#3113 - Implied Trusts Of The Home - GDL Equity and Trusts

Introduction

- Disputes over shared home implied trusts relevant.

• disputes when beneficial ownership not clear:

  • 1. property in names of both parties but no declaration of beneficial interests; or

  • 2. property in name of 1 party only, but other party claims beneficial interest.

• situations giving rise to claims:

  • breakdown of relationship.

  • 3^rd party claims: mortgagee seeking to enforce security; bankruptcy trustee wishes to claim home to meet bankrupt’s debts.

• divorce/dissolution of civil partnership: statutory powers to reallocate property rights.

  • Matrimonial Causes Act 1973: married couples.

  • Civil Partnership Act 2004: civil partnerships – registered same sex civil partners.

• but many situations not covered by statute trust principles apply.

  • trust principles apply to:

    • 1. unmarried heterosexual couples.

    • 2. claim by third party: e.g. mortgagee.

- Starting point: equity follows the law – Stack v Dowden [2007, HoL]; Kernott v Jones [2011, SC].

• joint legal owners 50%

  • UNLESS: 1. different shares intended (Stack v Dowden) – v. unusual; 2. common intention changes (Kernott v Jones).

• non-legal owner 0%

  • UNLESS: claims share under implied trust.

- Express declaration of trust conclusive: Pettitt v Pettitt [1970] ([Ld Upjohn]) – but problematic:

• unrealistic: most people do not take precautions.

• must comply with s53(1)(b) LPA 1925: evidenced in writing.

  • vs. s53(2) LPA: implied trusts exempt – Gissing v Gissing [1970] ([Ld Diplock]).

Issue 1: Establishing an Interest (where legal ownership in 1 name only).

- Claim by non-legal owner: must be based on existence of trust – [Ld Diplock] (in Gissing v Gissing).

• implied trust: some situations where inequitable for legal owner to claim full beneficial ownership – needed to overcome s53(1)(b) LPA 1925 formalities.

Resulting Trust: original method – very certain, but inflexible.

- Contribution to original purchase price of property: traditional purchase money RT.

• rationale: presumed intention of contributing party (equity presumes bargain).

• interest in proportion to contribution: generally set at date of acquisition.

• Bull v Bull [1955]: mother contributed to purchase of house in son’s sole name; both lived there; son tried to evict mother CoA: [Ld Denning]: RT – son + mother equitable tenants in common.

- Contribution to mortgage: more problematic only RT if made/agreed at time of purchase?

• taking out mortgage: regarded as contribution to purchase price (share attrib. to mortgage).

  • Cowcher v Cowcher [1972]: at purchase: Mrs C paid 1/3 purchase price, Mr C took on mortgage for 2/3 value; later: Mrs C paid some mortgage instalments Mrs C’s interest still 1/3: fixed at time of original RT (acquisition).

• BUT: later mortgage repayments disregarded: RT established on acquisition.

  • Cowcher v Cowcher: wife’s later payments disregarded.

  • Curley v Parkes [2004]: RT only if payments made at time of acquisition.

  • Samad v Thompson [2008]: later mortgage payments give rise to CT, not RT (even though agreed from beginning that non-legal owner would make repayments).

    • Close Invoice Finance Ltd v Abaowa [2010]: applied.

• but Tinsey v Milligan: later mortgage payments might be considered if anticipated from outset.

- N.B. RT not suitable for family homes: too inflexible/unfair – Kernott v Jones.

• CT more suitable: [Baroness Hale] in Stack v Dowden + Abbott v Abbott [2007].

• exception: home bought as investment – Laskar v Laskar [2008]: RT still used.

Constructive Trust

- CT based on common intention of parties – Lloyds Bank v Rosset [1991]: [Ld Bridge]: 2 types.

• 1. express: based on ev. of express discussions between parties.

• 2. inferred: from conduct.

- Express Common Intention Constructive Trusts (ECICT) – Lloyds Bank v Rosset: [Ld Bridge]:

• 1. agreement about sharing ownership: ‘ev. of express discussions between the partners’.

• 2. detrimental reliance: ‘acted to his/her detriment or significantly altered his/her position in reliance’

- Express agreement re: ownership (not merely right to reside/shared benefit of living together).

• timing: generally before or at time of purchase – Lloyds Bank v Rosset.

  • but exceptionally, later (if followed by DR) – Clough v Killey [1996].

• must relate to ownership: not merely sharing benefit of living together – objective view:

  • application – NOT about sharing ownership:

    • Lloyds v Rosset: ‘let’s share a family home’.

    • James v Thomas [2007]: ‘for the benefit of both of us’.

    • Walsh v Singh [2009]: ‘your financial future is secure’ just ‘fluff’.

    • Thompson v Humphrey [2009]: ‘you and the children will be looked after’.

  • application – about sharing ownership:

    • Clough v Killey: ‘everything’s 50:50’.

    • Hammond v Mitchell [1991]: ‘half yours’.

    • excuses for not sharing ownership – objective view: can indicate intention to share ownership.

      • Eves v Eves [1975]: ‘you’re too young’.

      • Grant v Edwards [1986]: ‘it will prejudice your divorce’.

        • [Nourse LJ]: raises clear inference of common intention that plaintiff was to have proprietary interest – otherwise excuse not needed.

- Detrimental reliance: conduct referable to belief in ownership.

• definition:

  • material contribution/sacrifice facilitating acquisition – [Ld Diplock] in Gissing v Gissing.

  • conduct otherwise inexplicable except for ownership – [Nourse LJ] in Grant v Edwards.

    • (but cf. dubious judgment of [Browne-Wilkinson VC]: any form of material contribution).

    • (+ Law Commission: take into account c.’s gender – but dubious).

  • need not be great, dep. on facts of each case – [Geoffrey Vos QC] in Levi v Levi [2008].

• must take place after agreement – Clough v Killey.

• conduct should be explicable only by belief in ownership: substantial / out of ordinary.

  • application – NOT sufficient DR: could be in lieu of rent / personal reasons.

    • Lloyds v Rosset: decorating [Ld Bridge]: de minimis + expected of wife.

    • Lalani v Crump Holdings Ltd [2007]: paying for furniture + running expenses could be in lieu of rent.

    • Thompson v Humphrey [2009]: ‘traditional wife’ role – leaving part-time job + caring for partner’s mother could merely show expectation of being looked after + love.

  • application – sufficient DR: conduct that is otherwise inexplicable.

    • Eves v Eves [2008]: heavy DIY (inc. demolishing concrete blocks).

    • Clough v Killey: paying for renovations.

    • Grant v Edwards [2008]: substantial expenses (therefore allowing partner to pay mortgage).

• DR does not need to have been agreed/anticipated – Parris v Williams [2008].

- inferred Common Intention Constructive Trusts (ICICT) – Lloyds Bank v Rosset.

• no express agreement: courts can infer agreement from conduct.

  • [Ld Diplock] (Gissing v Gissing): intention which was reasonably

• needed: direct contribution to acquisition of property.

- Strict approach: direct contribution to purchase price needed – Lloyds Bank v Rosset: [Ld Bridge]:

• direct contribution: initially or by mortgage instalments.

• “extremely doubtful” that anything less would do.

• must be referable to shared understanding that paying party would have equitable interest: if not, ICICT does not automatically arise (e.g. Lightfoot v Lightfoot-Brown [2005]).

- Wider approach: whole course of conduct between parties, inc indirect contributions – Stack v Dowden.

• Stack v Dowden: [Baroness Hale] + [Ld Walker] obiter: [Ld Bridge] set bar too high.

• Abbott v Abbott [2007, PC]: [Baroness Hale] obiter: consider whole course of conduct.

  • factors: contributions, discussions, relationship, outgoings, personalities, children, finances.

• indirect mortgage contribution: payments allowing other party to pay mortgage should count.

  • Burns v Burns [1984]: [Fox LJ]: indirect contributions may be referable to acquisition if wife:

    • a. pays part of purchase price;

    • b. contributes regularly to mortgage instalments;

    • c. pays off part of mortgage;

    • d. makes substantial financial contribution to family expenses so as to allow mortgage instalments to be paid.

    • (but obiter: on facts, wife’s contribution paid for services she used, esp. phone).

  • Le Foe v Le Foe [2001]: h. paid mortgage, w. paid expenses arbitrary division: w’s contribution referable to acquisition (but obiter).

• BUT: courts recently shying away from flexible approach stricter judgments.

  • recent CoA cases: James v Thomas [2007]; Morris v Morris [2008]: conduct will suffice only in ‘exceptional circumstances’ – on facts, conduct not sufficient.

    • but N.B.: both cases – ownership interest before relationship more flexible in different context?

  • Walsh v Singh: c’s indirect contributions referable merely to long-standing committed relationship.

- Indirect contributions: unlikely to give rise to ICICT.

• improvements to the home:

  • Pettitt v Pettitt [1970]: husband laid out garden, put up wall, redecorated.

  • Thomas v Fuller-Brown [1988]: man carried out substantial work (inc. extension) CoA: not referable to acquisition, but in return for rent-free accommodation (+enjoyment: liked DIY).

  • but: Stack v Downden obiter: substantial improvements adding significant value interest.

• general work around the home:

  • Lloyds v Rosset: redecoration by wife ‘almost de minimis’.

  • Walsh v Singh: woman supervised/helped with renovation referable to wish to live in property, not ownership.

• household expenses:

  • Gissing v Gissing [1971]: husband left telling wife house was hers wife’s claim failed: no common intention at time of acquisition + no contributions to acquisition.

  • but: Burns v Burns: [Fox LJ]: if allows other party to make mortgage payments indirectly referable to acquisition.

• raising the family

  • Burns v Burns: raising...