Claim for possession — Parties contributing to purchase of property — Property registered in sole name of appellant/plaintiff — Purpose of registration to assist in fraud — Defendant/respondent remaining in occupation — Plaintiff seeking possession — Court of Appeal holding by a majority that property held on trust in equal shares — Whether passing of property defeated by illegality — Whether difference in legal and equitable principles — Appeal dismissed by majority
The parties lived together in a property which they ran as a lodging house. The purchase price had been provided by a mortgage loan from the bank and money which both parties provided. It was agreed between them that the title should be taken in the sole name of the appellant in order to facilitate making false claims upon the DSS by the respondent. The parties disagreed and the appellant moved out. She subsequently claimed possession of the property and the respondent counterclaimed for a declaration that the appellant held the property on trust for both of them in equal shares. The county court found for the defendant on the counterclaim and the Court of Appeal, by a majority, dismissed the appellant’s appeal. The issue in all the courts revolved around the illegal purpose of taking the title of the house in the name of the appellant alone.
Held The appeal was dismissed, Lord Goff and Lord Keith dissenting.
1. Per Lord Jauncey: The ultimate question in the appeal was whether the respondent, in claiming the existence of a resulting trust in her favour, was seeking to enforce unperformed provisions of an unlawful transaction or whether she was simply relying on an equitable proprietary interest that she had already acquired under such a transaction.
2. The transaction whereby the claimed resulting trust in favour of the respondent was created was the agreement between the parties that, although the funds were provided by both of them, nevertheless the title to the house was to be in the sole name of the appellant for the unlawful purpose of defrauding the DSS.
3. So long as that agreement remained unperformed neither party could have enforced it against the other. However, as soon as the agreement was implemented by the sale to the appellant alone she became trustee for the respondent who could now rely on the equitable proprietary interest which had thereby been presumed to have been created in her favour and there was no need for her to rely on the illegal transaction which had led to its creation.
4. Per Lord Browne-Wilkinson: To draw a distinction between property rights enforceable at law and those which required the intervention of equity would be surprising. More than 100 years had elapsed since law and equity had fused. The reality of the matter was that, in 1993, English law had one single law of property made up of legal and equitable interests. Although they had differing incidents, the person owning either type of estate had a right of property, a right in rem, not merely a right in personam. If the common law was that a party was entitled to enforce a property right acquired under an illegal transaction, the same rule ought to apply to any property right so acquired, whether such right was legal or equitable.
5. Per Lord Goff, dissenting: The conclusion (in the appellant’s favour) flowed from the nature of the principle itself, which was that a court of equity would not assist a claimant who did not come to equity with clean hands. It was founded on the principle that “he who has committed iniquity shall not have equity”.
James Munby QC and Alexander Hill-Smith (instructed by Philip G Rees) appeared for the appellant; Vernon Pugh QC and Phillip Davies (instructed by Belmont & Lowe) appeared for the respondent.
