Topic 5 - The Common Intention Constructive Trust Flashcards
Background of CICT
o At law there is only a joint tenancy of land
o Law of Property Act 1925, ss34,36
o In Equity there can be a tenancy in common, and thus defined percentage shares of ownership
o Creating these trusts requires signed writing – Law of Property Act 1925, s53(1)(b)
o Positive effect of formalities in equity:
1. Evidence: Avoid fraud, arguments over evidence
2. Caution: Check against hasty or rash action
3. Channelling: Signalling the arrangements
o Negative effects of formalities
1. Parties are held to their strict legal rights – upon severance of the joint tenancy, each co-owner takes an equal share
SLO – one person takes all value and other left with nothing
JLO – Each person takes half
o CICT attempts to deal with this unfairness
Origins of the CICT
o Judges has no power to reallocate property on divorce until 1973
o Matrimonial Causes Act 1973
o Pettitt v Pettitt
o Can plead CICT – judge then as the power to adjust property interests
o Gissing v Gissing
o Failed on the facts, but established in principle:
There can be a CT over the family home, in effect adjusting the property interests
o 1973 Act only applied to divorce, the CICT was then mainly used for unmarried couples
The New Model Constructive Trust
o Appleton v Appleton
o What is reasonable and fair in the circumstances as they have developed, seeing that they are circumstances which no one contemplated for?
o Previously Pettitt and Gissing would impose trust as to what parties intended but Appleton introduces new test as to what is fair and reasonable in the circumstances
o Hussey v Palmer
o CICT is a trust imposed by law whenever justice and good conscience require it (gives very broad meaning to CICT
o Burns v Burns
o Attempt to rein in Denning’s approach in Hussey
o ‘Lord Denning … was wrong’
o Stack v Dowden
o ‘it does not enable the court to abandon [the principles of property law] in favour of the result which the court itself considers fair
Lloyd’s Bank v Rosset: Detrimental Reliance
o Lloyd’s Bank v Rosset
o Was a single legal owner case
o Concerned that CICT was being applied far too readily so took this opportunity to narrow it
o To get CICT there must be:
1. At any time prior to the acquisition, or at some later day
a) An express agreement that the property is to be shared beneficially
b) Detrimental reliance (doing something differently on account of moving in, changing one’s behaviour to one’s detriment or consequence)
2. Direct contributions to the purchase price, whether initially or by mortgage payments
o FACTS:
o Semi-derelict house. House put in Mr Rosset’s name – secured finance by taking up a mortgage. Mrs Rosset did not contribute financially. After marriage broke up Mr Rosset moved out and did not continue to pay mortgage so bank moved in and repossessed house.
o If Mrs Rosset had right under a trust, and this came before the mortgage, she would have priority over the bank. Issue was whether Mrs Rosset had a share – she claimed a ½ share.
o HofL noted that trial judge found Rossets had not decided that Mrs Rosset should have any share of family home – failed on common intention limb.
o What about detrimental reliance? – for a while she obtained building material and assisted with renovation of home. Trial judge noted she had some skill over and above that of most housewives – she was skilled painter and decorator and had good ideas. HofL thought joint venture to renovate a house by itself did not amount to an implied agreement to share ownership. Thought what he did was not out of the ordinary – it was the normal behaviour of any partner, they spend time contributing to the partnership. Therefore there was no detrimental reliance. Bank gets possession, evicts Mrs Rosset, sells land to pay back Mr Rosset’s debts
Application of Lloyd’s Bank v Rosset
o Eves v Eves
Heavy physical labour (and reliance on a lie)
Janet Eves separated from husband and met Stewart Eves whose marriage had also broken down. Started to live together in a home bought only in Stewart’s name and financed by sale of former house and by a mortgage that he obtained. Janet never married him, only changed her name to match his. Stewart told Janet that they could not be joint owners as she was under 21 but he agreed to share the house regardless of the formalities. This was not actually a legal restriction of Janet being owner under 21, it was just an excuse so Stewart could keep full ownership of the house.
House in poor condition and both of them renovated it – physical work. Janet did not contribute any money so could only rely on detrimental reliance argument. Lord Denning found common intention to share – Stewart should be held to what he told Janet, not what he secretly thought. As for detrimental reliance, he found it difficult to suppose Janet was doing the physical labour except for the implied agreement that she had an interest in the family home – was awarded a ¼ share of the family home for her efforts in renovation
o Grant v Edwards
Reliance on a lie and indirect contributions
Linda Grant began relationship with George Edwards and had a son. They moved into small house. George’s excuse that they could not put Linda’s name on title because it would cause difficulties with her divorce – this was nonsense.
Purchase money provided entirely by George. Linda made indirect contribution e.g. paying bills. Both of them did not have a lot of money and without Linda paying household bills, George would not have been able to afford mortgage. George had no intention of Linda sharing the home and wanted it all for himself.
Court looked at Eves v Eves and decided it did not matter what George thought, they would hold him to what he said – agreeing to share home. Objectively, an outsider would have looked and inferred there was a true intention to share. As to detrimental reliance, payment of household bills was necessary and so Linda was awarded a ½ share of family home
o Geary v Rankine
It must be a common intention
Guesthouse business owned by Mr Rankine. Romantic partner Mrs Geary did not hold a part of the business. Relationship came to end and she claimed for a share of business.
Court said no – Mr Rankine never promised Mrs Geary anything. It was not enough that she thought she should have an interest in the building, it must be a common intention that can be deduced from express discussions.
o Thomson v Humphrey
The detriment must be real and in reliance
Roy Humphrey and partner Thompson. She had not contributed to purchase price and he had no intention of passing interest to his girlfriend. Got her to sign agreement confirming she had no interest in the house. All he did was promise to look after her.
There was no detrimental reliance – judge noted that her giving up work to move in was not detrimental as it was part time with no prospects. Also, it was not due to moving in with Mr Humphrey that she had to give up work so no detrimental reliance.
What Thompson did was carry out usual tasks of a partner who is not working to keep the family home going. Giving up the job was not detrimental to her owning a share but only that she would be looked after – decided she had no share of property
o James v Thomas
Vague assurances e.g. I will take care of you was not detrimental reliance
o Ungurian v Lesnoff
Must be convincing
Renovation work in house and Mrs L’s solicitor had read law reports. When giving evidence, Mrs L gave graphic image of wielding a pickaxe – in reality the judge doubted she actually used it. Must make it convincing to the judge of how you contributed to the house
o Culliford v Thorpe
Substantial building work
Unmarried gay couple. Claim brought by Thorpe’s representatives as he was dead at time. C was ill and reducing his working hours. Came up with plan to develop two properties in building – live in upper flat and rent out lower one. Judge inferred an agreement to share from the plan alone – did not require express discussions.
C said ‘what’s mine is yours and yours is mine’ – this is agreement to share generally rather than share property.
Reliance was building work – T had experience in building and did most of the work removing carpets, radiators etc and painting. This was sufficient for the judge and a 50/50 CICT was obtained
o Cooke v Head (No 1)
Descent into gender stereotypes?
Woman did unusual amount of work for a woman e.g. using sledge hammer, hard labour
Infers only partners who do beyond household tasks would have defence of detrimental reliance – could this test stand in the modern age when household tasks are split more 50/50?
Quantification
o Proportion of ownership reflects proportion of contribution to purchase price
Springette v Defoe
* CICT originally founded on rule of purchase money resulting trust
o Courts developed more flexible approach
Midland Bank v Cooke
* Mr and Mrs Cooke were married. Trying to get CICT in Mrs Cooke’s name to defeat Bank’s claim for possession. Bank could only get Mr Cooke’s share since the mortgage was in his name. Family home bought in Mr C’s name using mortgage.
* Mrs C’s contribution was very small towards maintenance of home (6.74%). Court originally inferred Mrs C only had beneficial interest of 6.47%.
* However CofA took flexible approach to quantification and weighed up wider facts in relation to purchase. Mrs C went onto part time work having previously been a teacher. Her earnings paid household bills. When Mr C took out second mortgage, she undertook joint liability to pay it back. Court saw this as evidence of an equal partnership and determined Mrs C’s share to be ½ despite express discussions.
o Discretionary approach
Oxley v Hiscock
* Court would make an award on what they thought was fair in relation to the property
* Is this basically a return to the New Model Constructive Trust?
The emergence of two stages
- Acquisition stage – getting a trust of some sort in the first place (Rosset for SLO and Stack v Dowden for JLO)
- Quantification stage – Determining proportions each party owns (more flexible – Stack v Dowden later took over this stage)
Stack v Dowden
o This was a Joint Legal Owner case
o FACTS:
Stack and Dowden purchased house in joint names. Did not declare a trust, took joint tenancy in law and equity. 65% Dowden 35% Stack contribution to purchase price.
Stack was working, claiming no benefits and keeping no records of tax returns. Dowden was electrical engineer. Kept finances apart – separate savings and investments accounts.
Stack made application for sale of house and was granted. Issue came when it was time to calculate proportions of sale that should be divided between Stack and Dowden.
Stack presumption – beneficial shares in equity are presumed to be the same as those in law. If claimant is to get different outcome under CICT, the presumption must be rebutted with evidence there was a common intention to share in some other proportion.
As Oxley – look at whole course of dealing in relation to the property.
However in Stack, Lady Hale held we should prescribe property rights as to what is fair and presumption would only be rebutted in exceptional circumstances. Para 92 Stack judgment. Dowden got her 65%.
Dissent given by Neuberger and for him the starting point was presumption that share reflect proportion of money put in. Could still rebut this with common intention to share otherwise. On facts he came to same result as he followed 65%/35% split of money.
Difference is where we cannot determine parties common intention where Hale and Neuberger’s approach produce different outcomes – Hale would result in 50/50 split whereas Neuberger would result in contribution to purchase price.
Stack v Dowden - Lady Hale’s factors to consider when inferring common intention
- Any advice or discussions at the time of the transfer which cast light upon their intentions then;
- The reasons why the home was acquired in their joint names;
- The reasons why (if it be the case) the survivor was authorised to give a receipt for 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 separately or together or a bit of both;
- How they discharged the outgoings on the property and their other household expenses.
Academic commentary on Lady Hale’s Stack v Dowden judgment
o Nick Piška
Baroness Hale’s background in family law and her ideas of family property clearly influenced how she constructed intention in Stack.
[H]er list of factors … suggest that an intention to share will depend on whether the parties’ relationship indicates a shared life … this was not a case of a “real domestic partnership”
Mr Stack appears as a lazy free-loader, uninterested in his children, unconcerned with family responsibilities, and undertaking no financial responsibilities … Ms Dowden, on the other hand, is portrayed as a hard-working, successful and independent woman … working extremely hard [and] her earnings massively outstripped Mr Stack’s
Hale, … some time ago, considered that a discretionary approach similar to that under the Matrimonial Causes Act 1973 ought to govern all family home disputes
o Graham-York v York
The courts are not deciding what is fair, just and reasonable, instead they are sticking to property law and the property goes where the owners intended it to go
Jones v Kernott
o Loose ends by Stack came back to the court of appeal
1. Whether CICT takes into account changes to the common intention of parties over time
Jones decided YES – the intention can change over time
2. What kinds of intention were permitted at each stage?
Actual/Subjective intention
* this is the starting point
Inferred intention
* objectively deduced to be the subjective actual intention of the parties, in light of their actions and statements
Imputed intention
* Attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention (something the parties never thought of)
In Jones it was decided that:
* At the acquisition stage: actual or inferred intention is required (to displace the Stack presumption)
* AT the quantification stage: actual, inferred or imputed intention is required (to determine the shares)
o FACTS
Jones and Kernott cohabited in house purchased in their joint name. Did not declare express trust so the starting point is joint tenancy in both law and equity. Jones contributed £6,000 to purchase price of £30,000. Balance coming from joint mortgage. Looks equal initially. However later Kernott moved out and Jones remained in place and paid mortgage. Hard now to say it was an equal partnership in terms of relationship and proportions of money put in (by now Jones had put in 90% of the money).
Issue was whether CICT responds to changes in intention? – YES Their common intention was to be referrable to their contributions. Objective intention inferred from what the parties intended to do – deduce from words and actions of the parties. What is fair just and reasonable in the circumstances – imputed intention.
Majority of Supreme Court thought that imputed intention was not permitted and need to look at inferred intention. At acquisition stage have to objectively infer intention.
Where do Stack and Jones apply?
o Stack and Jones apply to the quantification stage for both SLO and JLO cases
o Difficulty with Rosset test is requirement for detrimental reliance – this requirement was absent from Stack and Jones
o Hard to say Stack and Jones overruled Rosset as it was made in obiter and from a lower court
* Abbott v Abbott
o Lady Hale: ‘The law has indeed moved on since Rossett, where detrimental reliance and express discussion were required’
Expansion of the field/Commercial CICTs
o Laskar v Laskar
o Mother and daughter bought investment flat. When selling and dividing proceeds, Lord Neuberger distinguished these facts from usual CICT as it was a commercial arrangement.
o Justifications for imposing a CICT – shared life together, pooling assets did not apply so the resulting trust method of quantification applied instead.
o Adekunle v Ritchie
o shared ownership between mother and son.
o Principles of CICT were applied as this was a place for them to live in so the conditions for CICT were satisfied even if romantic relationship was not there
o Crossco No 4 Unlimited v Jolan
o CICT can be applied to a commercial enterprise
o However on these facts there was no common intention so not the correct case to award a CICT
o Gallarotti v Sebastianelli
o CICT applied to flatmates
o Flatmates bought flat in London after renting for a while for companionship rather than romantic. 86% to Gallarotti and 14% Sebastianelli. In Gallarotti’s sole name and did not declare an express trust.
o At first instance court thought CICT was appropriate and should be 50/50. CofA disagreed and appropriate way would be to reflect proportion of money put in as intention to be 50/50 had changed since Gallarotti was contributing far more. Change in common intention
o Marr v Collie
o Rejected Laskar for small scale investments
o In romantic cohabiting relationship in Bahamas. Purchased several properties as investments. Marr provided purchase money and Collie did renovation, maintenance etc as he was a builder.
o On breakup of relationship, Marr applied for declaration that everything was on trust for him as he provided the purchase money.
o CICT would have favoured Collie more due to his contributions.
o Court said Stack only applies for purely domestic cases and Laskar was not authority. They applied CICT as in fully domestic cases, parties had not thought about relationship. There is no reason to doubt possible applicability of CICT in personal and commercial commitment, so Laskar did not apply.
Against expansion of the CICT
o Etherton LJ in Crossco No 4
The CICT was created to respond to the absence of legislation to adjust property rights for romantic couples
Romantic couples did not usually take advice or make formal agreements, instead there was a relationship of interdependency and cooperation
This is not the case in the commercial context
o Anne Barlow
Romantic couples tend to keep their arrangements informal and have ‘optimism bias’
Resurgence of Rosset and return of detrimental reliance - single legal owner cases
o Since Rosset was the only SLO case heard at the highest level means detrimental reliance is STILL required; a mere common intention to share is not enough
o Curran v Collins
Man bought house in his name and told girlfriend that cost of life insurance policies would be much higher if they put house in joint names. There was no express agreement that they were to share beneficial ownership. Arden LJ modified Rosset test and held that Miss Curran had to prove 1. she reasonably believed common intention was to share and 2. she relied on it to her detriment
o O’Neill v Holland
CofA endorsed Curran v Collins
Still need detrimental reliance
Stack and Jones has not removed this requirement, they were concerned with quantification
o Culliford v Thorpe
Reaffirmed need for detrimental reliance
Readier to imply the agreement to share nowadays – the fact it was an informal agreement does not mean it was not intended to be relied
