Joint purchasers — Endowment mortgage — Oral agreement — Appellant surrendering responsibility for property to first respondent — Agreement providing for payment of money by first respondent to appellant First respondent subsequently selling property — Appellant denying agreement — Whether circumstances entitling appellant to greater share in proceeds of sale Whether oral agreement giving rise to constructive trust in favour of first respondent — Appeal dismissed
In 1995, the appellant and the first respondent purchased a house for £54,250 with a mortgage from a bank. They both lived in the property, which was registered in their names. The mortgage repayments were made in equal shares until the appellant was made redundant, after which he failed to pay his share on four occasions.
In 1997, they agreed that the first respondent would take full responsibility for the mortgage payments and the appellant would move out. The first respondent was to pay £2,500 for the appellant’s share of the property. Since the money was not immediately available, he agreed to pay the sum as soon as he could. The appellant agreed to transfer his interest in the house to the first respondent upon receipt of the money.
Thereafter, the first respondent paid the mortgage repayments and all other outgoings on the premises and carried out repairs and redecoration. In 2003, he sold the house, by agreement of the court, for £160,000. The net proceeds of sale were £100,530.94 and the first respondent used this to purchase a house in his and the second respondent’s name.
In 2000, when the first respondent was in a position to pay the £2,500, the appellant denied the existence of any agreement. In 2002, he commenced proceedings but the matter did not reach the county court until after the property had been sold.
The first respondent relied upon the creation of a constructive trust under section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989, on the basis that there had been an unwritten contract for the disposition of an interest in land. The recorder declared that the parties had entered into an oral agreement as claimed by the first respondent and that he was entitled to the net proceeds, save for £2,500. The appellant appealed, contending that the relief granted by the court was disproportionate to the detriment suffered.
Held: The appeal was dismissed.
The recorder had been entitled to conclude that the appellant’s conduct, in reliance upon which the first respondent had acted to his detriment and/or changed his position, gave rise to a constructive trust. This made it unconscionable not to permit the first respondent to enforce the oral agreement for the sale of the property: Lloyds Bank plc v Rosset [1991] 1 AC 107 considered and Yaxley v Gotts [1999] 2 EGLR 181 applied.
Although the minimum equity to do justice should be strived for, all relevant circumstances, including the parties’ conduct, should be taken into account. It might be said that taking on the endowment mortgage when the market was rising had not been to the first respondent’s detriment. However, by taking on responsibilities for the outgoings, he had taken on a potentially heavy burden if, with the vagaries of the housing market, prices had begun to fall and the mortgage had not met the capital sum.
Accordingly, the appellant was entitled to the £2,500, and otherwise should surrender what he agreed to leave to the first respondent.
Michael Templeman (instructed by Robert Cooke & Co, of Fleet) appeared for the appellant; Simon Walsh (instructed by Foster Savage & Gordon, of Farnborough) appeared for the respondents.
Eileen O’Grady, barrister
