#15706 - Trusts Of The Family Home - Trusts and Equity

TRUSTS OF THE FAMILY HOME

Standard situation: A and B move in together, but the home is conveyed into the name of B alone. A and B live together and share living costs. Can A claim to own a share in the home?

• Not at law, if B is the sole name on the deeds / register.

• A has to claim in equity. A cannot claim under an express trust of land, unless it is evidenced in writing: s.53(1)(b) LPA 1925. However, s.53(2) says “resulting, constructive or implied trusts” can arise without writing.

EXPRESS TRUSTS

s.53(1)(b) LPA 1925: “a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust.”

An express trust must be evidenced in writing. The ET should also declare the nature of the beneficial interests and the terms of the trust.

Goodman v Gallant —if the conveyance of legal title declares the beneficial interests, that is conclusive (this only operates if C is a party to the conveyance):

Goodman v Gallant [1986]

• Facts: W and H had 50% each beneficial interest in the matrimonial home (H held legal title). They split. W and Mr. Gallant purchased H’s 50% share for 6,700 —W contributed to this fee. The purchaser’s declaration of trust stated they held the property as joint tenants. W and G split up and W sought to sever the joint tenancy. W claimed she should have a 75% interest (50% hers to start with, then 50% of the later contribution).

• Held: W was only entitled to 50% of the beneficial ownership —the express declaration of trust was conclusive to their ownership rights, the extent of contribution was irrelevant.

ss. 34 and 36 LPA: If there is no express declaration, then a statutory trust will be imposed when land is conveyed / transferred to two or more people.

RESULTING AND ‘COMMON INTENTON’ CONSTRUCTIVE TRUSTS

Ideally, people would sort out their property and financial arrangements formally before purchasing a house / moving in to their partner’s property. However, this does not always happen (most arrangements having been agreed informally / not discussed).

Where the relationship ends / mortgage lender tries to take possession of land following mortgage arrears, the courts must decide if the non-legal owner of the house has: (i) any right to the land; (ii) the extent of that right.

If there is no express / statutory trust, to claim a share in the beneficial interest in the land a non-legal owner will need to establish that there was always an intention that she should have such an interest. C may:

• Ask the Courts to declare him / her as the beneficiary under a RT or CT

• May try to establish a right in the land through PE.

Cases involve unmarried couples, where property, rather than family, law applies. A common problem is that the legal title is vested in just one of the contributing parties.

RESULTING TRUST

There are two principal categories: ‘presumed’ and ‘automatic’ RTs (following Vandervell):

• Automatic: arise where an express trust fails initially or subsequently. Property is then held by trustee for settlor.

• Presumed: arise where person voluntarily transfers property for no consideration in return, or contributes to the purchase of property in another’s name. Presumption is that the transfer was not intended as a gift.

Presumption of RT in land

If there is no other evidence of the parties’ intentions, a RT will arise when a person contributes towards the purchase price of land, but legal title is transferred into the name of another.

• The presumption is that the parties intend that the legal owner holds the land on trust for the benefit of the contributor, in accordance with the proportion given.

• Clear from s.53(2) LPA 1925 that an RT can arise in the absence of writing.

These are to undo cases of unjust enrichment. Where the transfer for no consideration is one of personality (e.g. money), a rebuttable presumption arises that the transferee holds on RT for the transferor. However, for land, s.60(3) LPA means that a voluntary conveyance of land takes effect as expressed, unless there is evidence of contrary intention —there is no presumption of RT simply because the conveyance isn’t expressly made for the benefit of the recipient.

• s.60(3) LPA: “a resulting trust for the grantor shall not be implied merely [because] the property is not expressed to be for the benefit of the grantee.”

• However, RTs still arise when the surrounding circumstances point to them.

Following Lady Hale’s comment in Stack v Dowden that the presumption of a RT is not a rule of law, RTs can be considered of decreased importance. As such, the application of the RT will likely be confined to the commercial context, with CICTs dealing with familial settings.

The operation of the presumption is seen in Dyer v Dyer [1788], where an RT arises when property is purchased by A in the name of B —B holds the property on trust for A (who paid the value): “The trust of a legal estate … whether taken in the names of the purchaser and others jointly, or in the names of others without that of the purchaser …, results to a man who advances the purchase money.”

• The law will generally be cautious of assuming gifts in cases of large sums, though the presumption can be defeated by evidence concerning whether the sum is intended as a gift.

It was confirmed in Hodgson v Marks: “if an attempted express trust fails, that seems to me just the occasion for implication of an RT, whether the failure be due to uncertainty, or perpetuity, or lack of form.” Makes clear RTs do not operate differently with respect to land.

Hodgson v Marks [1971]

• Facts: Mrs. H transfers freehold to her lodger, Mr Evans, for free. H orally tells E that she should still have benefit of the freehold (and she continued to live there), but nothing is put down in writing (oral express trust fails under s.53(1). E transfers the freehold to M, who is registered as the new owner and who mortgages the house.

• CA: found there was an RT in favour of H. She had an equitable proprietary interest as a result, which was capable of binding the bank’s charge.

MF: if this were about H’s bike, H could claim an express trust —she has transferred a right to E subject to a duty for E to use that right for H’s benefit; however, s.53(1) prevents an ET. B’s oral statement can nevertheless show B didn’t intend A to have the benefit of the freehold— therefore RT arises when E acquires title. Key: B can show she didn’t intend A to have benefit of the freehold.

RTs are based on intentions presumed to exist at the date of acquisition of the property concerned — i.e. intentions are those at the time title is obtained (Pettitt v Pettitt [1970]).

• This is difficult due to the modern practice of acquiring property via a mortgage —meaning the acquisition of the title is drawn out over a few years.

In cases where A and B both contribute money towards the purchase price in A’s name, the RT presumes beneficial ownership for each in proportion to their respective contributions.

• However, while direct contributions to the price of the house are clear, it seems that RTs do not extend to other kinds of contributions, which are left to CTs (Curley v Parkes).

A difficulty with both RTs and CTs is that a contribution cannot, in itself, be a source of rights —it needs additional factors, since it could be a gift, contractual payment, or other.

• Birks: payments are prima facie unjust unless they are justified on the basis of: (i) gift; (ii) contractual payment; (iii) other. Thus, there should be a general presumption, which can be disproved by evidence.

COMMON INTENTION CONSTRUCTIVE TRUSTS

Though much of the current case law fails to distinguish the issues, there are two stages: (i) existence of a constructive trust; (ii) distribution of benefit under the trust. Must also distinguish between sole owner and joint owner cases.

FIRST QUESTION: IS THERE A CONSTRUCTIVE TRUST?

It is clear from Lloyds Bank v Rosset that there are two distinct forms of common intention constructive trust —those founded on express agreement and those founded on inferred agreement.

• However, this split has been confined to sole owner cases by Stack v Dowden which makes it clear that conveyance into joint names itself established a CICT (joint owners).

Sole owner: express agreement

In these cases, there is an express agreement that the land should be co-owned, plus some act by C to her detriment or some significant alteration of her position due to reliance on the agreement. The following case illustrates the elements of a CICT:

Lloyds Bank v Rosset [1991]

• Facts: Mr. R bought a semi-derelict farmhouse with money from his family’s Swiss trust fund, the trustees of which insisted that only his name should appear as registered proprietor. For six months, Mrs. R supervised the renovation and decorated the house (although Mr. R funded these projects). In possession proceedings brought by a mortgagee, Mrs. R claimed she had an equitable interest under an informal trust.

• HL: Mrs. R’s claim failed: (i) there was no express agreement; (ii) no such agreement could be inferred as Mrs. R’s contribution had not been financial. Lord Bridge laid out the test:

Lord Bridge: test for an express agreement CICT: Two elements

1. Agreement / arrangement / understanding to share benefit

• “Whether … there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially.

• To establish this, need “evidence of express discussions between the...