Mortgage – Possession order – Constructive trust – Proprietary estoppel – Appellants appealing against order for possession and related orders in respect of family home – Whether appellants entitled to amend pleadings – Whether registration of creditor as owner of property was mistake – Whether judge erring in finding no proprietary estoppel arose – Appeal dismissed
The appellants agreed to purchase a house and paid part of the purchase price, with the balance payable at £1,000 per month. The appellants moved into the property which was to be transferred to them once the full price was paid. The balance was paid at a time when the first appellant was in debt to a business supplier (M) and it was agreed that the property would be transferred to M until the debt was paid. M was registered as the proprietor at the Land Registry. The agreement was purely oral.
The respondent finance company granted M a buy-to-let mortgage on the property. When the debt was cleared, M failed to transfer the property into the appellants’ names. M was subsequently made bankrupt. The respondent, as registered proprietor of a legal charge over the property, issued a claim for possession. The appellants, who had continued to live in the house as their family home, denied any knowledge of the mortgage and resisted the claim.
At trial, the appellants attempted to argue that there was a constructive or resulting trust in favour of the appellants; that the registration of M as proprietor, rather than as a charge holder, was a mistake, so that the appellants were entitled to alteration and/or rectification of the Register; and that the appellants were entitled to redeem the property, as any interest that the respondent had was subject to their rights under a proprietary estoppel.
The judge held that: (i) the facts pleaded had been expressly in support of proprietary estoppel, the application to plead the trust point would be refused and, in any event, there had been no trust; (ii) the parties had intended to transfer the property to M and it was neither void nor voidable; and (iii) the effect of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 rendered an oral agreement for the disposition of land void and unenforceable and the appellants’ claim to a proprietary estoppel was not within the express exception in section 2(5) of the 1989 Act. Therefore, the appellants at no time had any legal or equitable interest in the property and there was no defence to the claim for possession. The appellants appealed.
Held: The appeal was dismissed.
(1) A constructive trust was not to be assimilated with a proprietary estoppel. Although there were cases where the same factual situation might support both concepts, there were others where one would be present but not the other. There were large areas where the two concepts did not overlap and they were distinct and separate remedies. Although a proprietary estoppel might have similarities with a common intention constructive trust, the two were different both in terms of their jurisprudential basis and in their effects. The relief available was not the same as a successful proprietary estoppel claim which gave rise to relief which was within the discretion of the court and would determine the minimum necessary to satisfy the equity. On the other hand, where a constructive trust was found to exist, the court determined the extent of the actual beneficial interests under the trust: Yaxley v Gotts [1999] 2 EGLR 181, Thorner v Major [2009] 2 EGLR 111, Herbert v Doyle [2011] 1 EGLR 119 and Farrar v Miller [2018] EWCA Civ 172 considered.
Facts pleaded expressly in support of an allegation of proprietary estoppel could not reasonably be taken to indicate to the other side that an allegation of a constructive or resulting trust was also being made. A trust allegation had to be specifically pleaded, as it was quite likely to provoke specific responses of fact and law from the other side. In the present case, the appellants had not in their amended pleading set out the nature of a constructive or resulting trust case at all, let alone with care and precision. The judge was entitled so to hold and the challenge to his judgment in that regard failed.
(2) Whether to allow an amendment was a matter for the discretion of the court. In exercising that discretion, the overriding objective was of the greatest importance. Applications always involved the court striking a balance between injustice to the applicant if the amendment was refused and injustice to the opposing party and other litigants in general if the amendment was permitted. It was incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay. In the present case the oral application to amend was made at trial. The draft of the proposed amendment was inadequate. It was unsurprising that the judge exercised his wide discretion as he did. As the decision was one which the judge was entitled to take, an appeal court should not interfere with it.
(3) The judge was correct to hold that the disposition of the property represented by the TR1 form received by the Land Registry in the present case was neither void nor voidable, and that it embodied precisely what all concerned intended, namely to transfer title to M. It followed that the judge was right to decide that there was no mistake in registering M as proprietor and there was no ground for ordering the register to be rectified or altered.
(4) As regards the claim based on proprietary estoppel, the timing was fatal for the appellants. Any equity based on a proprietary estoppel could not have come into existence until M ought to have transferred ownership of the house to the appellants, as at which point his conduct in failing to do so would appear unconscionable. In the present circumstances, it was inconceivable that a court would grant relief such as to render retrospective any proprietary interest which the court thought fit to grant to the appellants, so that it would have priority over the respondent’s mortgage, which came into effect about two years prior to the earliest time at which an equity based on proprietary estoppel could have come into existence: Davies v Davies [2016] EWCA Civ 463; [2016] PLSCS 148 considered.
Paul Lakin (instructed by Handslaw LLP, of Dewsbury) appeared for the appellants; Clifford Payton (instructed by TLT Solicitors) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Kensington Mortgage Company Ltd v Mallon and others
