#1939 - Etherton - Land Law

Etherton [2008] CLJ 265

The difference between the institutional and the remedial constructive trust

• Etherton: term constructive trust in institutional sense = a relationship that is similar to an express trust in terms of obligations and enforcement

  • The court’s function is merely declaratory of existing private rights

    • So the constructive trust is a property institution, capable of binding third parties

      • And not an equitable obligation or remedy imposed by the court

  • By contrast, a remedial constructive trust has features of judicial discretion and retrospectivity

    • Thus, if the court feels tha other propeprietary and personal remedies are inadequate, it has the discretion to grant relief by way of a constructive trust

      • And this will be deemed to have arisen at the time when the duty to make restution first arose rather than when the duty is enforced.

• Lord Millet ex judicially:

  • Only two situations where proprietary restituionary remedies are available

    • 1. Where C can establish a continuing beneficial interest in the asset to which he claims

      • i.e. on arising normally under a resulting trust

    • 2. Where the original transfer is rescinded

      • And specific restitution of the asset is ordered b/c monetary compensation would not be an adequate remedy.

So what is the point of a common intention constructive trust?

• Etherton: For traditionalist, there is only one answer –

  • It is an institutional trust giving rise to property rights which pre-date the judgement

    • And the judgement of the court is therefore merely declaratory

    • At best the facts might give rise to proprietary estoppel

      • But we’re not talking relief for unjust enrichment here

  • Reason that constructive trust used rather than proprietary estoppel is that estoppel must be registered in order to bind purchasers

    • Whereas constructive trust gets around this, giving effect to the property claims of a spouse who had neither legal title nor entitlement under and express trust.

• In Gissing v Gissing

  • Lord Reid: There is a difference between imputing and inferring an agreement

    • If there is no evidence of any agreement, then the court cannot infer on

    • But it does not exclude an imputation of deemed intention if the law permits such an imputation

      • Then I am content if the law permits imputation.

  • Lord Morris (maj): The court cannot ascribe intentions which the parties never in fact had.

  • Viscount Dilhorne (maj): If a common intention is absent the law does not permit the courts to ascribe an intention to the parties they in fact never had

    • And to hold that property is subject to a trust on the ground that this would be fair in the circumstances

  • Lord Diplock:

    • Intentions of the parties should be drawn from those of a reasonable man observing their words and conduct

      • Family home often bought with a mortgage on credit – therefore the relevant transaction ought not be restricted to the original conveyance

        • Words and conduct relevant while mortgage is still outstanding

    • Equally, quantification need not be decided at the original transaction

      • But could be left to determination once mortgage discharged, based on what was fair having regard to the total contributions

        • Direct and indirect

          • The wife had made by that date.

• Oxley v Hiscock

  • Chadwick LJ:

    • In the absence of any express evidence of intention

      • Each party is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property

        • Including arrangements for outgogings e.g. mortgage, council tax, repairs, unstance, housekeeping

          • Which have to be met if they are to live in the property as their home.

• Stack v Dowden

  • Etherton: concerned with the second stage (quantification), not the first as this was already decided

    • However two points of interest:

      • No need for detrimental reliance on an actual (express or inferred) agreement

        • Moi: not necessarily conclusive though – there was no actual agreement, so they were dealing with inferred agreements and also quantification, not beneficial interests.

      • Lord Walker reckoned Lord Bridge in Rosset was too restrictive in thinking that nothing less than contributions to the purchase price or mortgage will get you on the chain

        • Abbot v Abbot confirms this view

          • Moi: again, not entirely sure about this one – the gift and the mortgage repayments by C had something to do with this.

      • Anyway, equity follows the law, and there is a rebuttable presumption that the parties want their equitable interests to follow their legal interests.

  • Etherton: Majority in Stack decided that there is no distinction between actual, inferred and imputed intention

    • Appear to be following Lord Reid in Gissing

      • As it is impossible to disagree with Lord Neuberger that there is a clear difference between imputed and inferred intentions

      • Moi: not sure Lord Walker understood this, Baroness Hale was not clear on what she felt.

        • Baroness Hale also qualified Oxley and made it clear that the yardstick of fairness was not appropriate....

  • Etherton: decision in Stack was due to undue enrichment

    • There was an enrichment of Mr Stack at the expense of Ms Dowden since he was joint owner of the property but she contributed more than half the purchase price

      • The key to the decision is the intimacy of the relationship between he two parties and Mr Stack acting unconscionably.

      • Thus, this means that if the presumption that the parties wish their beneficial interests to follow their legal interests is rebutted

        • Then the court will consider the contributions of both parties, direct and indirect, to ascertain the extent to which D was unjustly enriched if C was limited to a joint beneficial interest

          • Thus the Stack trust is not an institutional trust but a discretionary remedy trust

            • And also under s.116 + actual occupation gives an overriding interest over purchasers.

  • Etherton: shows that common intention constructive trusts and proprietary estoppel are separate concepts

    • Cos...