Resulting and Constructive Trusts Flashcards
Are there any formalities for the creation of implied trusts? i.e. resulting and constructive trusts
No
Two categories of resulting trust
- automatic
2. presumed
statute which states that resulting and constructive trusts do not need to comply with formalities for their creation or operation
s.53(2) LPA 1925
Similarity between express and implied trusts
once a trust has been created, whether expressly or impliedly, have the same entity. Once a trusts has arisen/been created, there is no longer any difference.
What is the primary/predominant focus of implied trusts?
Ownership rights in property.
4 Types of intention
- express - actual intention
- implied/inferred - intention as it appears from the circumstances. what, by looking at words and conduct, it appears that their intention is.
- imputed - May not be actual intention of parties, may be no evidence to suggest that this is the intention of the parties, but it’s what their intention should or would have been had they actually thought about it.
- presumed - intention that from common experience is the most likely intention in the circumstances. Has to be no evidence to the contrary (unlike for imputed)
What is the effect of a resulting trust?
that on the transfer of property the beneficial interest in that property, or part of it, will “result” back to the transferor.
What would it be if the presumption of resulting trust was rebutted by the courts?
an outright gift
What would it be if the presumption of advancement was rebutted by the courts?
a resulting trust
Modern approach to resulting trusts
Instead of starting with presumption then seeing if it is rebuttable (traditional approach), Court should first look for evidence of intention of the parties. Intention only effective if it creates an express trust or gives rise to a constructive trust.
- Only in absence of any effective intention then look at and apply the relevant presumption. But it’s recent dicta, it’s PC.
this modern approach was stated by Lord Briggs in Gany Holdings (PTC) SA v Khan [2018]
THREE situations where a resulting trust will arise
- Property is transferred from settlor to trustees on an express trust but some or all of the equitable interest in the property is not disposed of –> don’t know if this is automatic or presumed
- A voluntary transfer of property from one person to another or into the joint names of the transferor and another.
- A person contributes all or part of the purchase price of property and title to that property is put in the name of another or into their joint names –> with the beneficial interest being proportionate to the contribution
Statutory problem with saying there is a presumed resulting trust where there is a voluntary transfer of property
s.60(3) LPA 1925
this is an issue without a conclusion BUT… in the most recent case of National Crime Agency v Dong [2017] it stated that there shouldn’t be a difference between real and personal property. Section not intended to make any substantive changes to the law. But this is only a high court decision not HoL
In what situations will the presumption of advancement exist?
- transfer from a father to his child or someone to whom he is in loco parentis
- transfer from a husband to his wife.
What rebuts the presumptions of resulting trusts?
presumption of advancement - evidence of a contrary intention i.e. evidence of the transferor’s actual intention
presumption of a resulting trust - evidence that the transferor intended an outright transfer of the property
presumption of resulting trust because of contribution to the PP - need evidence that the contributor was making a gift or loan.
Case which highlights the diminished importance of the use of the presumption of advancement in resulting trusts in the context of a house acquired for joint occupation
husband and wife - Pettitt v Pettitt [1970]
father and son - McGrath v Wallis [1995]
Resulting trusts - Case which concluded that borrowed money is prima facie the direct contribution of the borrower(s), if there’s more than one then they’re regarded as contributing equally
Harwood v Harwood [1991]
Resulting trusts - case which is an example of rebutting the requirement that there is a DIRECT contribution to the purchase price
Carlton v Goodman [2002] - found evidence that she was only on the mortgage to facilitate it, she was never intending to pay anything back so this was found to be contrary to the notion of direct contribution.
Authority for the rule that payment of mortgage instalments when under no liability will not be sufficient to give rise to interest under resulting trust
Curley v Parkes [2004]; Barrett v Barrett [2008].
Reasoning behind this - because a resulting trust arises at the moment the property is acquired. Anything that takes effect after that moment is not relevant to a resulting trust because certainty is essential.
Example case of a reduction of the purchase price through the status of a party giving that party a commensurate interest under a resulting trust.
Springette v Defoe (1992) - BUT… this was an easily definable and significant reduction of 41% of the property price so is quite rare and is subject to evidence of contrary intention.
Example case of payment of the costs of initial work on the property potentially being sufficient as a contribution to the acquisition of the property - which would give them a beneficial interest under a resulting trust
Drake v Whipps - barn bought for conversion so the costs of initial work to make the property habitable/usable could be regarded as part of the cost of acquisition of the property
BUT… the CoA eventually held it was under a constructive trust so there’s little evidence for this position
Limitations to the use of resulting trusts
lack flexibility -
- mathematical calculation of share
- firmly based on strict property rights
all of this may be less appropriate in a family home setting so courts have moved away from resulting trusts even in some commercial situations e.g. investments by couples
Also - have been rendered irrelevant when the property is in the sole legal name of the other - use constructive trusts
TWO types of constructive trust
- an institutional constructive trust
2. a remedial constructive trust
Definition of institutional constructive trust
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] per Lord Browne-Wilkinson -
“the trust arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such a trust has arisen in the past.”
What circumstances will give rise to constructive trust?
Paragon Finance [1999]
“arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another.”
Definition of remedial constructive trust
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] per Lord Browne-Wilkinson -
“A remedial constructive trust, as I understand it … is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court.”
Characteristics of a remedial constructive trust
- Discretionary - Not only whether it is imposed at all, but its exact effect is also at the discretion of the court – could be imposed retrospectively or prospectively only.
- Can take into account any third parties.
- Has no connection with the intention of the parties – remedy used by courts to prevent unconscionable conduct.
Are remedial constructive trusts recognised in English Law?
In a literal sense NO - stated in Westdeutsche Landesbank Girozentrale v Islington LBC [1996]
BUT… it is arguable that in cases such as Lyus v Prowsa [1982] and Ashburn Anstalt v Arnold [1988] they were decided on the basis of remedial constructive trust rather than institutional.
Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington LBC and Lord Scott in Thorner v Major [2009] (HoL case) both thought the use of remedial constructive trusts would be a useful addition in the future
BUT… LJ Nourse in Re Polly Peck International plc (No 3) [1998] argued against they shouldn’t be used to remedy a wrong because he saw that because remedial constructive trusts are about varying property rights that should be a decision for Parliament only.
What is the effect of a resulting trust?
On the transfer, the beneficial interest, will result back to the transferor.
What intention is required for a constructive trust?
much more wide-ranging and may arise regardless of any intention at all, or they may arise because of the actual or implied intention of all the parties, not just the transferor.
Criticism of the presumption of advancement for resulting trusts?
Sexist
unjustifiably limited coverage
There is a section to deal with its abolition: Section 199 Equality Act 2010 – prospective abolition of the presumption of advancement, not yet in force.
Situations where a constructive trust will be imposed
- Cases in which a purchaser of property has agreed to recognise the interest of another in the property but then attempted to go back on that agreement.
- Other cases to be considered include constructive trusts imposed on the profit made by a fiduciary in breach of duty (nothing to do with intention but all about unfair benefit: idea of unconscionability) and the recipient of trust property transferred in breach of trust
- Common intention constructive trust
THREE example cases of when a constructive trust was imposed to remedy where a purchaser of property has agreed to recognise the interests of another and then attempted to go back on that agreement
- Bannister v Bannister [1948] - Old lady sold two cottages to her brother-in-law at below market value on an oral understanding that she could live rent free in one of them for her life. He tried to go back on this but the courts imposed a constructive trust because of his conduct
- Lyus v Prowsa [1982] - Purchaser of registered land agreed to be bound by an unregistered minor interest. Tried to rely on absence of registration under LRA.
- Ashburn Anstalt v Arnold [1988] - Purchaser of land agreed to be bound by a contractual licence. Prevent them going back on agreement and thus being in breach of their contractual obligations
Cases where the courts seek to give effect to intention despite failure to comply with formalities.
Re Rose, Pennington v Waine, probably secret trusts.
- All of these the underlying basis is ultimately unconscionability, that it would not be fair if a constructive trust were not imposed on the landowner.
TWO HoL decisions from which common intention constructive trusts developed
- Pettitt v Pettitt [1970]
2. Gissing v Gissing [1971]
Requirements for a common intention CT
- evidence that it was the common intent of the parties to share beneficial ownership
- evidence that the intent has been acted on by the party claiming an interest to his or her detriment.
Two situations in which a common intention CT can be established per Lord Bridge in Lloyds Bank v Rosset [1991]
1) where there is evidence of an agreement, arrangement or understanding that the property is to be shared beneficially; an express bargain.
2) where there is no direct evidence of an agreement etc and it is necessary to infer a common intention from the circumstances and the conduct of the parties; an implied bargain
Who said that constructive trusts have been left “perhaps deliberately vague”
Lord Justice Edmund-Davies in Carl Zeiss Stiftung v Herbert Smith [1969]
What traditionally will give rise to a constructive trust?
breach of a fiduciary obligation - fiduciary relationships generally arise where there is a situation of ‘trust and confidence’ between the parties.
e. g. solicitors, trustees, company directors, recipients of trust property, persons who assist in the breach of the trust (Twinsectra), secret commissions and bribes, breach of contractual obligations (Ashburn Anstalt v Arnold) - non-exhaustive list
- –> this shows the link to other equitable principles
Where was it suggested that resulting trusts are non longer applicable to the allocation of beneficial interests in family property?
Jones v Kernott [2011] - SC decision
- but not necessarily applied in the courts
case which accepted that contributions other than financial can create an interest in the home under constructive trust
Gissing v Gissing [1971]
in an express common intention constructive trust is it enough to have an agreement to pay rent?
NO -
the parties intention must be to share the home, not just share their lives so an agreement to pay rent isn’t enough to establish an interest in the family home
- authority in Thomas v Fuller-Brown [1988]
Ways in which an inferred common intention constructive trust be established?
- contribution to purchase of the property or substantial contribution to the mortgage
- Intention can be inferred from the words and conduct of the parties BUT… the court will NOT impute an intention.
- court will consider words and conduct of parties after acquisition of property BUT… only by looking at it as evidence of intention at the time of acquisition.
Can an interest under a constructive trust be acquired at some time after the property was initially acquired?
potentially yes - authority in James v Thomas [2008] CoA
- mr T was already the owner of the property when he entered into the relation with ms J
- on the facts the claim failed but the court stated that it could be possible but would be hard to show an inferred common intention
was successful in Aspden v Elvy [2012]
BUT… typically where an individual is trying to claim an interest after the initial acquisition of the property they would use proprietary estoppel
NB- the different between PE and CTs is that PE usually gives effect to promises to create rights in the future whereas CTs recognise rights which the parties intend to arise immediately
Example where a common intention constructive trust was successfully used after the initial acquisition of the property
Aspden v Elvy [2012] - where claimant spent money on substantial improvements to the property.
BUT… this is highly unusual
Example of a common intention constructive trust being extended to use in a commercial setting -
- Yaxley v Gotts [2000] - Y planned to buy a converted property and refurbish it. He approached Gotts for a loan. Gotts said that he would buy the property himself and Y could have the ground floor flat if he did work on the other flats. Y agreed. The property was actually bought by Gott’s son, Alan. Y did the work without knowing this.
HELD - Succeeded in claiming ownership of the flat by imposition of constructive trust
What is Pallant v Morgan equity? (context - common intention constructive trusts)
connected to common intention constructive trust. This has given name to a line of cases in which courts have intervened to enforce informal agreements, supports the notion that constructive trusts are relevant in commercial settings not just in the context of the family home.
equity where there is an unenforceable agreement to embark upon a joint venture which involves the acquisition of an identified plot of land by one of the parties to the agreement for the benefit of both parties. One party has acquired that land in own name with the agreement of the others because believe that is acting for benefit of them all.
- Courts held that the purchaser cannot keep the land for their sole benefit and will hold on trust for all parties.
What is the sequence of cases that developed common intention constructive trusts?
Developed from the ‘twin peaks’ of Pettitt v Pettitt and Gissing v Gissing, through Lloyds Bank v Rosset, to the current leading cases of Stack v Dowden and Jones v Kernott
Example of common intention constructive trust between brothers who owned many businesses together for over 40 years but then fell out, leaving disputes over property which was in different names.
Bhushan v Chand [2015] -
held that the understanding between them, never formally recorded as a contract or as a partnership, was that these assets were acquired for their joint benefit. So because the brothers acted on this common understanding by working in the businesses without any formal right to a reward, the assets would be shared equally between them in accordance with their understanding, irrespective of which brother’s name was on the legal title
(p201 TB)
why are constructive trusts sometimes used to support the enforcement of bargains?
because bargains are inchoate and, therefore, falls short of being contractually enforceable or because common law remedies are inadequate.
Example of a constructive trust being imposed to give effect to a promise expressly agreeing to honour the rights of a 3rd party and thus preventing the purchaser from taking advantage of his strict rights under LRA
Lyus v Prowsa Developments
Developers that purchased the land, under which the Lyus’s had contracted with a previous owner to build a house on the estate, was bound by the contract. Because they had expressly agreed to the interest and therefore a constructive trust was raised to ‘counter unconscionable conduct or fraud’.
Case which held that ‘the court will not impose a constructive trust unless it is satisfied that the conscience of the estate owner is affected’ i.e. the mere fact that land was expressly said to be conveyed subject to a contractual right doesn’t suffice on its own
Ashburn Anstalt v Arnold [1989
Case which developed the notion of Pallant v Morgan equity, linked to common intention constructive trusts
Banner Homes v Luff Developments [2000]
- and less so but still - Crossco No.4 Unlimited v Jolan Ltd [2011]
When did Banner Homes v Luff Developments [2000] say that Pallant v Morgan equity would apply?
- There is a pre-acquisition arrangement or understanding (which need not and usually will not be contractually enforceable)
- The arrangement contemplates that one party will take steps to acquire a property on the basis that the other will also acquire an interest in it (and they haven’t informed the other that they don’t intend to honour the agreement);
- The non-acquiring party has, because of the arrangement, refrained from taking action which is either detrimental to it or which gives the acquiring party an advantage.
Case in which it was tried and failed to create a law of family property by means of a “new model” constructive trust which would be imposed whenever it was fair to do so.
Gissing v Gissing [1971] per Lord Denning
Is there a doctrine of family property in English Law?
NO -
A big defect in the law – number of unmarried couples is significant, home is their most valuable asset, issue that they don’t have law determining ownership of that asset. So trusts fills the caps which is an issue because trust law principles depend largely on intention and parties when they enter into relationship don’t tend to discuss ownership of the property.
–> not really an issue for married couples or civil partners who break up because of the Matrimonial Causes Act
What did Gissing v Gissing (1971) say must happen for a constructive trust to arise?
For a constructive trust to arise there must be:
- inducement by the legal owner of the property to the other person that they were entitled to a share in its ownership (this could be shown either through express agreement or through contribution to the acquisition); and
- detriment to the claimant (eg, contribution made to the purchase of the property in question).
This approach was reaffirmed by the House of Lords in Lloyds Bank plc v Rosset (1991), although the court placed emphasis on the need for a common intention between the parties rather than inducement.
What did the Law Commission try to do to fill the gap due to there being no doctrine of family property under English law?
Law Com 278 Sharing Homes A Discussion Paper (2002)
BUT… they failed to propose any radical change. said the courts have done their best with what is available in trust law principles.
Tried to make law more flexible but still not entirely satisfactory, still are limitations on the law.
What TWO factors do the case law conclude are relevant to determining whether it is a domestic purchase or a commercial purchase?
- The relationship between the parties and
2. The property they have purchased and the reason for that purchase
Does the fact that they’re a couple mean the court can assume they intend to share their assets i.e it is a domestic purchase?
YES -
also applied while they’re cohabiting and years after the couple have separated e.g. Jones v Kernott and Aspden v Elvy
Will the court assume that a purchase by a parent with a child or by siblings is intending to share their assets?
CAN’T MAKE THE ASSUMPTION -
particularly in the case of parent and child, they may be treated in the same way as a couple depending on the facts of the case
Will the court assume that a purchase by friends is intending to share their assets?
NOT LIKELY -
unlikely you intend to share ownership, more likely to be like a commercial purchase where you intend to get out what you put in
BUT… there was the exception in Gallarotti v Sebastianelli [2012] where they held that it was “more domestic than commercial” but that didn’t mean they held it was shared ownership, they were just more generous than a resulting trust (not mathematic about their contributions)
What’s an issue with seeing the relationship between the parties as of fundamental importance when considering if a purchase is domestic or commercial?
May have to take cultural context into account -
If we assume a couple intends to share then it has been suggested that you may have to get into difficult considerations of a relationship in its cultural context because an unmarried couple from a different culture may differ from another in a different country
What makes an express declaration of trust as to the beneficial interest conclusive?
must comply with s.53(1)(b) LPA
and there must be no fraud (Goodman v Gallant [1986]) or mistake (Pankhania v Chandegra [2012])
The fact that the legal title is put into the joint names of the parties does not amount to an express declaration of trust of the equitable interest in the domestic purchase
Springette v Defoe (1992)
Can an express declaration (in writing obviously) be overridden by a common intention constructive trust arising later?
NO AGREEMENT ON THIS ISSUE -
- lady hale in Stack v Dowden suggests it is possible
- in Arif v Anwar [2015] - Most recent - the court concluded that once an express trust is created you can only change beneficial ownership by assigning part of it which would have to be in writing
- Gardner in Understanding Goodman v Gallant [2015] puts forward an argument that an express declaration of trust is basically a compromise of claims at the time of acquisition and is a question of construction
Case which developed the presumption of an equitable joint tenancy when the legal title in the joint names of the parties
Stack v Dowden [2007]
stated that this presumption could be rebutted but is difficult
Case which held that there would be a common intention constructive trust when the legal title in the joint names of the parties i.e. when there’s a purchase of a house or flat by a couple for their joint occupation
Jones v Kernott [2011]
held that to rebut this presumption would require evidence of INTENTION to not share equally
Case which extended the application of a common intention constructive trust when the legal title is in the joint names of the parties to include purchases by a parent and child
Laskar v Laskar
but the presumption was rebutted because of the rigid separation of finances and the mother having other children who she likely didn’t want to leave out
What’s been the most important factor in rebutting the presumption of an equitable joint tenancy when the legal title in the joint names of the parties
whether the parties kept their finances separate
e.g. in Stack v Dowden they kept their finances rigidly separate for years despite having kids (full facts on p16 notes)
TWO cases of a parent/child joint names on the legal title in which the presumption of an equitable joint tenancy was rebutted
Akundele v Ritchie - mother/son
Laskar v Laskar - mother/daughter
in both cases their financial affairs were kept separate and there were other children involved
but in Laskar v Laskar the court held the presumption didnt apply at all because the home was purchased primarily as an investment rather than domestic so the presumption doesn’t apply at all
does the presumption of an equitable joint tenancy apply when the property being purchased is for investment purchases?
NO
- this is why they didnt apply the presumption in Laskar v Laskar
What is an ambulatory constructive trust?
The intentions as to shares change over time
Where rather than saying the presumption of an equitable joint tenancy and therefore a common intention constructive trust applies or is rebutted at the time of acquisition the court deem the intentions of the parties to have changed some time after the acquisition and so the presumption can apply at the time of acquisition but later be rebutted.
Reference in Stack v Dowden and Jones v Kernott to an ‘ambulatory constructive trust’ – the idea seems to be that once the constructive trust arises (where you purchase a home in their joint names) then the shares can vary over time
- The only way of making sense of this – starting with an equitable joint tenancy is to say that the equitable joint tenancy is severed, and on severance the shares are determined according to the intentions of the parties
if the presumption of an equitable joint tenancy is rebutted what is the next consideration?
the issue to consider is the sole equity of the shares, it is harder where there is a sole legal owner because the person not on the legal title must first of all establish an equitable interest in the property
Case which highlights the commitment of the courts use of constructive trusts rather than resulting trusts in family home disputes
Oxley v Hiscock [2004]
Ms Oxley had contributed 22 % of the cost of acquiring the family home, and this is the share of ownership she would have acquired on classic resulting trust analysis but the CoA held that on the basis of a constructive trust she was entitled to a 40% share of the value of the home
- Even though there had never been a discussion about what share she would have
What do you need to prove an express bargain common intention constructive trust when there is only a sole legal owner (only one of the parties names on the legal title)?
evidence of a common intention/express bargain
- may be an express oral agreement which can be vague but must show shared OWNERSHIP not ACCOMMODATION –> rare
- in the past they have accepted an express oral agreement between parties where the sole legal owner gave an excuse as to why they couldn’t be on the legal title BUT there’s been a move away from this since Curran v Collins [2015] - detrimental reliance on the common intention - have to show acts done to the potential detriment to the claimant AND show that link between the acts done and the common intention
THREE examples where the courts concluded that there was an express bargain common intention constructive trust because the sole legal owner gave an excuse as to why only their name is on the legal title
- Eves v Eves [1975] - she was too young
- Grant v Edwards [1986] - it would be prejudicial in her divorce proceedings
- Hammond v Mitchell [1992] - for tax reasons in connection with his divorce
BUT there’s been a move away from this since Curran v Collins [2015] with the courts claiming that it will be fact-dependant.
Springette v Defoe [1992] - the parties must have actually discussed the issue
Case which states that it is essential that the claimant has acted to his/her detriment or significantly altered his/her position in reliance on a belief that he/she was thereby acquiring a beneficial interest to claim a express bargain common intention constructive trust when there is a sole legal owner
Midland Bank Ltd v Dobson [1986]
when there is a sole legal owner - TWO examples of where the court will assume detrimental reliance if the acts were done in reliance on such a belief are sufficiently detrimental
- Grant v Edwards - substantial contribution to household expenses, kept the house and brought up the children. Owner could not otherwise have paid the mortgage - given half share.
- Eves v Eves - Woman cleaned the house, carried out extensive decorative work, and did a lot of heavy duty work to improve the house and the garden which people would have had to be paid to do - given quarter share
added value to the property and weren’t jobs women typically undertook without expecting to gain an interest (dated sexist opinion)
When there is a sole legal owner - cases where the courts found there was no detrimental reliance because they were acts done out of mere love and affection
- Midland Bank v Dobson
2. Lloyds Bank v Rosset
What did two important judgments in Grant v Edwards say which prove the court is willing to be more flexible when it comes to the detriment required for a express bargain common intention constructive trust when there is a sole legal owner
- LJ Mustill (contractual analysis) - should look at the bargain/agreement between the parties so if there is an express agreement as to what the claimant should do to acquire an interest then they need only comply with that bargain. No matter how small the bargain, it will be sufficient. Also said one could infer the agreement from the actions of the parties, complying with the terms of that bargain would similarly lead to an interest in the property.
- LJ Browne-Wilkinson (referred to proprietary estoppel) - Possibly any act to the detriment of the claimant relating to the joint lives of the claimant might be sufficient. However he suggested this analogy with PE but didn’t make a decision on the point
Browne-Wilkinson’s analogy with PE would create the most flexibility for the courts
LJ Mustill’s views are undoubtedly more appropriate to a commercial setting and B-W’s are more appropriate for the family home
What’s the difference between inferring a common intention and imputing a common intention?
inferring is where an actual intention is objectively deduced from the dealings of the parties
imputing is one attributed to the parties by the court, having concluded what the parties would have intended
it is possible to infer a common intention from the evidence but not possible to impute one
Case which held that it is irrelevant whether or not the parties are married EXCEPT that inferences from conduct may be different if there is not the same commitment as marriage i.e. a more loose relationship
Bernard v Josephs [1982]
Case which has one sentence in it which is relied upon as authority that the courts should look at the WHOLE conduct of the parties when considering an implied bargain common intention constructive trust
Jones v Kernott –> was applied in Aspen v Elvey to name just one
What acts are sufficient to give rise to an implied bargain common intention constructive trust?
- direct financial contribution to the purchase price automatically give rise to an implied bargain common intention constructive trust
2.
Case which held that when it is borrowed money that is used to contribute to the purchase price of the family home the courts will give effect to an agreement as to whose contribution the borrowed money is when considering conduct which will give rise to an implied bargain common intention constructive trust
Huntingford v Hobbs [1993] - accepted the borrowed money as the man’s contribution to the purchase price because the couple had an agreement that only he would make loan repayments even though the loan was taken out in their joint names
In the context of when the courts are considering conduct which will give rise to an implied bargain common intention constructive trust -
Case which held that where borrowed money is used, it is enough to pay off a lump sum or paid regular and substantial payments to the loan for it to be considered a contribution by that person
Gissing v Gissing per Lord Diplock
HELD - It doesn’t matter who actually repays the loan, is about who is under the obligation to pay back the loan but in this case the court will also take into account the actual repayments of a mortgage loan -
- A lump sum payment would be sufficient e.g. paying off £10,000 of it
- Also regular and substantial payments would be sufficient
BUT… payment of the odd instalment probably won’t be enough
Authority for the need for both parties to KNOW about the repayments to the mortgage loan for it to be considered as conduct which could give rise to an implied bargain common intention constructive trust
Lightfoot v Lightfoot-Brown [2005]
What are indirect financial contributions to the purchase?
Payments of money or other acts by the claimant which enable the legal owner to pay for the property
most common example is paying for general household expenses
Arguments FOR indirect financial contributions to the purchase being considered as sufficient to give the claimant an interest in the property
- opinion of Lord Reed in Gissing v Gissing - the way couples choose to arrange their finances may simply be decided out of convenience
- why should someone who pays the mortgage acquire an interest in the property but someone who pays the same amount but in other bills and household expenses won’t?
- Law Com suggested bringing in a statutory scheme that doesn’t consider the allocation of bills as crucial where the claimant has paid other bills which have enabled their partner to pay mortgage instalments - couples rarely discuss this.
Arguments AGAINST indirect financial contributions to the purchase being considered as sufficient to give the claimant an interest in the property
- trust law requires evidence of a common intention and you can’t say someone who pays household bills MUST be doing so in reliance on acquiring a beneficial interest - difficult to fit within trust law
- relationship between the parties will be especially relevant – there will be no common intention if ask a friend to pay bills rather than rent
Authority FOR indirect financial contributions to the purchase being considered as sufficient to give the claimant an interest in the property
- Lords Pearson and Diplock in Gissing v Gissing, Fox LJ in Burns v Burns [1984] - dicta pre-dating Lloyds Bank that payments of household expenses can be sufficient if they are “referable to the acquisition of the property”
- Burns is a good example of how strict English law can be - Only get an interest if the mortgage is still being paid off because of the link of them paying expenses to enable repayment of the mortgage - Le Foe v Le Foe [2001] - H paid the mortgage, service charges and outgoings; W paid for day to day domestic expenditure. She earned less but indirect financial contributions were held to be sufficient because the judge had no doubt that the family economy depended on her earnings.
- Wasn’t just that her husband couldn’t pay the mortgage without her, it was that as a family they spent such an amount of money that her contribution was essential.
- The judge relied on the dicta in Gissing v Gissing that that Lloyds Bank v Rosset was too restrictive and also took the approach that what Lord Bridge was actually saying was that only exceptionally would something less than a direct contribution be sufficient - Comments in Stack v Dowden that the court ought to take a more relaxed approach
- Lord Walker – said that Lord Bridge (Lloyds Bank) probably wasn’t correct AND the law had moved on since that judgment so a broader view should be taken of contributions to household expenditure
- Baroness Hale – the hurdle to establish a beneficial interest is too high.
Authority AGAINST indirect financial contributions to the purchase being considered as sufficient to give the claimant an interest in the property
- Lloyds Bank v Rossett per Lord Bridge - His view was that only contributing to payments to the property will be sufficient for an implied bargain in a constructive trust
- Ivin v Blake [1995] - applied Lloyds Bank- A woman worked unpaid in her mother’s business, the profits were used to purchase property which wouldn’t otherwise have been possible. HELD she had not acquired a share of the beneficial ownership because her contribution was indirect
- –> BUT… in this case the actual discussion of the issue in the case was very limited - James v Thomas - similar facts to Ivin v Blake
- –> BUT… in this case the respondent had acquired the property before she moved in and starting working in the business - difficult to prove an interest
Can we conclude if indirect contributions to the purchase are sufficient to give rise to an interest under an implied bargain common intention constructive trust?
Conflicting authority means we can’t say with certainty if indirect contributions are sufficient. But can point to Stack v Dowden and James v Kernott that we should look at all conduct to show that in the future courts may see it as sufficient to establish a beneficial interest.
Statute which means that payment for substantial repairs and improvements on a property is sufficient to gain a beneficial interest in the property for spouses/civil partners?
meaning the issue of whether this gives rise to an interest and therefore an implied bargain common intention constructive trust isn’t an issue for spouses
s. 37 Matrimonial Proceedings and Property Act 1970
s. 65 Civil Partnerships Act 2004.
Only case about the issue of whether a contribution through payment for substantial repairs and improvements on a property is sufficient to gain an interest in the property for non-spouses/non-civil partners
Aspen v Elvy -
Barn originally acquired by Mr A before he cohabited with Mrs E. It was transferred into her sole name when they separated. Some 10 years after their separation Mr A contributed £65–70,000 to its conversion at a time when he was living in a caravan and the contribution was a significant part of his assets.
HELD - there was a constructive trust because he couldn’t have intended to make a gift of this amount of money. It was possible to infer from his contribution that he hoped to live in and have an interest in the property and also that Mrs Elvy knew that.
BUT… this is an unusual case
Are non-financial contributions e.g. DIY, looking after house/children/garden, enough to gain an interest in the property under an implied bargain common intention constructive trust?
NO - because of the immovable issue is the inability to find the common intention
(unless within section 37 MPPA 1970)
This has led to some seemingly unfair judgments
Main example case of why the law’s strict approach to non-financial contributions made by non-spouses/non-civil partners is unfair
Burns v Burns [1984]
A woman made a substantial contribution to the household for 17 years. She had looked after the children and home, done decorating, paid the rates and phone bill and purchased chattels such as a washing machine. She was found to have no interest when the parties separated because you couldn’t say that her acts were things she would only have done if she expected to acquire an interest in the property.
also - Gissing v Gissing [1970] and Pettitt v Pettitt [1970] (woman was legal owner)
What’s the next step to consider if you have found that both parties have a beneficial ownership i.e. that each party has an interest in the share of the property?
Quantification of shares - under a common intention constructive trust.
Cases which demonstrate the approach of the courts to quantification of shares under a common intention constructive trust where there is an agreement
they will enforce the agreement - Re Densham [1975]
BUT… look closely at the terms of the agreement - Gallarotti v Sebastianelli [2012] - Purchase by friends in S’s name; he paid more of the initial cost but it was agreed they would have equal shares and G would contribute a greater share of the mortgage repayments. G did not.
HELD - the agreement as to equal shares didn’t apply because it was conditional on G making larger payments.
What approach do the courts take when quantifying shares under a common intention constructive trust when there is an absence of an agreement?
a “holistic” approach - look at the whole course of dealing between the parties in relation to the property
Authority that the only conduct which is relevant when quantifying shares under a common intention constructive trust when there is an absence of an agreement is the conduct of the parties in relation to the property
Graham v York [2015]
- the fact the relationship was abusive was held to not be relevant conduct
Leading authority for what the courts are looking for when quantifying shares under a common intention constructive trust
Jones v Kernott
TWO stage approach proposed by the courts in Jones v Kernott to quantify the share of the parties under a common intention constructive trust
- Can they infer the intention of the parties as to their respective shares
- If it isn’t possible for the court to infer the intention of the parties it will impute to the parties the intention of a reasonable and just person
FOUR issues with the two-stage approach in the quantification of shares of the parties under a common intention constructive trust in Jones v Kernott
- Fairness (a discretionary approach) doesn’t seem to be consistent with us looking at property law and property rights - uncertain
- Not clear whether the court’s are using this approach in practice
- Problem is implying something from the facts can in some cases be very difficult to distinguish from imputing the facts (cannot impute a common intention)
- Even the SC didn’t agree – 3 inferred an intention from the facts, 2 said it was impossible to infer an intention but reached the same conclusion as the majority on the basis of fairness
TWO main cases on what contributions are relevant factors which the court will take into account in the quantification of shares of the parties under a common intention constructive trust - showing the more flexible approach the courts take what are considered ‘financial contributions’
both sole legal owner cases -
- Grant v Edwards - balance of insurance moneys received after a fire were paid into a joint account and claimant had made substantial contributions to household expenditure - half share given.
- Midland Bank v Cooke - contribution made from a wedding gift was held to be a direct contribution from both of them so was enough to give rise to an implied bargain under a constructive trust. Took into account her working, raising the children, paid household bills and the fact that they were married into account as proof that they intended equal sharing.
Authority that contribution through manual labour used for the significant improvements to the property can be taken into account as a relevant factor for the court in the quantification of shares of the parties under a common intention constructive trust
Drake v Whipp [1996] - shows the courts flexible approach by taking into account more than financial contributions BUT rare case of barn conversion
TWO cases which show where the beneficial ownership is initially a joint tenancy and changes later, any financial contributions made up until the change of intention are completely irrelevant because there is an equitable joint tenancy (in terms of quantification of shares of the parties under a common intention constructive trust)
- Jones v Kernott -
Couple separated, he moved out. SC took the view that the interests of the parties crystallised at the moment of separation because from that moment Mr Kernott no longer contributed to the household costs so held that any increase in the value of the property after the separation should belong to miss jones –> his share was half of the value of the property at the time of separation - Barnes v Phillips -
couple separated. the court started with equal shares but then altered those shares taking into account financial considerations from the moment of the change of intention and then they decided what would be fair shares
- So the factors taken into account – re-mortgaged their property and Mr Barnes had received 25% of the value of the property pursuant to that mortgage, took into account the contribution of the parties to mortgage repayments and the contributions of the parties to the cost of raising their children.
- So even though they started with 50:50, Mrs Phillips ended up with 85% of the share of the property
Individual who suggested that mercenary considerations will be more to the fore in cohabitation cases rather than marriage – a couple that are married are more likely to intend to share everything than an unmarried couple
Also, suggested that those who put the property in their joint names would likely aim to share more than look at precise contributions
Baroness Hale in Stack v Dowden
Rare case of resulting trust in a family home
Springette v Defoe -
shows that it remains possible that the quantification of shares of the parties can be calculated mathematically
- Assumption was the parties went into this purchase and intended to keep those significant assets, not intending to make a gift to either party - Intended to get out what they put in.
Stack v Dowden comments when the legal title is in joint names compared to where the legal title is in the sole name of the owner
The court was clear there were a strong presumption if the title was in joint names, but were not explicitly clear if the reverse presumption was as strong if the title was a sole legal owner.
- As Dixon observes the decision can be all things to all judges.
- Baroness Hale identified various factors that should be taken into account when qualifying an interest, including organisation of finances and whether the couple had children.
