is established generally involves a gap between what the judge finds and what the evidence shows
- Resulting trusts impute an intention, making an assumption about human nature
- Lord Diplock in Pettitt v Pettitt notes how they are “generation on” of judges, and LW and BH believe they are a generation on still
- Lord Neuburger imputed intention in S v D when applying resulting trusts to get the same result
- In Gissing v Gissing Lord Diplock created a test that once the beneficial interest has been determined the courts should give effect to the common intention
- In practice the difference between impute and infer is not as obvious as in theory
- No plan to reform cohabitation issues but there should be
- The appellate courts should be slow to overturn the trial judges’ findings - as the are involved in the finding of primary fact, drawing inferences and conclusions etc.
Quantification of shares;
- This test applies to cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interest:
“(1) The starting point is that equity follows the law and they are joint tenants both in law and equity. (2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change. (3) Their common intention is to be deduced objectively from their conduct [Quotes Lord Diplock in Gissing v Gissing - the common intention which is reasonable and conscionable] (4) In those cases where it is clear either (a) that the parties did not intend joint tenanc at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares which they would own the property [Quotes Chadwick L in Oxley v Hiscock - the court must decide what is fair having regard to the whole course of dealings]. (5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended or fair.”
- If the case concerns a couple where only one has legal interest - the it must first be established whether the other party has a beneficial interest… there is no presumption of joint beneficial ownership
Identifying joint tenants and tenants in common
- The presumption of joint beneficial ownership is not necessarily just because “equity follows the law”; the presumption will not frequently be deterred from as it is the case in most cohabiting couples who live together and are jointly liable for the mortgage that they will have joint beneficial ownership of the property; this is the case if the parties fail to make it otherwise clear by some agreement
- The law has changed as to suit the socio-economic climate, this is how couples currently operate in society
- It is difficult to pinpoint the pooling of resources over a long period of time
LORD COLLINS:
- In the absence of express agreement, intention can be inferred rather than imputed; this is a problem in many areas of law
LORD KERR:
- Does not think it is controversial to infer an intention from conduct, it is the most reliable way of ascertaining what the parties intended
- Inferring means the courts are not imposing a solution; it is not longer inferring when it is not simply deducible from the evidence or that no common intention exists
- However, sometimes imputing is necessary it may need to be done where it is fair
LORD WILSON:
- Thinks Lady Hale has quoted the Law Com out of context as they were referring to inferring not imputing
- Criticises Lady Hale’s judgment: how can the court impute a common intention through equity without the court deciding what is fair?
- This was the ratio so courts have not been able to ignore it and may courts have struggled with the idea…
NOTES:
- Piska: subjective intentions cannot be assessed directly… the court have to carefully consider what the relevant facts show… it is not the subjective intentions are irrelevant but that the courts must come to a conclusion on an objective basis
- Lady Hale notes how resulting trusts are not presumed from their having contributed to the deposit; the presumption is that the parties intended a joint tenancy both in law and in equity: this presumption can be rebutted with evidence
Section 53, LPA 1925
Resulting, implied and constructive trusts are not required to be in writing: (2)
They can be expressed however, in which case they must be registered: (1)(b)
Pettitt v Pettitt [1970] AC 777
FACTS:
- Cottage clearly belonged to the wife
- Husband had undertaken work which had enhanced its value; he had supplied material and completed other work
LORD REID:
Presumption of advancement may apply to father-child but not husband-wife/equivalent;
- Husbands do not commonly intend to make a gift to their wife.
- There economic dependence does not make it necessary as a matter of public policy to give them this advantage
Constructive trusts;
- Redecoration will only last for a few years so it would be unreasonable that a spouse should obtain a permanent interest in the house in return for making such improvements
- Finds it hard to believe that Parliament’s intention in the enactment of the Married Woman’s Property Act 1882 intended for the judge to have an unfettered discretion in declaring property rights
- As regards beneficial interest: a contributor to the purchase price will gain one unless there is evidence to the contrary effect; improvements to the property will not create an interest after acquisition unless there has been some sort of agreement
- Method: look at what reasonable people in the shoes of the spouses would have agreed to if they had asked the question of what the contributing spouse ought to have OR assumed properties used for family purposes in the absence of an agreement be regarded as joint property
- There is real difficulty in inferring from some vague evidence what intentions are; commercial contracts particularly difficult; spouses living together in a family home will likely not apply matters like this to their minds; do not think the judge is doing the best job dubiously spelling out contractual arrangements
LORD MORRIS:
- The work by H did not go beyond what a reasonable husband might do
- If there is some agreement between husband and wife then this should be adjudicated for accordingly… if the evidence shows there has been such an agreement
- Does not want to find whether property ought to be “family property”
LORD HODSON:
- His “leisure hours” in the house or garden
NOTES:
- Resulting trusts are no longer appropriate for domestic situations
Gissing v Gissing [1970] UKHL 3
FACTS:
- The parties were married; the wife worked substantially throughout the marriage until 1957, times where the husband didn’t work
- The house was brought in the name of the husband
- The husband paid installments on the mortgage, housekeeping and general family expenses
- According to the wife, when the husband left, he told her that the house was hers and that he would pay the mortgage installments and outgoings, which he did
LORD MORRIS:
Agreement;
- Where there is a common intention at the time of the acquisition of the house that the beneficial interest in it should be share, it would be a breach of faith by the spouse in whose name the legal estate was vested to fail to give effect to that intention and the other spouse will be held entitled to a share in the beneficial interest
- Difficulty with spouses as there may not be evidence of a common intention, and especially as the intention may be established years after the acquisition of the property
- To find the common intention they must take account of the conduct of the parties; providing part of the purchase price shows that common intention (usually)
- There must be some evidence that points to the existence of a common intention
LORD REID:
Direct contributions;
- When the wife makes direct contributions to the purchase price then she gets a beneficial interest in the house, even if nothing was said or agreed about this
- The competing view is: when her payment is indirect in the payment of sums which the husband would have otherwise paid, she gets nothing unless at the time of acquisition there was some understanding she would get a share: does not like this as it is unfair that it just happens she pays for a certain thing
Inferring/imputing;
- Wide gap between inferring an intention from the whole course of conduct and imputing to the parties an intention to agree without evidence
- He would be okay with imputing in the proper case, but would prefer the court to reach that conclusion in a different way
LORD DIPLOCK:
Direct contributions;
- Where the wife has paid no direct contributions and there is no express agreement of common intention that she should have beneficial interest just because she has contributed out of her private income
What should you spend on;
- Furniture and durables are depreciating assets whereas houses have turned out to be appreciating assets it make be more wise to devote savings in acquiring an interest in the freehold
Matrimonial Causes Act 1973
S.21(1)(2) Financial provision and property adjustment orders
Moorgate Mercantile v Twitchings [1976] QB 225
“Estoppel is… principle of justice and equity. It comes to this. When a man, by his word or conduct, has led another to believe in a particular state of affairs, he will not be allowed to go back on it when it would be unjust or inequitable for him to do so.” per Lord Denning
Midland Bank v Farmpride Hatcheries (1981) 260 EG 493
“If A under an expectation created or encouraged by B that A shall have a certain interest in B’s land, thereafter, on the faith of such expectation and with the knowledge of B and without objection by him, acts to his detriment in connection with such land, a court of equity will compel B to give effect to such expectations.” per Oliver J
Dillwyn v Llewelyn [1862] EWHC Ch J67
FACTS:
F gave his son land to build a house but no formalities. Son incurred great expense. F died without will.
HELD:
Imperfect gift - convey the fee simple
Inwards v Baker (1965) 2 QB 29
FACTS:
F encouraged son to build a bungalow for himself. Son paid for it and lived there for 30 years. Borthers sought property.
HELD:
Should have a ‘licence coupled with an equity’ to live there for then.
Pascoe v Turner [1979] 1 WLR 431
FACTS:
P said he would “never see T without a roof over her head”; “the house is yours and everything in it”. T carried out substantial works.
HELD:
T to transfer free simple. Perfected an imperfect gift.
Greasley v Cooke [1980] 3 All ER 710
FACTS:
C maid and carer, cared for family for over 30 years. One son said “he would do the right thing by me”, others said “no need to worry I’d be looked after”; she had received no payment for her services and said she had been encouraged to believe she could regard the house as her home for life
HELD:
Could live in house rent-free
Reliance is presumed; the court could and would infer that she had acted to her detriment in absence of contrary evidence produced; money is not required; must be unjust/inequitable for the party to go back on the assurance
Coombes v Smith [1987] 1 FLR 352
FACTS:
P assured D “she would always have a roof over her head”
HELD:
P sought and was refused life interest and fee simple. Tidying the garden and extensive redecoration was no detriment. Could stay until their son was 17.
