Contribution towards purchase of property — Deposit paid by parents of one cohabitee for purchase in name of other cohabitee — Whether presumption of resulting trust applicable– Whether constructive trust arising — Claim allowed in part
The claimants were the parents of the second defendant. They advanced £200,000 towards the purchase of a property in the name of the first defendant, with whom the second defendant was cohabiting and whom he had agreed to marry once his divorce was finalised. The remainder of the purchase price came from a mortgage taken out in the name of the first defendant. The second defendant did not wish to appear to have an interest in the new property in case it prejudiced his claim in the divorce proceedings with regard to the former matrimonial home.
The relationship between the defendants ended several months later. The first defendant sold the property, producing net proceeds of sale of £99,758.98 after the mortgage had been discharged. The claimants brought an action to recover their £200,000 contribution, contending that it had been a straightforward loan to the first defendant, which she was liable to repay in full. They further argued that she held the net proceeds of sale on resulting trust for them.
The first defendant denied that she was liable to pay anything. She argued that the £200,000 had belonged to the second defendant and had been advanced at his request and as agent or trustee for him, that it had been expressly agreed to be a gift to her in contemplation of marriage and that, in any event, such a gift was to be presumed pursuant to section 37 of the Matrimonial Proceedings and Property Act 1976. In the alternative, she contended that if the money had belonged to the claimants, they had given it to the second defendant and he had given it to her. In the further alternative, she argued that if the money had not been a gift, there was no agreement as to the basis upon which it had been advanced, and, as a consequence, there was a constructive trust over the proceeds of sale, which were to be divided according to the principles set out in Oxley v Hiscock [2004] EWCA Civ 546; [2004] 3 WLR 715.
Held: The claim was allowed in part.
(1) The principles set out in Oxley for determining the respective interests of cohabitees in circumstances where a property was purchased in the sole name of one of them were equally applicable to other cases. If a party had contributed to the purchase price without becoming a named purchaser and it was clear that he or she had been intended to have an interest, although there was no common intention as to the amount of the respective shares, the court would fix the shares having regard to the amount of the contributions and to relevant matters relating to the property that had occurred subsequent to the purchase. The effect of Oxley was to sideline the resulting trust in such cases, save in simple situations in which the only relevant circumstances were the respective financial contributions at the time of purchase. In all other situations, the court would no longer infer an intention that the parties were to share in proportion to their financial contributions to the purchase, but would rather infer that each should have a fair share taking into account the whole course of dealing between them in relation to the property: Stack v Dowden [2005] EWCA Civ 857; [2006] 1 P&CR 15 applied. The presumption of resulting trust was a rebuttable one and gave way to any evidence of a contrary intention.
(2) There was clear evidence to rebut the presumption in the instant case. The claimants’ advance had been neither a loan nor a gift, but had been made on the basis that the claimants’ interest in the transaction would be satisfied by contractual or trust arrangements on such terms as were appropriate once the situation, which was at that time uncertain, had become clear. Although the parties had not agreed that the claimants would necessarily be entitled to a share in all circumstances, it could fairly be inferred that they would have been intended to have a share in the circumstances that subsequently occurred. The court could find a constructive trust where it was possible to infer a common intention, existing at the time of purchase, that the party contributing to the purchase of the property in the name of the other would, although not entitled to a share initially, become entitled to a share in the circumstances as they stood when the matter was before the court.
(3) In quantifying the claimants’ share, it was fair to take into account the arrangements between the two defendants, including any mortgage payments made by the first defendant. Not to do so would leave the first defendant to bear the loss resulting from commitments that she had entered into at the claimants’ request as well as that of their son. Accordingly, the first defendant held on constructive trust the remaining proceeds of sale, less the amount of her expenditure on the property.
Sebastian Prentis (instructed by Sanders Witherspoon, of Brentwood) appeared for the claimants; David Schmitz (instructed by Rippon Patel & French) appeared for the first defendant; the second defendant appeared in person.
Sally Dobson, barrister
