Third party and appellant cohabiting — Third party leaving property, on his death, to children by previous marriage — Third party making appellant beneficiary under life insurance policy — Whether appellant estopped from claiming beneficial interest in property — Appeal allowed
In 1988, the third party purchased a farm in which he and the appellant dwelt as husband and wife. In 1989, he made a will in which he left the whole of his net estate to his children from a previous marriage, and effected an insurance policy that was written in trust for the appellant.
Between 1988 and 1992, the appellant worked on the farm and contributed financially to the upkeep and running of the property. In 1992, the third party took out a mortgage on the property in their joint names. In 1995, the property was remortgaged on terms that meant that the appellant and the third party were jointly and severally liable to the bank.
The third party died in 1999, and the appellant claimed, inter alia, a half-share of the beneficial interest in the farm, on the basis of a constructive trust.
The respondent executors claimed that the entire beneficial interest in the property should pass to the third party’s two sons. It was common ground that the appellant was aware of the contents of the will, and they argued that the deceased had taken out the insurance policy at the appellant’s instigation so as to compensate her for the loss of the farm when he died. In any event, it was inequitable for the appellant to receive the entire contents of the insurance policy, plus a substantial share of the property, at the expense of the deceased’s children. The judge found for the respondents, and the appellant appealed.
Held: The appeal was allowed.
The case demonstrated the two limbs of Lord Bridge’s judgment in Lloyds Bank plc v Rosset [1991] 1 AC 107, namely: (i) did the parties reach an agreement or understanding that the property was to be shared beneficially; and (ii) if so, did the partner assenting to a beneficial interest act to her detriment in reliance upon the agreement, thereby giving rise to a constructive trust.
Before 1992, any interest the appellant might have had in the farm would have fallen under the second limb. It would have been necessary for her to prove that, in the absence of any specific agreement between the parties, their conduct had inferred that they were to share the property beneficially. This would include, for example, the fact that the appellant had contributed financially to the running of the farm and the fact that she had set up a livery business, even to the extent of manually assisting in the construction of the associated outbuildings.
However, upon the execution, in 1992, of the legal charge in favour of the bank, the appellant had become entitled to an immediate and absolute beneficial interest in the farm by way of a constructive trust under the first limb. It was evident that discussions had taken place between the parties as to how the property was to be owned and the appellant had subsequently acted to her detriment in taking out the second mortgage in 1995. The appellant could not reasonably have been expected to incur that liability unless she was to have an interest in the farm.
There was no question of proprietory estoppel on the basis that it was inequitable for the appellant to receive a share of the farm as well as the proceeds of the insurance policy. The court was bound by the principles established in Gissing v Gissing [1971] AC 886 and, in any event, it was not, in the circumstances, unconscionable for the appellant to take an interest in the farm while retaining the proceeds of the insurance policy.
The parties’ shares were to be determined by their common intention. Having rendered themselves jointly and severally liable to the bank, it could be inferred that they had intended that they would each take a half-share.
Jeremy Cousins QC and Anthony Verduyn (instructed by Scaiff & Co, of Worcester) appeared for the appellant; James Quirke (instructed by Everatt & Co, of Evesham) appeared for the respondents.
Vivienne Lane, barrister
