In Hudson v Hathway [2022] EWHC 631 (QB); [2022] PLSCS 53, the High Court has provided some welcome clarification on whether detrimental reliance is a necessary ingredient in establishing a common intention constructive trust in joint names cohabitee cases.
The appellant and respondent were an unmarried couple who had two children. They purchased their family home in joint names. There was no express declaration of trust as to how the beneficial shares in the family home would be owned. The parties initially paid the mortgage on the property jointly, but over time the majority of the mortgage was discharged by the appellant until the parties separated. From 2015 the respondent assumed payment of the interest-only mortgage.
Following the end of the parties’ relationship, the respondent remained living in the family home with their two children. The appellant and respondent subsequently reached “a deal” in respect of their financial separation. The appellant was to retain sole ownership of his shares and a pension. The respondent would sell the family home, but would acquire it contents, the totality of the equity in the family home plus savings and income from endowment policies.
Owing to delays in the respondent selling the family home, the appellant issued a claim seeking an order for sale of the former family home under the Trusts of Land and Appointment of Trustees Act 1996.
Although at trial it was found that the parties had reached a deal, it was held that it did not satisfy the formalities for transferring the legal title or creating a declaration of trust. Changes to the beneficial ownership could only arise by way of a constructive trust or proprietary estoppel. The respondent argued that she was entitled to the whole proceeds of sale under a constructive trust following the common intention and agreement in reliance of which she had acted to her detriment, although she was not required to establish detrimental reliance. The trial judge found that a common intention trust had arisen and that it was necessary for the respondent to establish that she had acted to her detriment. On the facts of the case, the trial judge found that the respondent had arguably done so in relinquishing any claim she had to assets in his sole name.
The High Court overturned the finding of the trial judge below that detrimental reliance was a necessary ingredient in establishing a common intention constructive trust in joint names cohabitee cases. Relying on Jones v Kernott [2011] PLSCS 264; [2012] 1 AC 776 and Stack v Dowden [2007] 2 AC 432, the High Court observed that it was “striking” that no mention was made of detrimental reliance in the principles that were applicable to cases of this nature. A constructive trust could be established by whatever evidence was necessary to show that it would be unconscionable for the party denying the equitable interest to do so.
Elizabeth Dwomoh is a barrister at Lamb Chambers
