Posts Tagged ‘constructive trust’

The family home. Types of constructive trust. The end of detrimental reliance?

August 22, 2020

Archibald v Alexander: the facts

In Archibald v Alexander ([2020] EWHC 1621) a mother and her three children (Patsy, Brenda and John) orally agreed that a house would be purchased in the name of the mother and one of the siblings. It was to be held on trust for the mother for life and then for the three children equally.

This was for tax-planning reasons and to protect the property from any claim by the mother’s husband should she re-marry. The assumption was that there was no need to take excessive care to formalise the trust given the loving family context.

The property was transferred to the mother and Patsy as joint tenants, neither Brenda nor John was available to attend the solicitor’s office at the time of the purchase.

When the mother died, there was a dispute as to whether Patsy was the sole owner of the property or held it on the terms of the oral trust.

Was there reliance?

If this was a common intention constructive trust, then Brenda and John needed to show detrimental reliance. Fancourt J. held that there was reliance: ‘the non-signing siblings were self-evidently relying on the word and promise of those who did become owners’ ([14]).

Was there detriment?

Given the finding of reliance, the detriment was the decision of Brenda and John not to take steps to legally protect their ownership interest in the house; this was a sufficient change of position ([30]).

Not a common intention constructive trust?

The findings on detrimental reliance were obiter:

‘the instant case is of a different kind, in which a property is transferred (gratuitously) into the name of the owner on the basis of their express agreement to hold the property on trust for another. The owner only obtains the property on the terms of the agreement and equity does not permit them unconscionably to refuse to give effect to the terms. The trust arises from the terms on which the property was transferred, not from detrimental reliance on the agreement by the beneficiary.’ ([32]).

The essential elements of this constructive trust are: ‘property had been transferred to a volunteer on the basis of his promise to hold it on certain terms, and would not otherwise have been so transferred’ ([37]).

Fancourt J. referred to Rochefoucauld v BousteadBannister v Bannister and De Bruyne v De Bruyne.

There is no need to establish detrimental reliance for constructive trusts like this.

Michael Lower

 

Proprietary estoppel: co-habitees

April 13, 2016

In Liden v Burton ([2016] EWCA Civ 275) B and L co-habited in B’s home for twelve years until they broke up in 2013. B’s home was mortgaged and he was concerned that he would not be able to keep up with the mortgage payments. He asked L to contribute and she made monthly payments to him of GBP 500. She asked him to explain how this was made up and he agreed that GBP 200 of this was ‘towards the house.’ The sum of  these payments ‘towards the house’ came to GBP 28,500.  L made the payments because of her reliance on the relationship (that he would look after her forever) and because of the later assurance that the payment was ‘towards the house’ which she reasonably understood to mean that she was to have an interest in the house. At first instance, the judge found that the elements of proprietary estoppel were present. B held the house on trust under the terms of which the first GBP 32,500  (GBP 28,000 plus interest) of the equity was held on trust for L. The English Court of Appeal (Hamblen LJ giving the main  judgment) upheld the first instance decision.

The assurances about the the long-term nature of the relationship and that the house would be their joint home were confirmed by the assurance that the payments were ‘towards the house’ ([28] – [30]). There was clear reliance and the GBP 200 payments were detriment. ‘The combination of reliance and detriment leads to and justifies the conclusion of unconscionability’ ([32]). The judge had a discretion as to how to satisfy the equity and it could not be said that the trust securing the repayment of the contributions with interest was more than the minimum required to do justice.

Michael Lower

Contractual licence coupled with an equity

October 25, 2010

In Binions v Evans ([1972] Ch 359 CA (Eng)) an employer had granted an employee’s widow a right to live in a cottage for the rest of her life. They sold the cottage ‘subject to’ the agreement with the widow. The purchasers, Mr and Mrs Binions, then tried to evict the widow. Lord Denning MR held that the purchasers who had notice of the agreement and may have paid a reduced price because of it, held the property on constructive trust for the widow. They could not evict her. The other judges in the Court of Appeal reached the same result but employed different reasoning. Lord Denning’s approach would amount to an exception to the rule that licences do not bind third parties.

Michael Lower