Transcript Document

EQUITY AND TRUSTS
CONSTRUCTIVE TRUSTS
(2)
Circumstances giving rise
to CTs
Exhaustive categorisation not possible:
will examine some other of the
categories but the main focus in this
lecture is CTs of the
family home.
Mutual wills
CTs can arise from mutual wills. If two
or more agree to make wills and not to
revoke without mutual consent.
If first to die performs then it will be
unconscionable for second to deviate
from terms.
CT imposed on survivors property.
Proctor v Dale [1999] 4 All
ER
Held: not necessary for testators to agree to
leave property to each other.
Equity will impose trust on property of
survivor where each testator agrees to leave
property to third party.
Goodchild v Goodchild [1997] 3 All Er 63 for
mutual wills must be clear evidence intent not
to unilaterally revoke.
Wills and formalities
Formalities: s9 Wills Act 1837 a will
must be in writing signed by testator
and two witnesses in presence of
testator
If not will is void.
Wills – secret trusts
Take effect on testators death + do not
comply with requirements of Wills Act
Testator normally leaves property to
someone – prima facie an outright gift
But: donee has agreed to take on
certain trusts = fully secret trust
Half secret trust
Property left on trust in will but without
specifying terms trust
Why a secret trust?
Usually to keep identity of beneficiary
secret
or
testator undecided about dispositions
Subject to some conditions secret trusts
are enforceable despite not conforming
with Wills Act.
Secret Trusts
STs traditionally justified on basis of doctrine
of fraud
But: modern doctrine is that STs arise
independently of will
Are secret trusts express or CTs? Important in
case of land and s53(1)(b) LPA 1925 which
applies to express only.
CTs and crime – unlawful
killing
A person cannot benefit from their crime
If one person kills cannot take benefit
from will or through intestacy rules. If
killer acquire legal title to victim’s
property he will hold it on CT for people
next entitled.
Fraud
CT imposed where property gained
through fraud. See:
Rochefoucauld v Boustead [1897] 1 Ch
196
Bannister v Bannister [1948] 2 All ER
133
Binnions v Evans
Land
Contract to sell land is specifically
enforceable – vendor holds it on CT for
purchaser. CT arises through maxim:
“equity treats as done that which ought to be
done.”
Contract for sale of personal property not
generally enforceable unless unique see
Oughtred v IRC [1960] AC 206
Imperfect gifts
Substantive law relating to this dealt with in trustees’
lectures
In circumstances where failed transfer or gift as
declaration of trust no real declaration of trust – so if
settlor is to be treated as trustee then must equity
must impose a trust. See:
Re Rose
Mascall v Mascall
Pennington v Waine
in lecture on creation of express trusts
CTs of the family home
CTs of family home
Trusts can arise where dispute as to ownership
e.g. where property owned by one cohabitee and the
other claims interest through contribution to the
purchase price or improvements or payment of
domestic expenses
RT: when two people contribute to purchase legal
owner hoods it on RT in proportion to contribution
CT: if one does not make direct contribution to
purchase price – interest under a CT? or proprietary
estoppel?
CTs social context
Family home CTs arose out of married women
where property held in husbands sole name
Wife may claim under CT if direct contribution to
purchase
But if mortgage paid by husband then only
monetary contributions count. CT developed to
provide share. See Gissing v Gissing 1971 AC 886
and Pettit v Pettit 1970 AC 777 and also the
Matrimonial Causes Act 1973
Family home
MCA 1973 does not apply to unmarried
cohabitees so general law principles
apply + doctrines of CTs and RTs
Also important to married couples
where third party is claiming priority
interest e.g. mortgagee
RTs and family home
Claim under RT requires direct
contribution to purchase price at outset share is then proportionate
Contrib can be payment towards
mortgage instalment if agreed at outset
RTs – limitations
Limitations of RT clear – no contribution
to initial purchase price then useless.
Proportionate basis can also be unfair.
CT sometimes preferable. Not limited to
contributions to the purchase price or
share of entitlement
CTs – requirements
Two requirements for CT:
(i) common intention to share the
beneficial interest in property
(ii) acted to their detriment on basis of
that intention
Trusts of the family home
Lloyds Bank v Rosset [1991] 1 AC 107
Lord Bridge two situations:
(i) Agreement to share OR (ii) no such
agreement.
If no agreement then conduct is used to
infer common intention to share.
“Common intention” CTs
CT gives effect to common intention.
Can arise from (i) express agreement
OR (ii) inferred from conduct.
(i) express agreement
Agreement to share beneficial interest
required.
(i) express agreement
Agreement must be expressly
discussed.
(i) express agreement
• Bridge considered Eves v Eves [1975] 3
All ER 768 and Grant v Edwards [1986]
Ch 638 as outstanding examples of
category (i)
• In both cases female partner misled by
male partner
(i) express agreement
• In Grant v Edwards female partner told
by male: no joint names because she
was getting a divorce
• Norse LJ: facts raised inference of
common intention of female’s
proprietary interest
(i) express agreement
Hammond v Mitchell [1991] 1 WLR 1127
Hammond said he would have to put house in his
name because of tax problems – he had lost his
accounts in fire.
Hyett v Stanley [2003] All ER (D) 284 statement to
claimant that no need for her name on deeds
because it was on mortgage and would give her a
right to the property was a clear inference of
understanding to share.
Common intention
Common intention without more does not
give a CT. Is equal to express declaration of
trust but ineffective unless formalities of
53(1)(b) LPA 1925 have been complied with.
But does not apply to CTs see 53(2).
Claimant must have acted to their detriment
in reliance on common intention.
Detrimental reliance?
Difficult to know what detrimental reliance is.
Conduct is different from that for inference of
common intention.
Nothing short of direct contribution to
purchase price will give rise to such an
inference
Detriment not needed where express
agreement
Detrimental reliance
Rosset does not analyse the conduct needed to
give rise to a CT. Reference should be made to
Grant v Edwards as leading authority
Grant made substantial contributions to expenses
of household maintenance that enabled Edwards
to pay mortgage – thus detrimental reliance.
Type of conduct that is acting on common
intention? Uncertain.
Detrimental reliance
Norse LJ: behaviour that would be
unreasonable unless expected to have
interest in house
Mustill LJ: conduct to be used to determine
quid pro quo – if claimant provides this then
sufficient
Browne-Wilkinson VC: more liberal, any act of
detriment done by claimant relating to joint
lives is sufficient
Conduct as detrimental
reliance
Conduct that has been considered sufficient:
Grant v Edwards: substantial indirect contribs to
mortgage and bringing up children
Eves v Eves: labouring work
Hammond v Mitchell: unpaid business assistant as
well as looking after house and children
Stokes v Anderson [1991] 1 FLR 391 £12k to man
to pay ex-wife’s mortgage
Chan v Lun: giving up political career and helping
with property development projects
Contrast Rosset
But Mrs Rosset’s activities – painting ,
decorating, supervising builders
carrying out renovations, ordering,
delivering materials – so trifling as to be
de minimis.
No agreement to share
• Conduct becomes basis from which to
infer (i) common intention and (ii)
conduct to give rise to CT
• Usually nothing less than direct
contributions to purchase price
Trowbridge v Trowbridge
[2002] All ER (D) 207
Court found no discussions that Mr T to
have interest in house. As no
discussions possible inference from
conduct? Payment to purchase price or
by mortgage instalments. Common
intent arose from his mortgage
contributions
Contrast
Buggs v Buggs [2003] All ER (D) 379
claimant contributed to common pool
from which mortgage payment were
made. Judge decided no trust in her
favour – perverse and criticised.
Rosset
Rosset: house bought from family trust.
Property bought in Mr Rosset’s name.
Mr Rosset obtained £15 k loan from
Lloyds then defaulted. Possession
claimed by bank and Mrs R claimed
overriding beneficial interest 70(1)(g)
LRA 1925
Rosset
Mrs R claim that express agreement
that property would be jointly owned
rejected at first instance. But common
intention that Mrs should have beneficial
interest under CT. HL held activities
insufficient to justify inference.
Express agreement
Absence of express agreement not
necessarily fatal – court may still infer.
But only where conduct leads court to
infer this is what happened I.e. court
cannot infer simply if one would have
been reasonable had the parties
thought about it.
Direct contributions
Direct contributions to mortgage or
purchase price will readily lead the court
to infer an agreement was present.
See Burns v Burns [2004] EWCA Civ
1258 Gissing v Gissing decorating and
gardening work justified on basis of
making the homes more pleasant rather
than gaining a share of equity.
Rosset – indirect
contributions
Bridge: appears to rule out indirect
contributions as in Grant v Edwards
These were accepted in Burns as giving
rise to CT.
Rosset – indirect
contributions
Fox LJ: absent express agreement then
conduct is sued to infer common
intention – especially expenditure.
Court looks for expenditure related to
purchase of house e.g. making of
indirect contributions
Grant v Edwards – indirect
contributions
Norse LJ: expenditure referable to
purchase of house is necessary – duel
effect in establishing common intention
and detrimental reliance
Rosset - indirect
contributions
Does Bridge rule out such contributions?
Analysed Grant v Edwards female’s indirect
contributions to mortgage and Eves v Eves
where labouring done. Conduct was sufficient
because of express common intention. On its
own conduct was insufficient to base claim to
CT.
Le Foe v Le Foe HC concluded Bridge
had not intended to exclude wife’s
indirect contribution to mortgage. Court
entitled to infer from indirect contribs of
Mrs Le Foe parties intended she should
have beneficial interest.
Improvements
Are improvements - contributions of time and
labour enough to give rise to inference
necessary to found CT?
These can = detrimental reliance - see Eves
But unclear whether would fall into Bridge
second category (see earlier decisions Cooke
v Head [1974] 2 All ER 1124 and Hussey v
Palmer – but now apparently ruled out)
Rosset - criticisms
Confusion of second category with that
of RTs. Direct contributions traditionally
gives rise to RT but in Rosset is basis
for CT.
CT/RT confusion
CT/RT confusion problematic for
quantification. Midland Bank v Cooke
[1995] 4 All ER 562 CA held that where
direct contrib made – not an RT on
proportionate basis but would assess
contributions the parties could be
assumed to have intended by
undertaking a survey of whole course of
conduct relevant to ownership.
See also
Drake v Whipp [1996] 1 FLR 826: D made
direct contributions to the purchase and
claimed direct share under RT – CA found
a CT not RT as evidence of express
common intention to share – can employ
broad brush approach set out in Midland
Bank v Cooke. Here fair share was one
third.
Le Foe v Le Foe
Parties married 40 years. In husband’s sole
name. Wife made indirect contributions to
mortgage and cash contributions to second
mortgage and arrears on earlier mortgage.
Husband argued beneficial interest was 10%.
J applied Midland Bank v Cooke. From
whole course of dealing share should equal
50%.
RTs/CTs and Rosset
• Direct contribution can equal RT and a
proportionate share
• Under Rosset such a contribution can
give rise to CT or can be used to infer
necessary common intention
• Court not bound to apply RT formula but
can take account of whole range of
conduct as above
Quantification
Where express common intention to
share then shares equals what parties
agree e.g. Hammond v Mitchell
Quantification
Where there is no express agreement
then principles laid down in Gissing v
Gissing apply. Can an inference be
drawn from parties conduct of what
share was intended.
e.g. Grant v Edwards and Hyett v
Stanley
Quantification
e.g. half shares awarded in
Grant v Edwards and Hyett v Stanley
Quantification
Could be inferred that share was to be
quantified later having regard to total
contributions of whatever kind.
Court can then determine what in all the
circs is a fair share. Stokes v Anderson
Oxley v Hiscock [2004] EWCA Civ 546
Oxley v Hiscock
Court at first instance determined
shares on basis of intention to share
equally.
On appeal defendant argued that
shares should be proportionate on basis
of original contributions.
Oxley v Hiscock
CA held: each entitled to share
considered fair – in regard to whole
course of dealings – including
occasional expenses.
Accounting also for defendants greater
contribution fair share was 60/40.
Oxley v Hiscock
Where no discussion therefore each is
entitled to share court considers fair
after survey of whole course of dealing.
Chadwick LJ gave leading judgement –
followed Gissing. In absence of any
express agreement intention must have
been to agree this later on what was
agreed to be fair.
Quantification
• Under second limb of Rosset: CT as a result of
direct contribution to the purchase price then
starting point in quantifying shares is
proportionate entitlement.
• e.g. Springette v Defoe [1992] 2 FLR 388 RT
ordered after council house discount obtained.
See also Ashe v Mumford 33 HLR 756 and
Huntingford v Hobbs [1993] 1 FLR 736
Quantification
Where direct contribution court is not
bound to use proportionate basis.
Midland Bank v Cooke – wife made
contrib of £550 being half of wedding
gift to both parties. At first instance
awarded 6.5%.
Quantification
CA held: not bound to deal with
quantification on strict basis of cash
contrib. Could attribute intention to
share beneficial interest by survey of
whole course of dealing and take
account of all conduct relevant to issue
of hat shares were intended.
Quantification
Approach in Midland Bank v Cooke
applied applied in other cases
Oxley v Hiscock
CA in Oxley criticised approach of Waite
LJ in Midland Bank v Cooke that whole
course of dealing should be surveyed
Chadwick thought this artificial that
shares should be fixed as from time of
the acquisition when the evidence
suggests they gave no thought to the
matter.
Lloyds Bank v Rosset
Rosset: appeared to provide clear
statement but problems surrounding
quantification of beneficial interest –
especially where direct contribution is
made
Law Commission
•
•
•
•
Discussion paper: “Sharing Homes”
law is complicated, difficult to apply and
unsuited to informalities of home sharing.
Much depends on what court identifies as
common intention – unrealistic
No clear what contribs are sufficient
Quantifying shares extremely difficult –
decisions inconsistent
Uncertainty of law can lead to delay
Summary
Considered law of CTs in variety of situations:
Trustees or other fiduciaries becoming trustees of
unauthorised profit
Third party when in receipt of trust property
Common intention and the family home
Property received as a result of killing
Mutual wills
Specifically enforceable contracts
Imperfect gifts
Unifying factor – unconscionable conduct.