Real property – Constructive trust – Detrimental reliance – Unmarried parties purchasing house jointly – Appellant seeking order for sale of property and equal division of proceeds – Judge holding respondent entitled to whole of proceeds of sale under constructive trust – Appellant appealing – Whether respondent required to show acted to detriment or changed position in reliance on agreement – Whether respondent acting to detriment or having changed position – Appeal dismissed
The parties started a relationship in 1990. They did not marry but had two sons. In 2007, with a mortgage, they bought a property in joint names, with no declaration of trusts. Both worked. The appellant’s earnings soon overtook those of the respondent.
In 2009, the appellant left the respondent who stayed at the property with the two sons. The mortgage was converted to an interest only basis. It was paid from the joint bank account into which both their salaries were paid. Over the years, the appellant substantially paid the mortgage; the amount he contributed far exceeded the respondent’s contributions.
In 2011, the house was blighted by an oil spill, making it very difficult to sell. A complicated insurance claim dragged on for years. Over the following 20 months or so, the parties had sporadic email discussions about financial arrangements.
In October 2019, the appellant issued a claim under CPR part 8 and the Trusts of Land and Appointment of Trustees Act 1996 seeking an order for the sale of the property, with equal division of the proceeds. The respondent agreed that the house should be sold but contended that she was entitled to the whole of the proceeds under a constructive trust, in reliance on which she had acted to her detriment by, amongst other things, paying all interest payments on the joint mortgage from January 2015; and living frugally to afford the upkeep and mortgage.
The county court held that the respondent was entitled to take the whole of the proceeds of sale under a constructive trust, following a common intention and agreement between the parties that the respondent would have the entire equity in the property. The appellant appealed.
Held: The appeal was dismissed.
(1) There was an express agreement that, among other things, the respondent would have sole beneficial ownership of the property but the appellant argued that the judge was wrong to decide that sufficient detrimental reliance or change of position on the respondent’s part was made out. That assumed, as the judge found, that detriment was necessary to make the agreement enforceable in equity, it not being enforceable at law for want of necessarily formalities.
Where a family home was bought in the joint names of a cohabiting couple who were both responsible for any mortgage, but without any express declaration of their beneficial interests the starting point was that equity followed the law and they were joint tenants both in law and in equity. That presumption could be displaced by showing that the parties had a different common intention at the time when they acquired the home; or that they later formed the common intention that their respective shares would change. Their common intention was to be deduced objectively from their conduct. The relevant intention of each party was the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party: Gissing v Gissing [1971] AC 886 and Jones v Kernott [2011] PLSCS 264; [2012] 1 AC 776 applied.
In the present case, the property in question was in joint names and there was nothing to rebut the presumption of beneficial joint tenancy at the point of purchase. At that stage, equity followed the law and the beneficial shares were equal. The onus therefore fell on the respondent to show a later alteration of the beneficial shares. The judge decided that the agreement, whose existence was undisputed, provided the necessary evidence of such an intention.
(2) It was consistent with principle for the law to permit a constructive trust to be established by whatever evidence was necessary to show that it would be unconscionable for the party denying the equitable interest to do so. The issue was always ultimately one of unconscionability, in the broadest sense. The question in each case was what factors and what kind of evidence would satisfy the requirement of unconscionability or not, ie, persuade the court that the party denying the equitable interest was not permitted to do so.
In the domestic consumer context, an express agreement as to beneficial shares, provided it was not a unilateral oral declaration of trust making the putative beneficiary a mere volunteer, could itself supply the necessary detriment or satisfy the requirement of unconscionability without the need to establish separately that the beneficiary had acted in detrimental reliance on or changed her position in reliance on the promise. In the present case, the judge could just as well have found that the deal itself provided all the necessary requirements for the constructive trust asserted by the respondent. It provided all the evidence needed to make it unconscionable for the appellant to resile from the deal which was sufficient to establish the common intention which in turn was sufficient to establish the constructive trust. It was unnecessary to show detriment in the present context, where the property was bought in joint names in the domestic consumer context and without an express declaration of trust.
(3) If it were necessary to show detrimental reliance or change of position, the judge’s findings were soundly based and the appellate court would not be justified in interfering with them. The judge’s decisions on detriment were not just primary findings of fact but were evaluative; they extended to the judge’s considered assessment of the quality and character of the primary facts and whether they sufficiently amounted to detriment.
Although the notion of detriment was broad and unconfined in this domestic context, the judge was not bound to tie the detriment to the central basis of the parties’ understanding and to reject other peripheral features as sufficient in themselves. He was not bound to treat the respondent’s mortgage payments, her conduct of financial affairs and her lifestyle generally as detriments separate from the agreement between the parties. His rejection of those matters as sufficient detriments was an evaluative decision which was open to him.
Zoë Saunders (instructed by Veale Wasbrough Vizards, of Bristol) appeared for the appellant; Michael Horton QC and Guy Holland (instructed by Ashtons Legal, of Bury St Edmunds) appeared for the respondent.
Eileen O’Grady, barrister
