Archive for the ‘Whole course of dealing’ Category

Jones v Kernott in the Supreme Court

November 11, 2011

In England (where co-ownership of land gives rise to a statutory trust), when a co-habiting couple buy a family home in joint names but do not declare the nature of the co-ownership there is a presumption of a beneficial joint tenancy (thus, equal shares following severance (Stack v Dowden)). The presumption can be departed from if there is evidence to show either that they had a different common intention at the time of acquisition or that they subsequently reached a different common intention. The common intention is to be deduced objectively from the parties’ conduct (‘the whole course of dealing’). If (a) it is clear that the parties formed a different common intention either at the time of acquisition or subsequently, and (b) it is not possible to find an express or inferred agreeement (common intention) then the parties are entitled to the ‘share which the court considers just having regard to the whole course of dealing between them in relation to the property.’

In Jones v Kernott ([2011] UKSC 53, SC)  K and J cohabited and had two children together. K abandoned J in 1993. J then met all mortgage and other payments concerning the family home and got very little financial help from K. In 2007 J sought a declaration that she was the sole beneficial owner of the family home. She accepted that in 1993 at the time of the separation, K was entitled to a one half beneficial interest in the property. She contended that the events of the next 14 years (the fact that she made all payments) showed that in the light of the whole course of conduct, the parties’ intentions had changed so that J’s share had increased at the expense of K. K succeeded at first instance and the court found that she had a 90% beneficial interest. This was reversed in the English Court of Appeal (see Kernott v Jones). J’s appeal to the Supreme Court was successful and the first instance decision was restored.

While all of their Lordships concurred in the result, there are differences between them (for example as to whether or not the distinction between inferred and imputed intentions has practical significance). It seems clear that the imputed intention has been given a place in this area of the law.

Lord Walker and Lady Hale gave a joint judgment. They relied on the finding at first instance that there was evidence of an actual change in the parties’ intentions. They summarised the law thus: when a co-habiting couple buy a family home in joint names but do not declare the nature of the co-ownership there is a presumption of a beneficial joint tenancy (thus, equal shares following severance (Stack v Dowden)). The presumption can be departed from if there is evidence to show either that they had a different common intention at the time of acquisition or that they subsequently reached a different common intention. The common intention is to be deduced objectively from the parties’ conduct (‘the whole course of dealing’). If (a) it is clear that the parties formed a different common intention either at the time of acquisition or subsequently, and (b) it is not possible to find an express or inferred agreeement (common intention) then the parties are entitled to the ‘share which the court considers just having regard to the whole course of dealing between them in relation to the property.’ (para. 51)

The court engaged in quantifying the beneficial interests is primarily seeking the parties’ actual shared intentions:

‘However, there are at least two exceptions. The first, which is not this case, is where the classic resulting trust presumption applies. Indeed, this would be rare in a domestic context, but might perhaps arise where domestic partners were also business partners: see Stack v Dowden, para 32. The second, which for reasons which will appear later is in our view also not this case but will arise much more frequently, is where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared. In those two situations, the court is driven to impute an intention to the parties which they may never have had.’ ([31])

Michael Lower

Joint name case: quantifying the beneficial interest by reference to the whole course of conduct

November 1, 2011

Hapeshi v Allnatt ([2010] EWHC 392) concerned a dispute as to the ownership of property bought in the joint names of a mother and her son M. There was an agreement that another son, K, was to have a beneficial interest in the property (para. 42). There had been no express agreement that the mother, M and K would hold as beneficial joint tenants. Although there was an express agreement that the mother and M were to hold as beneficial joint tenants, the judge thought that the mother (who spoke no English) had not understood the idea and that the property was actually held by them as tenants in common (para. 47). The mother and M died and the court had to decide how the beneficial ownership was to be divided between K and the estates of the mother and M. The judge referred to Stack and, based on an assessment of the whole course of conduct, decided that the mother’s estate was entitled to 50% of the equity, and that K and M’s estate were each entitled to 25% of the equity. Megarry & Wade’s explanation of the current law as to when a common intention constructive trust can arise (Megarry & Wade (2008) para. 11-025) was quoted with apparent approval (para. 18). This passage suggests that a common intention constructive trust can be inferred from the parties’ whole course of conduct. The finding at para. 42 seems to mean, however, that (in relation to the primary question as to the existence of a constructive trust) there was no need to rely on the whole course of conduct in the present case.

Michael Lower

Whole course of dealing: the focus is not on financial contributions

June 1, 2011

In Stack v Dowden the House of Lords held that where property is in joint names there is a presumption of  a beneficial joint tenancy so that the parties are equally beneficially entitled to it on severance. This presumption is only rebutted in unusual cases where there is evidence to show that the parties’ common intention was that ownership should be shared in some other way. When considering whether the presumption has been rebutted, the Court can look at the whole course of dealings between the parties. The Court is not limited to examining the parties’ respective financial contributions to the purchase of the property.

In Fowler v Barron ([2008] EWCA Civ 377, CA (Eng)) an unmarried couple cohabited for over twenty years and had two children. Then they separated. The family home was in joint names but there was no declaration of trust. Mr B had paid all of the initial purchase price. He had paid the mortgage instalments and all other expenses directly related to the property. Ms F had paid for clothes, school trips and so on. Mr B claimed to be the sole beneficial owner of the property. The Court of Appeal found that the parties were equally beneficially entitled to it. The fact that the title was in joint names created a presumption that this was so. There was nothing in the whole course of dealings between the parties to rebut the presumption. The fact that Mr B had made all of the direct payments for the purchase did not rebut the presumption. The parties had treated their income and assets as a single pool (para. 46)

Quantifying the beneficial interest under a constructive trust focuses on intention

April 29, 2011

When quantifying a beneficial interest under a common intention constructive trust the Court seeks the intention of the parties. When this has not been expressed, the court can take a holistic approach and look at the whole course of conduct between the parties to see what light it sheds on the matter.

In Holman v Howes ([2007] EWCA Civ 877 CA (Eng)) a couple bought property. They had been married and were divorced at the time of the acquisition. They were attempting a reconciliation. Title to the property was in the man’s name (the defendant). They had each contributed and the Court accepted his evidence to the effect that the intention had been that the property was jointly owned. The dispute was as to how the parties’ respective shares should be quantified. The English Court of Appeal applied the approach of Baroness Hale in paragraphs 69 and 70 of Stack v Dowden. It had to determine what the parties’ intentions had been. It could look at the whole course of dealings between them.  The Court decided that their intention had been that they would share equally in the beneficial ownership of the property.

The defendant had assured the claimant that she would be secure in her enjoyment of the property for as long as she wanted. The Court of Appeal held that this gave rise to an estoppel given that she had detrimentally relied on it. There would be no order for sale without her consent.

Michael Lower

Quantifying the beneficial interest: Constructive v resulting trust

April 28, 2011

Once the Court has found that there is a common intention constructive trust, the Court can find that the parties’ intentions as to quantum can best be discovered by looking at the whole course of dealings between them.

In Drake v Whipp ((1996) 28 H.L.R. 53, CA (Eng)) an unmarried couple bought a barn as their family home. Each contributed financially to the purchase price and to the much larger cost of converting the barn into a home. They also devoted substantial amounts of personal time and labour to the work. Each took care of certain household bills. Title to the property was in the male defendant’s name. It had been found at first instance that there was a common intention that each would have a beneficial interest. The Court of Appeal took the view that this meant that the relationship should be thought of in terms of constructive rather than resulting trust. It held that in this case the beneficial interests should be quantified by looking at the entire course of conduct between the parties. The plaintiff was awarded a one third share (which exceeded what she would have received under a resulting trust approach).

Michael Lower

Liberalising the constructive trust

April 26, 2011

In the absence of express agreement, a constructive trust can arise when the whole course of dealing between the parties indicates a common intention that property is to be held on constructive trust.

Abbott v Abbott ([2007] UKPC 53, PC) is an enormously important Privy Council decision in the area of the common intention constructive trust. Legal title to property was in the name of the husband. The husband conceded that the wife’s earnings should all be treated as a contribution to mortgage payments. That would be enough on an orthodox understanding to give rise to a constructive trust. As suggested by the English Court of Appeal in Oxley v Hiscock the Court could (in the absence of express agreement as to how beneficial ownership was to be shared) look at the whole course of dealing between the parties to quantify their respective beneficial interests; the Court need not take a resulting trust approach to this question. The significance of Abbott lies in the statement that the whole course of conduct could be relevant to the question of whether or not there was a constructive trust at all. It suggests that there could be a constructive trust even when there has been neither express agreement nor a contribution to mortgage payments. It might still appear from the whole course of the dealings between the parties that each was to have a beneficial interest under a constructive trust (para. 19). This is, however, obiter in the light of the husband’s concession that the wife had made a contribution to mortgage payments. The key passage is slightly ambiguous since it could be interpreted as an uncontroversial statement that the whole course of dealings is relevant to the question of quantum. It seems, however, that Baroness Hale intended to say that the whole course of dealings might be relevant too to the question as to whether or not there is a constructive trust (see the final sentence in para. 3). As Baroness Hale points out a number of factors were present that would justify a finding of a constructive trust in any event: the property had been a gift from the husband’s mother and it was strongly arguable that she had intended  a gift to them both and the wife had contributed to the mortgage payments. If the whole course of dealing approach is taken then other facts in the case assumed significance. The husband accepted that she had a beneficial interest and that the property was family property. The wife had taken on joint and several liability for the loan and part of the lender’s security was a charge over a life policy in respect of the wife.

Michael Lower

Constructive trust and proprietary estoppel: how specific must the assurance be?

April 16, 2011

It is possible for a common intention constructive trust to arise after the property has been acquired and this can be inferred from express agreement or conduct. It needs to be clear, though, that such a common intention has been formed. Contributions made in the absence of such a common intention count for nothing. Proprietary estoppel, too, depends on an assurance that some kind of interest in property will pass (though, clearly, that interest need not be quantified).

In James v Thomas ([2007] EWCA Civ 1212 CA (Eng)) Mr Thomas owned a property. He met Ms James and they cohabited. The property was their family home for many years. Ms James made financial contributions to mortgage instalments and did heavy building work both at the home and as an employee / partner in Mr James construction business. Mr Thomas refused to agree to Ms James’ suggestions that he sell the house and buy another joint home. He assured Ms James that her efforts would benefit them both, He told her that she would be provided for.

The English Court of Appeal held that there was no evidence of a common intention that Ms James should have any proprietary interest in the house. The undeniable fact that she made very significant contributions did not, therefore, result in her having any beneficial interest under a constructive trust. Mr Thomas’ assurances did not amount to an assurance that she would have any interest in the property. So the proprietary estoppel claim failed too.

Michael Lower

‘Ambulatory’ constructive trust v post-acquisition agreement

April 11, 2011

There might be a common intention constructive trust where the parties have agreed that the precise apportionment of their respective beneficial interests is to be settled at some future date by reference to the course of dealings between them. This is not the same as the case where the parties have agreed on some particular apportionment and then, post-acquisition, agree to change this apportionment. Strong evidence will be needed of any such post-acquisition agreement.

In Chan Chui Mee v Mak Chi Choi ([2008] HKEC 1572) title to property was in the name of a husband. he had told his wife that it was to be ‘family property’. This was found to be evidence of an agreement that beneficial ownership was to be equally divided between them. The wife made some contributions to the mortgage payments and this provided the necessary reliance.

Speaking obiter Johnson Lam J said that strong evidence would be needed as to a post-acquisition agreement that someone was to have a beneficial interest in property or that the apportionment of beneficial ownership was to be altered. He also suggested that a post-acquisition variation of beneficial entitlements would not bind third parties. Thus, imagine that  A and B had been equally beneficially entitled and then (post-acquisition) they agreed that B was to have a 75% beneficial entitlement. This amounts to a disposal of 25% by A to B. As far as that 25% is concerned the interest of B would rank behind any interest acquired before the agreement concerning the change.

It would be otherwise if the parties had from the outset agreed that there was to be a constructive trust but that the precise beneficial entitlements would be calculated later by reference to the whole course of dealings. Here the priority date for the whole ‘ambulatory’ entitlement would be the date when the constructive trust arose.

Michael Lower

Common intention constructive trust again

February 11, 2011

Where title to property is in the name of A and B claims a beneficial interest under a common intention constructive trust then there must either be express agreement coupled with an appropriate form of detrimental reliance or (if there is no express agreement) then there must be direct contributions to payment of the purchase price (either at the time of acquisition or by paying mortgage installments).

In Lloyds Bank plc v Rosset ([1991] 1 AC 107, HL) a husband bought property to be the matrimonial home. He provided the purchase price. He borrowed money from the bank to fund renovation works. The wife made no contribution to the purchase price or to the mortgage installments. The marriage broke down. The husband did not keep up with the mortgage repayments and the bank sought to enforce the mortgage. The wife claimed that she had a beneficial interest under a common intention constructive trust. The claim failed because there was no evidence of an express agreement that she should have a share. So even if there had been detrimental reliance by her there would still be no constructive trust. In any event, she had not done enough to show detrimental reliance.

Lord Bridge of Harwich emphasised that where title to property is in the name of A and B claims a beneficial interest under a common intention constructive trust then there must either be express agreement coupled with an appropriate form of detrimental reliance or (if there is no express agreement) then there must be direct contributions to payment of the purchase price (either at the time of acquisition or by paying mortgage installments). The express agreement must usually have been reached before the date of acquisition of the property.

Michael Lower

Proprietary estoppel, constructive trust and co-habiting couples

November 3, 2010

The courts have often been asked to look at cases where property has been bought by an unmarried co-habiting couple to act as their family home. Where the property is bought in the name of just one of them then equity might still decide that the other has a beneficial or equitable entitlement under either a resulting or constructive trust. In constructive trust cases, there is a need to decide on the size of the parties’ respective beneficial entitlements. It is now established that in the absence of an express agreement between them on this issue then the court has regard to the whole course of conduct during the relationship. On what legal / conceptual foundations is this approach supported?

In Oxley v Hiscock [2005] Fam. 211 CA (Eng) Chadwick LJ reviewed the answers to this question that had been given in earlier cases.  One possible explanation is that:

‘the court treats what has taken place while the parties have been living together in the property as evidence of what they intended at the time of the acquisition.’ (at 247).

The problem with this is that in these cases the evidence is that no agreement had been reached at all.

The alternative is that:

‘The court makes such order as the circumstances require in order to give effect to the beneficial interest in the property of the one party, the existence of which the other party (having the legal title) is estopped from denying.’ (at 247)

This is a proprietary estoppel approach. Chadwick LJ did not reach a conclusion as to which explanation was to be preferred but he said:

‘But, as I have said, I think that the time has come to accept that there is no difference in outcome, in cases of this nature, whether the true analysis lies in constructive trust or in proprietary estoppel.’ (at 247)

Proprietary estoppel does indeed seem to be one thread or approach that runs through cases like this.

Michael Lower