Trusts of the Family Home 10/01/2014 5:42 PM

Equitable mechanisms for determining interests in property

(a) express trust

(b) the resulting trust

(c) the remedial constructive trust

(d) the institutional constructive trust

(e) the common intention constructive trust (most significant to

the family home)

(f) proprietary estoppel

Common Intention Constructive Trust

Issues stemming from the breakdown of unmarried couples relationships

as identified by Lord Collins in Jones v Kernott [2011];

- couples rarely make arrangements about their respective shares in the

property

- inflation of house prices causes difficulties when dividing the proceeds of

sale

Requirements for a common intention trust

Lord Bridge outlined the requirements in Lloyds Bank plc v Rossett

[1991];

- has there, prior to the acquisition (or exceptionally at some later point)

been any agreement, arrangement or understanding reached between the

parties that the property is to be shared beneficially.

- once such an agreement has been established, the claimant must show

that they acted to their detriment or significantly altered their position in

reliance on the agreement

if both of these requirements are met, it gives rise to a constructive trust

or proprietary estoppel

examples of such a situation;

Eves v Eves [1975]

The male partner told the female that the only reason the property would

be registered in his name alone was because she was under 21. In

evidence the male partner admitted that this was just an excuse. The

court held that there was an agreement between the parties that the

property would be shared beneficially.

Grant v Edwards [1986]

The male partner told the female partner that the only reason the

property would be registered in his name alone was because at the time

she was involved in divorce proceedings and that if the property were

acquired jointly this might operate to her prejudice in those proceedings.

The court held that these facts raise a clear inference or common

intention that the plaintiff was to have some proprietary interest in the

house.

in cases where there is no arrangement to share the property beneficially,

the courts will look at conduct between the parties, from which to infer a

common intention to share the property beneficially.

Lord bridge in Lloyd Bank plc v Rossett, held that anything other than

direct contribution to the purchase price or payment of mortgage

instalments would not justify the interference necessary to the creation of

a constructive trust.

This was criticised in Stack v Dowden [2007], as it did not take into

consideration other non-financial contributions such as the running of the

home.

In Oxley v Hiscock [2004], the court took the approach that the extent of

the claimants beneficial interest in the property would be determined by

what the courts though was fair in light of the whole course of dealing

between the parties.

In Oxley, Chadwick LJ held that mortgage contributions, council tax and

utilities, repairs, insurance and housekeeping were all considered when

determining a claimants beneficial interest in the property.

Problem Question 10/01/2014 5:42 PM

Jim and Raven, a happy couple, decide to purchase a flat and move in

together. Raven’s mother decides that she would like to give Raven a

contribution to the purchase price of the house as a gift, because Raven

has been such a dutiful daughter all of her life, and as a postgraduate

student in Art History, has poor job prospects. She gives Raven £50,000 to

purchase a £250,000 flat, the remainder of which is raised by way of

mortgage.

Jim has few savings, and wants to use them in six months’ time to buy a

new surfboard for himself (his second love after Raven).

They purchase a small flat in Hackney and Raven’s mother insists that

Raven be sole title-holder in the event that the relationship breaks down.

Jim agrees because he has full confidence that this won’t happen.

Jim writes self-help books for a living and Raven works as a part-time

teaching assistant in her Department. They agree that they will contribute

equally to the mortgage payments and the bills.

Three years go by…

Jim’s books have really taken off and he is a minor celebrity on the new

age self-help scene. Raven has given birth to their first child and is

struggling to finish her dissertation. They decide to move into another flat

as they now need more space. They sell their flat for £400,000, Hackney

having become a fashionable locale for media types.

There was still £150,000 remaining on the mortgage, and after this is paid

off they use the remainder to purchase a 3-bedroom flat worth £600,000

in the same area. This time around, Jim insists on being on title too, and

that they be joint-title holders. Raven agrees.

Jim’s book tours take him away from the family home for long stretches

at a time, and while in the U.S., he strikes up a relationship with someone

else, unbeknownst to Raven.

For the next 5 years, he spends half his time in the U.S., and then for

another six years, doesn’t return at all. During these six years, he doesn’t

contribute to any of the mortgage or bill payments, and doesn’t even have

much contact with their child.

Raven, now an emerging authority in the field of 1970s Japanese film

aesthetics, meets Paul, a dentist, and wants to marry him. She also

decides to sell the house so that she can buy a house with Paul in the

leafy suburb of Richmond.

Jim returns, wanting to re-unite with Raven and their child, and if that is

not possible, to claim 50% of the proceeds of the sale of the house.

Advise Jim and Raven

Advise

Jim and Raven hold the property as joint-title holders. There beneficial

interests in the property have not been allocated expressly in writing,

therefore there is no express trust.

Where there is no beneficial interest, it is to be presumed that the

beneficial interest in the property mirrors the legal interest.

In Stack v Dowden, Lord Neuberger held that where property is

registered in the names of both parties, it is to be assumed that their

beneficial interests are to be divided equally. In Jones v Kernott this was

described as the default option, however in Stack v Dowden, Lady Hale

made the point that this presumption is rebuttable. She stated;

“in joint ownership cases, it is upon the joint owner who claims to have

other than a joint beneficial interest [to show that the beneficial

ownership is different from the legal ownership]”

Therefore is either Jim or Raven is unhappy with the presumption that

their beneficial interests are to be divided equally, the onus is upon them

to prove otherwise.

Rebutting the presumptions

In Stack v Dowden, Lady Hale made the point;

“the law has indeed moved on in response to changing social and

economic conditions. The search is to ascertain the parties’ shared

intentions, actual, inferred or imputed, with respect to the property in the

light of their whole course of conduct in relation to it”

She went on to identify a number of factors which were considered

significant when determining whether the presumption has been rebutted.

These included;

(a) any advise or discussions at the time of the transfer which cast light on

their intentions.

(b) the reason why the house was bought in their joint names

(c) the purpose for which the house was acquired

(d) the nature of the parties relationship

(e) whether they had children for whom they both had responsibility to

provide a home

(f) how the purchase was financed (both initially and finally)

(g) how the parties arranged their finances

(h) how they discharged the outgoings on the property and other

household expenses.

Express common intention

Express understanding or agreement to the apportionment of the

beneficial interest in the property.

this will rebut the relevant presumption, but it does not have the relevant

formalities to create an enforceable express trust.

this express common intention will be established on the facts, not on

consideration of the factors outlined by Lady Hale.

Inferred common intention

Inferred intent is actual intent which can be deduced objectively from the

parties conduct.

The factors outlined by Lady Hale will be of particular importance when

looking for inferred common intention.

Imputed common intention

Imputed common intention was defined by Lord Neuberger in Stack v

Dowden;

“an imputed intention is one which is attributed to the parties, even

though no such actual intention can be deduced from their actions and

statements, and even though they had no such intention. Imputation

involves concluding what the parties would have intended”

We can see that Jim and Raven had no express common intention,

therefore we must look at either their inferred or imputed common

intention in order to rebut the presumption that their beneficial interest is

to be divided equally.

Following criticism of the imputed common intention by Lord Neuberger

in Stack v Dowden, Lady Hale and Lord Walker reconsidered the

principles underlying the common intention constructive trust in Jones v

Kernott, and found two exceptions in which the imputed common

intention could apply;

(a) resulting trusts (not common in the domestic context – unless partners

are also business partner)

(b) cases where it is clear that the beneficial interests are to be shared,

but it is impossible to divine a common intention as to the proportions in

which they must be divided.

They stated;

[if the court] “cannot deduce exactly what shares were intended, it may

have no alternative but to ask what their intentions as reasonable and just

people would have been had they thought about it at the time”

Lord Collins added that where imputation of an intention is required, the

court must consider what is fair having regard to the whole course of

dealing in respect of the property (note Lady Hales factors listed above)

Jim and Ravens case may fall into exception (b) should we be unable to

infer how they wished their beneficial share in the property to be divided.

Where the common intention of the parties changes over time, this is

known as ambulatory intention. Ambulatory intention is difficult to prove,

and therefore compelling evidence is required before one can infer that.

In Jones v Kernott, the prolonged separation of the parties was considered

sufficiently compelling to infer ambulatory intention

Inference v Imputation 10/01/2014 5:42 PM

A legitimate inference may not correspond to an individuals subjective

state of mind.

Lord Diplock in Gissing v Gissing [1971];

“the relevant intention of each party is the intention which was reasonably

understood by the other party to be manifested from by that party’s

words or conduct, notwithstanding that he did not consciously formulate

that intention in his own mind”

Nick Piska in ‘Intention, Fairness and the Presumption of Resulting Trust

after Stack v Dowden’ [2008];

“subjective intentions can never be accessed directly, so the court must

always direct itself to a consideration of the parties’ objective intentions

through a careful consideration of the relevant facts. […] Finding …

subjective intention can only be made on an objective basis”

In Jones v Kernott the court held that where imputation of an intention is

required, the court must consider what is fair having regard to the whole

course of dealing in respect of the property.

Trusts and the Family Home 10/01/2014 5:42 PM

Pettit v Pettit [1970] AC 777

Gissing v Gissing [1971] AC 886

Goodman v Gallant [1986] 1 FLR 513

Lloyd’s Bank v Rosset [1991] AC 107

Hammond v Mitchell [1991] 1 W.L.R. 1127

Springette v Defoe [1992] 24 H.L.R. 552

Huntingford v Hobbs [1992] 24 H.L.R. 652

Midland Bank v Cooke [1995] 4 All ER 562

Oxley v Hiscock [2004] EWCA Civ 546

Stack v Dowden [2007] UKHL 17

Fowler v Barron [2008] EWCA Civ 377

Jones v Kernott [2011] UKSC 53

Geary v Rankine [2012] EWCA Civ 555

Gardner and Davidson, “The Future of Stack v Dowden” (2011) 127 LQR 13 10/01/2014 5:42 PM