The Court of Appeal has reviewed the requirements to establish a common intention constructive trust, confirming that both a common intention and detrimental reliance on that intention are required, in Hudson v Hathway [2022] EWCA Civ 1648; [2022] PLSCS 203. The case concerned the equitable ownership of a family home, purchased in joint names, initially with equal ownership rights.
Key points
- Proprietary estoppel typically concerns an equitable claim against the conscience of the true owner
- A common intention constructive trust means identifying the true beneficial owner(s) and the size of their interests
- The common intention can change over time but the claimant must prove detrimental reliance on it
Background
In 1990 Lee Hudson and Jayne Hathway began a relationship which lasted almost 20 years, during which they acquired a number of homes in joint names. In 2007 they acquired Picnic House as joint tenants with no declaration of trusts. It was agreed that the property was held as joint tenants in law and equity.
In 2009 the claimant left the defendant for another and the defendant remained at Picnic House with their two sons. The mortgage was paid from their joint bank account, into which their salaries were paid. Initially, both worked in the financial services sector, but following the birth of the children, the defendant moved into the charity sector, earning significantly less than the claimant. In 2011 the house was blighted by an oil spill, which made it very difficult to sell.
The parties had sporadic email discussions about financial arrangements, agreeing in principle that anything accrued while they were together was for them to reach agreement on. In July and August 2013 they agreed over email that the claimant would get sole ownership of his shares and pension and the defendant would get the equity from the house, its contents, savings and income from endowments. The defendant agreed to sell Picnic House once issues concerning the oil spill were resolved.
Proceedings
The clean-up and sale of the property were delayed. In January 2015 the claimant ceased contributing to the mortgage, and in October 2019 he sought an order for sale of Picnic House with equal division of the proceeds.
The defendant agreed to the sale but counterclaimed for the entire proceeds of sale under a common intention constructive trust, in reliance on which she had acted to her detriment: in paying the mortgage from 2015; desisting from claiming against the claimant’s assets or financial support for the children; maintaining the property; and dealing with the oil spill and subsequent insurance claim.
The decision and first appeal
The trial judge decided that the parties had clearly reached a deal but it did not satisfy the statutory formalities for transferring legal or equitable interests. However, the defendant had established that she had changed her position or relied on the email agreement to her detriment by giving up potential claims against the claimant’s shares and pension. The defendant was awarded the whole beneficial interest in Picnic House. This was upheld on first appeal, Kerr J deciding that a claim for an increased equitable share only required a common intention; detrimental reliance was not necessary.
The law
The creation and transfer of property rights in land must be in signed writing under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Section 53(1) of the Law of Property Act 1925 also requires declarations of trusts of land and dispositions of subsisting equitable interests to be made by signed writing. Where a legal estate is held in trust for joint tenants, section 36 of the 1925 Act provides that it shall be held in trust as if they were tenants in common but not so as to sever the joint tenancy. One joint tenant cannot assign its beneficial interest to the other because each is entitled to the whole of the land, but section 36(2) reserves the right of one to release its interest to the other.
Such statutory formalities do not affect the creation or operation of a constructive trust, which is a creature of equity. Lord Justice Lewison reviewed the authorities, including Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53, which are clear. Whether the claimant is seeking a share of property in the single name of another or a greater share of jointly owned property, it is necessary to establish a common intention, which can change over time, and detrimental reliance on that common intention. The claimant in a single name case will have the additional burden of establishing an entitlement to any beneficial interest.
The decision
The Court of Appeal considered that the claimant’s emails were sufficient to amount to an immediate release to the defendant of his equitable interest in Picnic House under section 36(2) and a disposition of the same under section 53(1). The words “Take it” in relation to the house and subsequently disavowing any interest in it evinced clear intention to divest himself of the interest immediately rather than a promise to do so in future. The emails were clearly in writing, and deliberately subscribing a name to an email – electronically or not – amounted to a signature.
That was sufficient to dispose of the appeal, but the court also considered the issue of detrimental reliance. The defendant could not, as a matter of law, claim against the claimant’s pension or shares. However, since the parties believed that wealth generated between them would be shared between them when they separated, in giving up those claims the defendant had acted to her detriment. Lord Justice Lewison commented that perhaps insufficient weight had been given to the defendant’s payment of
the mortgage since January 2015.
Louise Clark is a property law consultant and mediator
