Posts Tagged ‘inferred intention’

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

When do improvement works confer a proprietary interest?

February 9, 2011

In the absence of express agreement between the parties (or perhaps an estoppel), carrying out improvement works to the property of another does not give rise to a proprietary interest in the property. This is especially so where the works are ephemeral or relatively small in value.

Pettitt v Pettitt ([1970] AC 777, HL) has to be seen as part of a broader effort to establish the legal and equitable principles to be applied when deciding on the beneficial entitlements of spouses (or co-habiting couples) in the family home. In particular, it should be read together with Gissing v Gissing ([1971] AC 886, HL), Lloyds Bank plc v Rosset ([1991] 1 AC 107, HL) and later authorities in the same line. In Pettitt v Pettitt the matrimonial home had been paid for by the wife and title was in her name. When the marriage broke up, the husband claimed a beneficial interest by virtue of improvement works that he had carried out. The House of Lords was unanimous in concluding that he had no beneficial interest in the home. At least one of them (Lord Reid) would have allowed a claim had the works been more substantial.

Lord Upjohn embarked on a systematic effort to explain the legal and equitable principles that apply in this area. First, one should look for express agreement on the question of beneficial ownership. An express declaration as to legal and beneficial ownership is conclusive in the absence of fraud or mistake. If there is no express agreement as to beneficial ownership then parol evidence can be admitted or it may be possible to infer what the parties had agreed from their subsequent conduct. If the matter is still not settled then an intelligent application of the presumptions that the equitable title follows the legal title, of resulting trust and advancement might help. Lord Upjohn thought that spending money on someone else’s property did not confer any kind of proprietary interest in it but might give rise to a claim for monetary compensation.

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