Beneficial interest in property – Purchase of two flats – Purchase in sole name of appellant – Common intention that respondent to own one of them beneficially – Respondent decorating and contributing to annual maintenance charges – Common intention constructive trust – Whether respondent entitled to one flat absolutely – Whether necessary to show express agreement on acts to be performed to earn beneficial interest – Whether sufficient to show detrimental reliance – Appeal dismissed
The appellant and respondent were friends who together had run a business. In 1998, they discussed the possibility of purchasing two flats in the block in which the appellant lived. The flats had two kitchens and two front doors between them, but there was no dividing wall because they had been occupied as one flat. The parties planned to buy the flats, reinstate them into two self-contained units and rent them out. Financial difficulties meant that the respondent could not contribute to the purchase price or obtain a mortgage. The appellant purchased both flats in his name, paid the deposit and took out mortgage loans for the remainder of the purchase price. The separating wall was reinstated and the flats were decorated and let. The appellant used the rental income to pay the mortgage instalments and other outgoings.
A dispute later arose with regard to ownership of the flats. The appellant claimed that he owned both but the respondent alleged an agreement under which one of the flats would belong to him beneficially. In the county court, the recorder found that an informal agreement had been reached whereby the appellant was to purchase the flats on the basis that the parties would each own one in due course. He found that the respondent, in reliance upon that agreement, had spent several days painting the flats, and had paid annual maintenance charges in respect of them, such that it would be unconscionable for the appellant to renege on the agreement. He made a declaration that the appellant held one of the flats on trust for the respondent absolutely and directed that the property should be sold and the net proceeds paid to the respondent.
The appellant appealed, contending that the facts found by the recorder were insufficient to establish a common intention trust enforceable under section 53(2) of the Law of Property Act 1925. He argued that the respondent had to establish not only a common intention that he should have an interest but also some express agreement at the time of the agreement as to what he was to do in order to earn that interest; the fact that he had acted to his detriment made no difference if his acts had not been undertaken pursuant to the express terms of the agreement. In the alternative, he contended that the respondent’s contributions were too insignificant to amount to sufficient detriment to establish a constructive trust.
Held: The appeal was dismissed.
The applicable principle was not so narrowly circumscribed as contended for by the appellant. In order to make good a claim to a beneficial interest in a case where an express agreement or arrangement was found to exist, it was not necessary to establish the existence of a “bargain” by which the person claiming the interest had agreed to do something in return for that interest. The agreement did not need to prescribe what the claimant was to do. It was sufficient to show that the person claiming a beneficial share had acted to his detriment or significantly altered his position in reliance upon the agreement: Lloyds Bank plc v Rosset [1991] 1 AC 107 and Grant v Edwards [1986] Ch 638 applied; Eves v Eves [1975] 1 WLR 1338, Gissing v Gissing [1971] AC 886 and Midland Bank plc v Dobson [1986] 1 FLR 171 considered. Accordingly, the recorder had taken the correct approach in the instant case. He had also been entitled to find that the respondent’s contributions were sufficient acts of detriment to establish a constructive trust. That was essentially a matter for the judge to decide in each case having considered all the circumstances. Although the respondent had contributed materially less than the appellant, the recorder had been entitled to find that his contributions were more than trivial and were sufficient to justify his claim.
Philip Glen (instructed by Walton Mills & Co, of Southampton) appeared for the appellant; Mark Dubbery (instructed by Steele Raymond LLP, of Bournemouth) appeared for the respondent.
Sally Dobson, barrister
