Real property – Beneficial interest – Constructive trust – Detrimental reliance – Appellant appealing against finding that she had no beneficial interest as equitable co-owner in property where she cohabited with respondent – Appeal allowed
In March 1999, the appellant’s father purchased a property at 53 Worsley Road, Farnworth, Bolton. It was vested in his sole name until March 2008, when he transferred the property for a nil consideration into the sole name of the respondent.
At that stage, the respondent was in a long-established relationship with the appellant. The property had been their home for more than seven years, and they had three young children living with them. However, in July 2012, the relationship between the appellant and the respondent came to an end when the appellant left the property with the children. The respondent continued to live there at all material times from July 2012 onwards.
In February 2016, the appellant brought proceedings seeking a declaration that the respondent held the beneficial interest in the property on trust for the two of them in equal shares.
The district judge found that the property was originally purchased to be a family home for the appellant. It had not been put into joint names because the respondent had wrongly told the appellant that she would not be able to get a mortgage. The circumstances were such as to give rise to a common intention constructive trust in favour of the appellant, and her beneficial interest in the property was 50%.
The respondent appealed successfully against that decision on the basis that the crucial ingredient of detrimental reliance by the appellant had neither been pleaded nor established by the district judge’s findings of fact. The appellant appealed.
Held: The appeal was allowed.
(1) Detrimental reliance remained an essential ingredient of a successful claim to a beneficial interest in a residential property under a common intention constructive trust, in the class of case where the legal estate was in the sole name of the other party. If the legal estate in a joint home was vested in only one of the parties, the other party, in order to establish a beneficial interest, had to establish a constructive trust by showing it would be inequitable for the legal owner to claim sole beneficial ownership. It had to be demonstrated that there was a common intention that both should have a beneficial interest; and that the claimant had acted to his or her detriment on the basis of that common intention: Gissing v Gissing [1971] AC 886 and Grant v Edwards [1986] Ch 638 followed.
(2) The starting point where there was sole legal ownership was that there was also sole beneficial ownership. The onus was on the person seeking to show that the beneficial ownership was different from the legal ownership to show that he had any interest at all: Stack v Dowden [2007] UKHL 17; [2007] 2 AC 432 followed.
In the present case, the mere fact that the appellant’s father, having purchased the property, intended it to be a family home for his daughter and her family could not, by itself, have given rise to a constructive trust in her favour. The district judge nowhere found that her father and the appellant shared a common intention that she was to take an immediate beneficial interest in the property, as opposed to occupying it rent-free as her family home, and even if her father had so intended, the appellant could not point to any detrimental reliance by her on the strength of such a common intention. For all practical purposes, she was fully protected while the property remained vested in her father’s sole name and she had continuing permission to occupy it. There might have been a general intention shared between father and daughter that he would at some future date transfer the property to her, or to her and the respondent jointly, either by lifetime gift or by will upon his death; but a generalised future intention of that nature could not begin to ground an immediate beneficial entitlement under a constructive trust: Stack v Dowden, Jones v Kernott [2011] UKSC 53; [2011] PLSCS 264; [2012] 1 AC 776 and Curran v Collins [2015] EWCA Civ 404, [2016] 1 FLR 505 followed.
(3) However, the judge had adopted too narrow a view of the district judge’s findings of fact, and he was also wrong to take the view that detrimental reliance had not been pleaded sufficiently or at all by the appellant. The appellant’s pleading was not inherently defective. Her claim could not have been struck out for failure to plead a sufficient detrimental reliance. She had pleaded sufficient facts to support her claim, and the case would have had to go to trial in order to see whether her claim succeeded.
Although the district judge did not accept the pleaded case of either party, the findings she made did not differ very much from the case which the appellant had originally pleaded. The original plan was that the property would be transferred into the joint names of herself and the respondent. However, the end result was that she had no legal interest in the property when the transfer took place. Viewed objectively, that was a position of clear detriment incurred by the appellant in reliance on the respondent’s misrepresentation that she would be unable to obtain a mortgage. Although the district judge did not accept the appellant’s pleaded case in full, the facts which she found were nevertheless sufficient to establish a broadly similar case which led to the conclusion that the respondent held the beneficial interest in the property on trust for himself and the appellant in equal shares.
(4) As the question of detriment had to be determined objectively, it was legitimately open to the court to examine the district judge’s findings of fact, and the documentary evidence relevant to the 2008 transaction, to form a view on whether, objectively, the appellant relied to her detriment on the assurances of the respondent and her father. The detrimental reliance lay in her agreement to the property being transferred into the sole name of the respondent, when the previous intention had been for a transfer into joint names, and the primary factor which caused the appellant to give her consent was the respondent’s false representation that (in effect) he would otherwise be unable to obtain a mortgage.
Simon Charles (instructed by Joe Egan Solicitors) appeared for the appellant; Leslie Blohm QC and Michael Horton (instructed by Direct Access) appeared for the respondent.
Eileen O’Grady, barrister
