A declaration of trust of land must be in writing under section 53 of the Law of Property Act 1925, but this does not affect the creation or operation of resulting, implied or constructive trusts.
The High Court considered this issue in Parker v Parker-Bowyer and others [2024] EWHC 2239 (Ch)
In 2007, the claimant acquired a large house and grounds at Bourne End, Buckinghamshire, which he subsequently remodelled into a luxury house with outbuildings including three residential units known as Babs Park.
The claimant aimed to ensure that Tom and Eddie, sons from his first marriage, were well provided for and on an equal basis. The court accepted that in 2015 he considered transferring the house to Tom and Babs Park to Eddie to mitigate inheritance tax on the basis that he would continue to live, manage, maintain and develop the property and run his businesses from there during his lifetime. He discussed these plans with his sons, who worked in his businesses, and wider family.
In 2018, the claimant tried to sell the house, but when this failed he agreed to transfer it to Tom on various conditions:
i) that replacement financing in Tom’s name would be arranged to remove existing charges;
ii) that Tom would pay the new lender and maintain the house from income provided by the claimant;
iii) the claimant would retain control of and use the property including the house as he saw fit during his lifetime.
Various family members heard the claimant explain his plans to transfer the house to Tom and the separation and gifting of Babs Park to Eddie at a wake in August 2019.
A sham lease arrangement and other financial transactions were entered into to deceive lenders that this was an arm’s length transaction. The transfer of the house to Tom and the refinancing was completed in November 2019.
The parties fell out in December 2022 and the claimant sought a declaration that Tom held the house pursuant to a life interest constructive trust in his favour.
The court decided that arrangements for the transfer of the house in November 2019 established a common interest constructive trust which the claimant relied on to his detriment since he was unable thereafter to dispose of the house or his previous equity in it. If it was wrong on the detriment, it would be inequitable for Tom to exclude the claimant’s claim: Rochefoucauld v Boustead [1898] 1 Ch. The claimant was entitled to a declaration that Tom held the house on trust for him on the agreed terms.
Louise Clark is a property law consultant and mediator
