Equitable Interests and Proprietary Estoppel
If there is a single legal owner, there is a presumption that they are the equitable owner as well. If there are two or more legal owners of the fee simple, there is a presumption that equity follows the law: it is presumed that the legal owners are also the equitable owners. It is assumed that they are joint tenants in equity unless there are circumstances where survivorship would not be appropriate. Survivorship is appropriate between couples, but not in terms of a commercial relationship - they would like to leave their share of the land to a person of their choice.
There are two ways of creating trust: express declaration, which is made by the person creating the trust that they intend to create a trust. It will only be effective if it complies with the formalities (it must be in writing (s 53(1)(b) LPA)). The second way is by implied trust.
The Acquisition and Quantification of Interests under Express and Implied Trusts:
There are various ways in which a person might acquire an equitable interest in property (when the legal title to it does not belong exclusively to them). The intention of the parties plays a crucial role in all of these methods, at least where that intention can be ascertained. In some cases, a successful claimant might be able to prove that they own the entire beneficial interest. More usually, however, a successful claimant will establish only that they have an interest as a beneficial joint tenant or tenant in common, thus giving rise to equitable co-ownership.
In the absence of any indications as to a contrary intention of the parties (along the lines set out in the following sections of this handout), there is a rebuttable presumption that equity follows the law. Thus, A would be presumed to be the sole equitable owner if he was the sole legal owner whereas A and B would be presumed to be the equitable joint tenants if they were the legal joint tenants. It should be noted, however, that equity assumes that, if the relationship is that of business partnership, mortgagees etc, equity would presume that they would rather have intended to become beneficial tenants in common with equal shares. Survivorship would not be appropriate in such cases.
Thus, it is important to remember that, if no express trust, implied trust or proprietary estoppel alters the situation, the fallback position is that equitable ownership reflects legal ownership – Stack v Dowden. In single legal owner cases, claimants therefore face the twofold task of first establishing that they have acquired an equitable interest and second persuading the court that it should be quantified at the desired amount. By contrast, claimants in joint legal owner cases will not need to establish acquisition of an equitable interest (as this is assumed from ownership of the legal title) and their argument will relate solely to quantification.
2. Express Trust A trust will be ‘express’ if it comes into existence as a result of an express declaration of trust by the legal owner. It is extremely important to remember that, if the property concerned is land, an express declaration of trust will not be effective unless it is evidenced in writing and signed by the person parting with beneficial ownership - s 53(1)(b) Law of Property Act 1925 (LPA). If there is an express declaration which complies with s 53(1)(b), it will be conclusive. In Pettitt v Pettitt [1970] AC 777 Lord Upjohn observed that:
If the property in question is land, there must be some lease or conveyance which shows how it was acquired. If that document declares, not merely in whom the legal title is to vest, but in whom the beneficial title is to vest, that necessarily concludes the question of title ... for all time, and in the absence of fraud or mistake at the time of the transaction the parties cannot go behind it at any time thereafter.
The use of the phrase "joint tenancy" or "tenancy in common" is not essential. The form of co-ownership intended is a question of construction. The use of a word such as "jointly” tends to indicate that a joint tenancy was intended. Words such as "equally" or "shares" will tend to indicate a tenancy in common. If conflicting expressions are used, which prevails is a question of construction for the court: Martin v Martin (1987) 54 P & CR 238.
3. Implied Trusts and Proprietary Estoppel
3.1 Underlying Concepts
Despite the fact that there is no express trust, a trust may nevertheless arise. It might be implied, either as a “resulting” or a “constructive” trust. Alternatively, it may come into being as a result of a court order in a proprietary estoppel action. In the context of the informal acquisition of interests in equitable estates in land, all these concepts play a role. However, there is considerable uncertainty and confusion as to the extent to which they overlap and the ambit of any distinctive roles possessed by each of them. This confusion has been exacerbated by a judicial tendency to use the terms interchangeably. The resulting chaos was described by Carnwath LJ in Stack v Dowden [2005] EWCA Civ 857, 75 as follows:
To the detached observer, the result may seem like a witch's brew, into which various esoteric ingredients have been stirred over the years, and in which different ideas bubble to the surface at different times. They include implied trust, constructive trust, resulting trust, presumption of advancement, proprietary estoppel, unjust enrichment, and so on. These ideas are likely to mean nothing to laymen, and often little more to the lawyers who use them.
In subsequent sections of this handout, issues such as the relationship between constructive trusts and proprietary estoppel (Section 4.1.1) and the relationship between resulting and constructive trusts (Section 4.2.5) will be explored in more depth. The operation of the doctrine of proprietary estoppel (in contexts extending beyond the acquisition of interests in equitable estates in land) will be examined in Part II. At this stage, however, it is helpful to have a preliminary idea of what is generally understood by the terms “resulting trust”, “constructive trust” and “proprietary estoppel”.
A resulting trust is a type of implied trust. It comes into being in two or three main situations, only one of which is relevant for current purposes. In all resulting trusts, the equitable interest ‘results’ back to a person who previously had some claim to the property in question or the consideration with which it was purchased. It is often said to allow effect to be given to what was assumed to be the intention of the parties. For our purposes, the only relevant type of resulting trust is one in which a person has paid towards the cost of property of which somebody else is the legal owner. According to what is known as “the presumption of resulting trust”, in the absence of evidence or presumptions to the contrary, it is presumed that the parties intended that the legal owner would hold the property on trust for him/herself and the person who contributed toward the price. Their respective shares in the equitable ownership should reflect their respective contributions to the purchase price. (For a detailed analysis of resulting trusts, see W Swadling, ‘Explaining Resulting Trusts’ (2008) 124 LQR 72.). Increasingly, resulting trusts are becoming viewed as mechanisms which are more appropriate to the commercial than the domestic context (see below).
A constructive trust is also a form of implied trust. Constructive trusts will arise in a variety of situations in which it would, for some reason, be unjust or unconscionable to allow the owner of the legal title to retain the entire equitable interest.
Proprietary estoppel is a doctrine which may result in a court order requiring a legal owner of land to acknowledge the claims of another – whether by way of a trust in their favour, by an award of damages or some other remedy.
3.2 History It is only in the latter half of the last century that the question of how a person might acquire an interest in their home under an implied trust, or by means of a proprietary estoppel, has become very important. It initially became important in the context of married couples who divorced. Wide discretionary powers to re-allocate property on divorce were only conferred on the judges in 1973 by the Matrimonial Causes Act. This followed the ruling by the House of Lords in Pettitt v Pettitt and Gissing v Gissing [1971] A 886 that (contrary to the approach advocated by Lord Denning in various cases) courts did not have a general discretion to reallocate property rights between married couples on divorce
Although the question of entitlement to equitable ownership still arises in connection with married couples in some cases (eg where one of them has been declared bankrupt and the trustee in bankruptcy needs to establish the precise extent of their interest, if any, in the matrimonial home), it usually arises today (after the MCA) in disputes between formerly cohabiting but unmarried couples or in disputes between other family members.
The House of Lords in Pettitt and Gissing provided some guidance on how the proprietary interests of the couple should be identified. In essence, if there had been no express declaration as to the beneficial ownership, duly evidenced in writing and signed by the person parting with the beneficial ownership, consideration must be given to whether a claimant had acquired an interest under an implied trust or proprietary estoppel. Whether a claimant had acquired an interest under a constructive or a resulting trust (between which their Lordships thought it unnecessary to differentiate in those cases) depended on the common intention of the parties. The two cases did not spell out all the situations in which judges should find and give effect to such a common intention. However, two such situations did emerge. First, where there had been an oral agreement between the parties to share the beneficial interest, on which the claimant had relied to his or her detriment. Second, where the claimant had contributed to the purchase price. The precise boundaries of these situations, however, were not defined with clarity.
Despite criticism of his approach by their Lordships in Pettitt and Gissing, Lord Denning continued to exercise a wide discretion in deciding on the property rights of couples in their former home.
It was against this background that the matter again came to the House of Lords in Lloyds Bank v Rosset [1991] 1 AC 107 (Dixon [1991] CLJ 38; Clarke [1990] All ER Rev 154; Davies (1990) 106 LQR 539; Gardner (1991) 54 MLR 126; Gardner (1993) 109 LQR 263; and Halliwell (1991) 20 A-A LR 500). Lord Bridge delivered the sole judgement, with which all the other members of the panel concurred. Lord Bridge's judgement was orthodox in approach and designed to achieve greater certainty and clarity. He set out two methods by which a claimant, who did not own the legal title and could not establish an express trust, might acquire an equitable interest under a trust. This two-limbed formula became the guiding template governing disputes concerning the informal acquisition of interests in land and, although its continued application has been thrown into some doubt by Stack v Dowden (and subsequent developments), still seems (subject to some amendments) to play the pivotal role at the acquisition stage of single legal owner cases. According to Lord Bridge in Rosset:
I … draw attention to one critical distinction which any judge required to resolve a dispute between former partners as to the beneficial interest in the home they formerly shared should always have in the forefront of his mind.
The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to the acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or an arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made, it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or proprietary estoppel.
In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or an arrangement to share, however reasonable it may have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do.
As mentioned above, this two-limbed Rosset formula provides a useful starting-point for the analysis of scenarios in which disputes focus on the acquisition of beneficial interests in properties where legal title is vested in a single legal owner. Its continued application after Stack v Dowden, however, has been doubted. Stack concerned a different type of scenario – that in which legal title to a property was vested in the names of both parties and the dispute concerned how the equitable entitlement (which both were acknowledged to have acquired) should be quantified.
The decision in Stack as regards quantification undoubtedly affects quantification of interests in the single legal owner context. The question of whether the Rosset formula should govern at the acquisition stage of single legal owner cases, however, continues to attract debate and divergent perspectives. Baroness Hale, who was uncomfortable with the potential restrictiveness of this formula, cast some doubt on its continued relevance in the Privy Council case of Abbott v Abbott 27 July 2007, Privy Council Appeal No 142 of 2005 (M Dixon [2007] Conv 456). In Thomson v Humphrey [2009] EWHC 3576, however, the question was addressed head-on by a first instance court and Warren J decided that Stack applied only to the quantification stage of single owner cases –
The rules governing quantification of interests in joint legal owner cases were traditionally thought to be those of resulting trust - see eg Springette v Defoe [1992] 2 FLR 388. This meant that shares were quantified so that each party was awarded a share proportionate to their contribution to the price. In Stack, however, the House of Lords held that the starting point should be the presumption that both parties were jointly entitled in equity as well as at law. This approach was further refined and developed by the Supreme Court in Jones v Kernott. This will be discussed further in Section 5 below.
4. Constructive Trusts - Acquisition Stage (Single Legal Owner Cases Only) NB IN joint legal owner cases a common intention to share the equitable interest is assumed because of the shared legal ownership. In single legal owner cases, however, claimants who do not own the legal title have to prove that this common intention exists by other means. The Rosset formula (as expanded and softened by subsequent caselaw) still appears to provide a useful formula to guide assessments of whether such a common intention can be established.
4.1 The First Limb of the Rosset Formula (Actual Common Intention Constructive Trusts) 4.1.1 Relationship with Proprietary Estoppel Lord Bridge stated that if a claimant satisfied the conditions set out in the first limb of his formula, an interest would be acquired under a constructive trust or proprietary estoppel. The relationship between a constructive trust (in this context) and a proprietary estoppel has been the subject of some debate.
The most important difference between them appears to be that, once a proprietary estoppel has been raised, the court has a discretion as to what remedy to award and generally awards what it considers the minimum equity needed in order to address the relevant unconscionability (see discussion of this below). If a constructive trust is found to exist, the court has no discretion because it is simply recognising the existence of a pre-existing trust.
Another difference between proprietary estoppel and the common intention constructive trust relates to the claimant’s belief. In the actual common intention constructive trust there must have been a common intention that the claimant should have a beneficial interest, evidenced by oral discussions. Generally, estoppel does not require such evidence, it being sufficient for claimants to believe that they have or would have a right in the property; for defendants to acquiesce in that belief (possibly through silence); and for there to be detrimental reliance.
The Court of Appeal in Yaxley v Gotts [1999] 3 WLR 1217 accepted that, although there are many areas in which the doctrines do not overlap, ‘in the area of a joint enterprise for the acquisition of land ... the two concepts coincide’ (per Robert Walker LJ). In Stack v Dowden, however, Lord Walker adopted a more cautious approach – stressing the fundamental differences between the two doctrines. He said of the tendency to assimilate them (at para 37):
I have myself given some encouragement to this approach (Yaxley v Gotts [2000] Ch 162,177) but I have to say that I am now rather less enthusiastic about the notion that proprietary estoppel and "common intention" constructive trusts can or should be completely assimilated. Proprietary estoppel typically consists of asserting an equitable claim against the conscience of the "true" owner. The claim is a "mere equity". It is to be satisfied by the minimum award necessary to do justice (Crabb v Arun District Council [1976] Ch 179, 198), which may sometimes lead to no more than a monetary award. A "common intention" constructive trust, by contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests.
In summary, if the conditions of the first limb are satisfied, a claimant will succeed on the basis of either a constructive trust or a proprietary estoppel. However, it should be noted that a proprietary estoppel, the estoppel might be satisfied by a remedy falling short of equitable ownership – eg a licence to occupy the property (Jones v Jones; and Matharu v Matharu (The Times, 13 May 1994)). Estoppel will be discussed more fully below, in Part II of this handout.
In order to acquire an equitable interest under the first Rosset limb, two requirements must be satisfied. These will now be considered in turn.
4.1.2 Common Intention/Agreement (1) Nature of the agreement/understanding The agreement must be to share the beneficial ownership of the house. It need not specify the precise interests of each party. Provided that it is clear that each is intended to have some interest, the court will scrutinise the words used and any other relevant circumstances to determine the shares that were intended: Eves v Eves [1975] 1 WLR 1338; and Grant v Edwards. An agreement to live in the property together or to renovate it as a joint venture will not suffice - Rosset. Neither will a common intention to run a business together - Geary v. Rankine (2012 EWCA Civ 555. Nor will vague assurances not intended to confer interests in property (such as that improvements ‘will be for the benefit of both of us’ or ‘I will take care of you’) – James v Thomas [2007] EWCA Civ 1212.
(2) Proof In Lloyds Bank v Rosset Lord Bridge indicated that:
The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been.
This was echoed by Dillon LJ in Springette v Defoe [1992] 2 FLR 388:
It is not enough to establish a common intention which is sufficient to found an implied or constructive trust of land that each of them happened at the same time to have been thinking on the same lines in his or her own uncommunicated thoughts, while neither had any knowledge of the thinking of the other.
NB The oral discussions need only evidence the agreement/understanding. They do not need to make it explicit. Thus, excuses by the legal owner for not putting the house into joint names will suffice - Eves v Eves; Grant v Edwards; and Hammond v Mitchell [1991] 1 WLR 1127. Note, however, that Mr Rankine’s explanation to Mrs Rankine that he did not want her name on the legal title until she had been divorced from her husband was not treated as an ‘excuse’ but as a genuine reason in Geary v Rankine 2012.
4.1.3 Detrimental Reliance (1) Detriment Where the legal owner does not specify the quid pro quo for the assurance of ownership, the courts appear to have adopted a prima face objective test for determining whether or not conduct is detrimental. In order to qualify, in the words of Nourse LJ in Grant v Edwards, ‘... it must be conduct on which the [claimant] could not reasonably have been expected to embark unless she was to have an interest in the house’.
(a) Conduct satisfying the objective test Financial contributions to the property have been held to qualify as detrimental conduct: eg Drake v Whipp [1996] 1 FLR 826. It was accepted in Grant v Edwards that contributions to the mortgage, or substantial contributions to housekeeping expenses without which the legal owner could not have paid the mortgage, would suffice. Payments for improvements will also suffice: Pascoe v Turner [1979] 1 WLR 431.
Women have been held to act to their detriment by undertaking heavy physical labour upon the property in question. The claimant succeeded in establishing detrimental conduct in Cooke v Head [1972] 1 WLR 518 where, according to Denning MR, she ‘...did much more than most women would do’. (She had helped her former partner in the building of their bungalow by, eg, knocking down part of a building using a sledgehammer, removing rubble using a wheelbarrow and working an awkward cement mixer). Similarly, the claimant in Eves v Eves acted to her detriment. According to Denning MR, she did ‘much more than many wives’. (She had, for instance: stripped wallpaper; painted; broken up concrete in the front garden with a fourteen pound sledgehammer; demolished a shed and put up a new one; and prepared the front garden for turfing (see Bottomley and Connaghan (1993) 20 Jo of Law & Soc 58). Proving unusual/abnormal behaviour may be difficult. In Ungurian v Lesnoff [1990] Ch 206, Vinelott J observed that:
Mrs Lesnoff gave a graphic account of wielding a pickaxe. No doubt her solicitors had retailed to her the facts in Eves v Eves, which they drew to the attention of Mr Ungurian's solicitors ... I doubt whether Mrs Lesnoff used a tool as clumsy as a pickaxe at all, unless possibly she picked one up that had been left lying around by workmen and put it to some temporary and possibly inappropriate use.
Unpaid labour in a business belonging to the legal owner has amounted to detrimental conduct: Re Basham [1986] 1 WLR 1498; and Wayling v Jones (1993) 69 P & CR 170 (see Davies [1995] Conv 409; Cooke (1995) 111 LQR 389) demonstrate this in relation to proprietary estoppel. The claimant was found to have acted to her detriment, so as to raise a constructive trust, in Hammond v Mitchell. Waite J's reason for so holding is not entirely clear. Miss Mitchell's unpaid labour in relation to Mr Hammond's business activities may provide the best explanation.
Depriving oneself of opportunities of financial improvement may amount to detrimental conduct, at least in relation to proprietary estoppel: Gillett v Holt [2000] 3 WLR 815 (on which see Part II below).
(b) Conduct failing the objective test
Claimants who simply behave as they might have been expected to, had they never been assured of an interest in their home, will probably not be regarded as having acted to their detriment so as to raise a constructive trust: Midland Bank v Dobson; and Lloyds Bank v Rosset. They may also fail to establish a beneficial interest under proprietary estoppel: Coombes v Smith [1986] 1 WLR 808. However, Matharu v Matharu indicates that proprietary estoppel may afford them a lesser interest, such as a licence to live in the property.
Christian v Christian (1981) 131 NLJ 43 demonstrates that agreeing to a course of conduct which is embarrassing or emotionally unpleasant will not suffice.
(2) Reliance Once detriment has been proved by the claimant, it is presumed to have been performed in reliance on the common intention. It is then up to the legal owner to disprove reliance: Greasley v Cooke [1980] 1 WLR 1306. This can be done only if the legal owner can prove that the claimant would still have performed the detrimental conduct had the assurance been retracted: Wayling v Jones (see M. Thompson [2003] Conv 157). This means that claimants will not be denied a chance to raise an estoppel just because they are motivated by a mixture of considerations, not all of which take the form of a belief in ownership – see also Campbell v Griffin 2001 and Chun v Ho 2001.
4.2 The Second Limb of the Rosset Formula (Inferred Common Intention Constructive Trusts) 4.2.1 Relationship with Resulting Trusts Trusts established under limb 2 of Rosset are constructive trusts, not resulting trusts. This means that (particularly because of post-Rosset caselaw) there is much more flexibility about the type of conduct from which an intention to acquire an interest will be inferred. It also means that the court’s approach to quantifying the relevant interest will be much more flexible. Further, In resulting trusts, in resulting trusts the common intention must exist at the date the property is bought; whereas, in constructive trusts, it may arise at a later date.
The resulting trust is now likely to apply only where the dealings between the parties have been commercial in nature. Where the property in dispute is their home, the constructive trust approach is likely to apply.
4.2.3 Conduct from which an Intention to Acquire will be Inferred (1) Direct Contributions to the Purchase Price Direct contributions to the purchase price (in the form of the deposit or the mortgage) will suffice.
In addition to payments to the deposit, direct contributions may take less obvious forms - Springette v Defoe; and Tinsley v Milligan [1992] Ch 310.
It was established in Gissing v Gissing that payments towards the mortgage should be treated as payments towards the purchase price.
(2) Indirect Contributions Since Gissing v Gissing there has been considerable debate as to whether indirect financial contributions to the purchase price will suffice. Such payments include payment of household bills and unpaid/poorly paid work in the legal owner's business from the proceeds of which the property is bought.
Lord Bridge in Lloyds Bank v Rosset, however, suggested that the authorities indicated that it was ‘at least extremely doubtful’ whether anything less than direct contributions would do. This remark was purely obiter and was not based on any painstaking review of the conflicting authorities or arguments. Considerable weight was placed upon it, however, by the Court of Appeal in Ivin v Blake [1995] 1 FLR 70. It was there decided that indirect contributions could not give rise to an implied trust (no distinction was made between resulting and constructive trusts).
More recently, however, the courts have moved away from the narrowness of the Rosset limitations and indicated that indirect contributions to the purchase price will also suffice to ground an inference of a common intention to share equitable ownership. In Le Foe v Le Foe [2001] 2 FLR 970, Nicholas Mostyn QC suggested that indirect contributions should suffice. In Stack v Dowden, Lords Hope and Walker favoured the approach taken to indirect contributions in Le Foe. Lord Walker doubted whether Lord Bridge’s observations in Rosset took full account of the relevant dicta in Gissing. Whether or not Lord Bridge’s observations had been well-founded at the time, however, he took the view that the law had now moved on and Lord Hope considered that indirect contributions ought to be taken into account.
(3) Other Factors, Not Amounting to a Contribution to the Purchase Price
The question of whether conduct which does not amount to a direct or indirect contribution to the price can ever give rise to an inferred intention constructive trust remains unanswered. After Stack and Jones v Kernott, however, this argument is gaining increasing support. Nevertheless, the Court of Appeal in Geary v Rankines 2012 was clear that, at this acquisition stage, courts would be permitted only to infer an intention from the parties’ conduct and not to impute to them an intention which they never actually had. In that case, the fact that Mrs Geary had gone to live with Mr Rankines and that they had formed the intention to be business partners was not sufficient to found an inference that they intended to be equitable co-owners, Mr Rankine’s insistence that Mrs Geary should not become a co-owner until after her divorce also being a relevant consideration.
4.2.4 Detrimental Reliance
In Rosset 2 cases, the conduct which provides the basis for the inference of a common intention to share equitable ownership also appears to constitute the detrimental reliance on that intention which allows a constructive trust to come into being. There seems to be no separate detrimental reliance requirement. Nevertheless, some regard to cases on detrimental reliance may help to provide guidance as to what types of conduct will prove sufficient to found a constructive trust of this type.
5. Constructive Trusts - Quantification Stage (Single and Joint Legal Owner Cases) 5.1 The Stack v Dowden Presumption Once it is clear that there is an intention to share equitable ownership in some way (in single owner cases, derived from an express or inferred intention; and, in joint legal owner cases, derived from presence on the legal title) the issue of the quantification of the shares of each of the co-owners must be addressed.
Until Stack v Dowden, the quantification of shares in joint legal owner cases received little attention from the courts. In single legal owner cases, however, some guidance had emerged, and this may be summed up as follows:
If there was an oral agreement which had specified how interests should be quantified (much more likely in Rosset 1 than in Rosset 2 cases) this would prevail. If, however, there had been no agreement as to quantification, it was established in Eves v Eves and Grant v Edwards (for Rosset 1 cases) and Midland Bank v Cooke (for Rosset 2 cases) that the court would have regard to the whole course of dealing between the parties in an attempt to ascertain what their intentions were. Thus, in Midland Bank v Cooke [1995] 2 FLR 915 (see Battersby [1996] CFLQ 261; and Pawlowski [1996] Fam Law 484) the Court of Appeal held that Jane Cooke, who had contributed only 6.7% of the purchase price (her half of a wedding present from her in-laws) owned a 50% beneficial interest in the former matrimonial home.
The issue of quantification in single legal owner cases was examined, in some depth, by the Court of Appeal in the pre-Stack case of Oxley v Hiscock [2004] EWCA Civ 546. Chadwick LJ stressed that the court would not be bound to quantify the interests by reference only to the proportions of the purchase price provided. It would instead consider the entire course of dealing between the parties and, where they had not themselves agreed what their exact shares would be, the Court would decide on the basis of what it considered would be fair. Chadwick LJ went on to explain that the courts had not found this broad discretionary test an easy one to apply. He criticised the emphasis placed, in cases such as Cooke, on the intention of the parties at the date of the acquisition. Making such intentions determinative of the shares to be awarded in cases where no express agreement had been made was both artificial and inconsistent with the need to take into account subsequent events and the entire course of dealing. Guidance should be derived from principles of proprietary estoppel.
The issue of quantification has now been addressed by the House of Lords, in Stack v Dowden [2007] UKHL 17, and by the Supreme Court, in Jones v Kernott – both of which were joint legal owner cases.
In Stack v Dowden [2007] UKHL 17, a majority of their Lordships held that, in the family/consumer context, the presumption that equity follows the law should be the starting-point. In joint legal owner cases, such as Stack, this would result in the parties becoming joint owners in equity as well as in law. Equitable joint tenancies may be ‘severed’ with the result that the parties generally become tenants in common with equal shares (see previous lecture handout). This was confirmed by the Supreme Court in Jones, where further guidance was provided as to when this Stack presumption should be abandoned in favour of unequal shares.
The Stack presumption was set out in the context of joint legal owner cases. In that context, the presumption that equity follows the law results in equitable joint tenancy or in equal shares. In single legal owner cases, however, the presumption that equity follows the law results in the claimant having no equitable interest – a fall-back position which can be overcome by satisfaction of the requirements of the acquisition stage discussed above.
Some uncertainty still surrounds the question of the extent to which any presumption of equality operates in single legal owner cases where an express or inferred intention to co-own can be shown. In Midland Bank v Cooke, it was suggested that, unless the entire course of dealing between the parties could found an inference that they intended to have different shares, the fall-back position should be that they had equal shares. This would suggest something like the Stack presumption in single legal owner cases. In Oxley v Hiscock, however, Chadwick LJ placed more emphasis on the respective financial contributions made by the parties, suggesting that equality was more likely to be appropriate in cases like Cooke where the parties were married and had a joint bank account.
NB The term the ‘Stack presumption’ is often used. This is sometimes used to refer to the presumption that equality follows the law and sometimes to the presumption of equality – in joint legal owner cases, both presumptions produce the same result. In single legal owner cases, however, these latter two presumptions produce different results.
5.2 Sphere of Application of the Stack Presumption An issue which has caused some confusion since Stack is the identification of cases in which the Stack presumption (that equitable ownership reflects legal ownership) should apply and those in which the presumption of resulting trust should apply instead. Baroness Hale, in Stack, suggested that the Stack presumption should represent the starting-point to the quantification of equitable ownership at least in the domestic or consumer context. This left open the question of what should happen in cases falling outside that context.
According to the resulting trust approach, the parties would be presumed (in the absence of evidence to the contrary) to have acquired shares reflecting their contributions to the purchase price. Lord Neuberger, in Stack itself, had favoured adopting the resulting trust approach in all joint legal owner cases. Interestingly, relying on that presumption on the facts of Stack brought him to the same result as the majority – a 65%-35% split.
In Laskar v Laskar [2008] EWCA Civ 347 (N Piska [2008] Conv 441), Mrs Laskar wished to purchase the council house she had rented for many years. She could not afford to do so alone. Her daughter agreed to provide £3,400 (the total purchase price being £79,500) and to assume joint liability for the mortgage. The house was transferred into their joint names. When they fell out, the daughter claimed that she owned a half share in the house on the basis of the Stack presumption that equity follows the law.
The Court of Appeal (in which Lord Neuberger sat) distinguished Laskar from Stack – drawing attention to the fact that the relationship between the parties in this case was not a long-term sexual relationship and that it was more commercial in nature as neither of the parties had planned to live in the house which had been purchased primarily as an investment (Mrs Laskar was renting it out to tenants). It was held that, in commercial arrangements such as this, the presumption of resulting trust should be applied instead of the Stack presumption of equality.
The Stack presumption thus applies only in the domestic/consumer context. Ascertaining whether the case is of a domestic/consumer nature is therefore a necessary first step in joint legal owner cases. The fact that the line between domestic cases and commercial cases will not always be easy to draw is demonstrated by the fact that, in Laskar, a mother-daughter relationship was held to be commercial whereas, in the earlier case of Adekunle v Ritchie [2008] BPIR 77, the Stack presumption was considered to have been appropriately applied to a mother-son relationship. In Adekunle, however, the primary purpose had been to buy the property as a home rather than as an investment.
5.3 Rebutting the Stack Presumption Baroness Hale, who delivered the leading judgement in Stack, stressed that the presumption that equity followed the law could not be rebutted in joint legal owner cases without the showing of unusual or exceptional circumstances. It would be rebutted only if the party alleging a different ownership division could establish, on the basis of the entire course of dealing between the parties, that an unequal split was intended.
Stack made it clear that intention (actual or inferred) was a key factor in this process but contained some apparently contradictory observations about the possibility of imputing an intention. The issue of imputation was addressed more fully in Jones v Kernott.
On the particular facts of Stack, it was held that Ms Dowden had demonstrated that the course of dealing between the parties did indicate that their intention had been to share ownership on an unequal basis. Particularly significant was the fact that they had kept their financial arrangements largely separate. Consequently, Stack fell into the category of cases that were sufficiently unusual or exceptional to merit a departure from the presumption that equity follows the law. Ms Dowden was therefore held to own a 65% share as an equitable tenant in common and Mr Stack, a 35% share.
Stack clearly raises the question of how it should be decided whether the facts of a particular case are sufficiently exceptional to warrant a departure from the Stack presumption. For arguments that the financial arrangements made between Ms Dowden and Mr Stack are in fact quite common amongst cohabiting couples, despite the assertions of their Lordships that they were ‘unusual’, see eg G Douglas et al [2008] Conv 365). In Adekunle v Ritchie [2008] BPIR 77 it was again held that the facts were sufficiently unusual to require a departure from the Stack presumption. Indeed, that case suggests that where the parties are not a couple, it will require very little evidence to rebut the presumption.
An example of a case in which the Stack presumption has been applied strictly without any departures is Fowler v Barron [2008] EWCA Civ 337. This concerned a home which was vested in the joint names of an unmarried couple. Ms Fowler had not made any direct contributions to the purchase price. However, their relationship was a sexual one, they had bought the house at the time of the birth of their first child and she had used earnings on family purposes (such as school trips and children’s clothes). Their finances had not been kept as separate as those of Ms Dowden and Mr Stack. Ms Fowler was therefore held to have a half share in the house.
The Court of Appeal, in Jones v Kernott, addressed the issue of when the presumption should be rebutted. It ruled that, no matter how exceptional the facts might be, the presumption would apply unless there was evidence of an expressed or inferred intention that the house should not be owned equally. In other words, it ruled that unfairness alone would not rebut the presumption – genuine intention was needed. In the Supreme Court, however, it was held that the judge in that case had found that the parties had, after their relationship break-up and Mr Kernott’s subsequent property transactions, formed an intention that shares in their former quail-matrimonial home should be altered without quantifying what they should be. This, they held, was a sufficient intention to rebut the Stack presumption and allow the court to proceed to quantifying their interests on the basis of the entire course of dealing between them and the imputation of an intention to share in certain proportions.
Lord Wilson flagged the question of whether it should be possible to rebut the Stack presumption on the basis of an imputed intention as one that required further reflection but one which had not yet been addressed. On the current state of the authorities, it seems that only an express or inferred intention will serve to rebut the Stack presumption by demonstrating that the parties did not intend equal shares (Jones v Kernott, Geary v Rankines).
5.4 Quantification after Rebuttal of the Presumption that Equity Follows the Law Once the presumption that equity follows the law has been rebutted, it falls to the court to quantify exactly how much is owned in equity by each of the legal owners. It appears from Jones that, at this stage, if there is no evidence of an express intention as to the shares intended and no evidence (based on the entire course of dealing between the parties and all the circumstances of the case) from which such an intention can be inferred, the court may impute an intention to them to have shares that would be fair in the circumstances.
This quantification process has generated considerable debate about the appropriate roles of intention and fairness. In Oxley, as already mentioned, Chadwick LJ was critical of the emphasis on intention and suggested that principles of fairness should play a greater role. His emphasis on fairness, as opposed to genuine intention, has proved highly contentious. In Stack, their Lordships stressed that it was the intention of the parties that mattered and not principles of fairness. However, confusion resulted from reconciling this stress on intention with the fact that some of their Lordships (in particular Baroness Hale) referred to intention as including ‘imputed’ intention. An ‘imputed’ intention is, in reality, not a genuine intention of the parties at all but one which is attributed to them and the obvious basis on which such an intention would be attributed is fairness.
This tension came before the Supreme Court in the case of Jones v Kernott [2011] UKSC 53. This case concerned a house which was bought by, and transferred into the joint names of, Mr Kernott and Ms Jones. They lived together in that house with their children until their relationship broke down and Mr Kernott moved out in 1993. No express agreement had been made as to the equitable ownership but Ms Jones subsequently accepted that, in 1993, they had equal shares. Once Mr Kernott moved out, he bought a property of his own and ceased to make any contribution to the mortgage or other outgoings associated with the house and the children – leaving Ms Jones to pay them all. Twelve years later, he claimed that he had an equal share in the equitable ownership of the house but Ms Jones argued that his share had decreased in light of the events after 1993.
The Court of Appeal stressed the need to act only on the expressed or inferred intention of the parties. Baroness Hale’s reference to imputed intentions in Stack was disapproved and regarded as confusing. There was, their Lordships considered, no evidence of an actual or inferred intention that the shares should be varied according to the parties’ contributions to outgoings after separation. Their Lordships therefore ruled that the ownership situation of 1993 had not been changed and that the parties were tenants in common with equal shares.
In the Supreme Court, however, a different approach was taken. Their Lordships all accepted that, if it were clear that the parties intended unequal shares but not possible to identify an actual or inferred intention as to the size of their respective shares , then it would be permissible to impute an intention to the parties as to the size of their shares. According to Lady Hale and Lord Walker (who delivered a joint judgement):
“In a case such as this, where the parties already share the beneficial interest, and the question is what their interests are and whether their interests have changed, the court will try to deduce what their actual intentions were at the relevant time. It cannot impose a solution upon them which is contrary to what the evidence shows that they actually intended. But if it cannot deduce exactly what shares were intended, it may have no alternative but to ask what their intentions as reasonable and just people would have been had they thought about it at the time.” (para 47)
They also suggested (as did Lord Collins) that, in practice, the line between inferring and imputing an intention was unclear and that, to some extent, the two merged together.
According to Lords Kerr and Wilson, however, it was important to maintain a clear division between inferring and imputing intention because the former involved hunting for the views of the parties whereas the latter involved hunting for what was fair – two exercises which they regarded as very different.
The steps that should be taken by the court were summed up by Lady Hale and Lord Walker in Jones as follows:
“(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.
(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.
(3) Their common intention is to be deduced objectively from their conduct: "the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party" (Lord Diplock in Gissing v Gissing [1971] AC 886, 906). …
(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, "the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property": Chadwick LJ in Oxley v Hiscock [2005] FAM 211 para 69. In our judgment, "the whole course of dealing … in relation to the property" should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties' actual intentions.
(5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).” (para 51)
6. Resulting Trusts 6.1 The Presumption of Resulting Trust In commercial type cases, where there has been no express declaration as to beneficial ownership (either orally or in writing), equity may impose a resulting trust to give effect to what it presumes to have been the intention of the parties at the time the property was acquired. The presumption is expressed in Dyer v Dyer (1788) 2 Cox Eq Cas 92, by Eyre CB. In his words, equitable ownership "... results to the man who advances the purchase money".
Thus, a person who contributes the whole of the purchase price would be presumed to have been intended to become the sole beneficial owner. A person who contributes half of the purchase price would be presumed to have been intended to acquire half of the beneficial interest (whether as a joint tenant or as a tenant in common would depend upon the relationship between the parties). A person who contributes a quarter of the purchase price would be presumed to acquire a quarter share of the beneficial interest as a tenant in common.
6.2 Conduct from which the Intention will be Inferred The presumption of resulting trust will be raised only if there is a contribution to the purchase price. This means that subsequent payments (eg to mortgage instalments) will be relevant only if they evidence an intention at the date the property was acquired. It also seems likely that indirect contributions will have no role to play in resulting trusts. Were they to be included, the strict arithmetical quantification required in resulting trusts would prove highly problematic.
6.3 Quantification Under resulting trust principles, as explained above, the court must quantify the successful claimant's interest by reference to the amount they contributed to the purchase price. This approach was summed up by Dillon LJ in Springette v Defoe as follows:
The common intention must be founded on evidence such as would support a finding that there is an implied or constructive trust for the parties in proportions to the purchase price. The court does not yet sit, as under a palm tree, to exercise a general discretion to do as the man in the street, on a general overview of the case, might regard as fair.... Since, therefore, it is clear in the present case that there never was any discussion between the parties about what their respective beneficial interests were to be, they cannot, in my judgement, have had in any relevant sense any common intention as to the beneficial ownership of the property.... The presumption of a resulting trust is not displaced.
6.4 Displacement of the Presumption of Resulting Trust The presumption of resulting trust will be rebutted by any evidence that the parties intended to own the property in question differently.
In the absence of evidence of a contrary intention, the presumption historically gave way to a contrary presumption (the presumption of advancement) in certain circumstances. The role played by the presumption of advancement in recent years has been fairly minimal: Pettitt v Pettitt. It operated where a father contributed towards the cost of property bought in the name of his child; and where a husband contributed towards the cost of property bought in the name of his wife. It was therefore based on sexist assumptions and was probably inconsistent with Article 5 of Protocol 7 of the European Convention on Human Rights (which the UK has not yet ratified). According to this:
“Spouses shall enjoy equality of rights and responsibilities of a private law character between them, and in their relations with their children, as to marriage, during marriage and in the event of its dissolution…”
The presumption of advancement was abolished by the Equality Act 2010.
7. Reform The rules governing the acquisition of equitable interests under Pettitt, Gissing, Rosset and Stack have caused a great deal of concern and attracted considerable criticism, not least from the judiciary. The issue has recently been considered by the Law Commission, twice.
In its discussion paper ‘Sharing Homes’, July 2002 http://www.lawcom.gov.uk/docs/lc278.pdf
the Law Commission set out a scheme which it devised in an attempt to replace the current system of property entitlement with one which operated in a fairer, more realistic way, regardless of the type of relationship between the parties and which was not restricted to financial contributions. It concluded, however, that this scheme would be unworkable and create anomalies. The variety of situations and relationships covered was too large. In Stack (para 46) Baroness Hale referred to this conclusion and observed that:
While this conclusion is not surprising, its importance for us is that the evolution of the law of property to take account of changing social and economic circumstances will have to come from the courts rather than Parliament.
The Civil Partnerships Act 2004 contains provisions which allow for the application of principles similar to those applying on divorce on the breakdown of registered partnerships. The Act, however, is limited to same sex couples who have entered into a civil partnership, and therefore leaves the current law intact for heterosexual couples. This apparent anomaly led to a further referral to the Law Commission from the Government which, after a lengthy Consultation Paper, resulted in the publication of ‘The Financial Consequences of Relationship Breakdown’ (Law Comm Report No 307) on 31 July 2007 (Hughes et al [2008] Conv 197). .
In its 2007 report, the Law Commission proposed the introduction of a structured judicial discretion to order property adjustment on the breakdown of the relationships of couples who are not married or in a civil partnership and who satisfy specified eligibility criteria. Thus, couples who do not satisfy the eligibility criteria (which relate broadly either to having children or to a minimum period of cohabitation) will fall outside the proposed scheme. So too will situations in which the disputants are not in an intimate relationship (eg where they are siblings or parent and child). Cases in which the dispute as to beneficial ownership involves a third party (such as a bank, as in the Rosset type of scenario) will also fall outside the scope of the Law Commission’s proposals.
The Law Commission’s proposals have not been given a high priority by the Coalition Government and may not be translated into law in England and Wales. It is interesting to note that statutory reform in this area has been introduced in Scotland by the Family Law (Scotland) Act 2006.
Part II Proprietary Estoppel Reading
Essential Dixon, Modern Land Law, ch 9.4 – 9.8; or
Smith, Property Law, ch 10.1-10.4
Supplementary Gray and Gray (Elements), ch 9.2
McFarlane et al (Casebook), ch 13
Thorner v Majors [2009] UKHL 18
T Etherton, ‘Constructive Trusts and Proprietary Estoppel: The Search for Clarity and Principle’ [2009] Conv 104
N Piška, ‘Hopes, Expectations and Revocable Promises in Proprietary Estoppel’ (2009) 72 MLR 998
M Dixon, 'The Reach of Proprietary Estoppel: A Matter of Debate' [2009] Conv 85.
M Thompson [2003] Conv 157
M Balen and C Knowles, ‘Failure to Estop: Rationalising Proprietary Estoppel Using Failure of Basis’ [2011] Conv 176
1. General According to Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129:
If a man, under a verbal agreement with [an estate owner] for a certain interest in land, or ... under an expectation, created or encouraged by the [estate owner], that he shall have a certain interest, takes possession of such land, with the consent of the [estate owner], and upon the faith of such promise or expectation, with the knowledge of the [estate owner], and without objection by him, lays out money upon the land, a Court of Equity will compel the [estate owner] to give effect to such promise or expectation.
His judgement is often referred to today and commonly thought to mark the beginning of the modern law of proprietary estoppel. Some years later, in Willmott v Barber (1880) 15 Ch D 96, Fry J identified five conditions to be satisfied in order to raise a proprietary estoppel. These became known as “the five probanda”. They may be summarised as follows:
(1) The claimant must have made a mistake as to their rights.
(2) The claimant must have spent money or done some act (not necessarily on the defendant’s land) because of the mistake.
(3) The defendant must be aware of their (the defendant’s) right.
(4) The defendant must be aware of the claimant’s mistake.
(5) The defendant must have encouraged the claimant’s expenditure, either directly or by refraining from asserting the defendant’s own rights.
Today, these probanda are not applied strictly by the courts in determining whether or not an estoppel has arisen. Oliver J in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133, stressed that they should not be treated as strict rules unless, possibly, in cases in which there had simply been acquiescence by the land owner in the detrimental reliance, as opposed to ones in which there had been some form of representation or encouragement. Oliver J’s broad approach, focusing on “whether, in all the circumstances of [the] case, it was unconscionable for the defendant to seek to take advantage of the mistake” has been adopted by the Court of Appeal (see, eg, John v George (1995) 71 P&CR 375 and Lloyds Bank plc v Carrick [1996] 4 All ER 630). It was approved by the House of Lords in Yeoman’s Row Management v Cobbe [2008] UKHL 55 where, however, it was stressed that it was “emphatically not a licence for abandoning careful analysis for unprincipled and subjective judicial opinion” (per Lord Walker at [59]).
Indeed, in Yeoman’s Row Management v Cobbe [2008] UKHL 55, the House of Lords repeatedly emphasised that unconscionability alone must not be regarded as sufficient to allow a claim to succeed on the basis of proprietary estoppel. In the words of Lord Scott (at [16]):
“My Lords, unconscionability of conduct may well lead to a remedy but, in my opinion, proprietary estoppel cannot be the route to it unless the ingredients for a proprietary estoppel are present. These ingredients should include, in principle, a proprietary claim made by a claimant and an answer to that claim based on some fact, or some point of mixed fact and law, that the person against whom the claim is made can be estopped from asserting. To treat a “proprietary estoppel equity” as requiring neither a proprietary claim by the claimant nor an estoppel against the defendant but simply unconscionable behaviour is, in my respectful opinion, a recipe for confusion.”
Similarly, Lord Walker observed (at [46]) that:
“Equitable estoppel is a flexible doctrine which the Court can use, in appropriate circumstances, to prevent injustice caused by the vagaries and inconstancy of human nature. But it is not a sort of joker or wild card to be used whenever the Court disapproves of the conduct of a litigant who seems to have the law on his side. Flexible though it is, the doctrine must be formulated and applied in a disciplined and principled way. Certainty is important in property transactions.”
In order to raise a proprietary estoppel today, then, it must be unconscionable for a defendant to deny the claimant’s assumption or expectation but this must be because of the occurrence of the essential elements necessary to found a proprietary estoppel claim. The following three sections will focus upon the broad conditions which must be satisfied before a proprietary estoppel can be raised. However, in the words of Robert Walker LJ in Gillett v Holt [2000] 3 WLR 815 (see Wells, [2001] Conv 13):
[I]t is important to note at the outset that the doctrine of proprietary estoppel cannot be treated as subdivided into three or four water-tight compartments... that the quality of the relevant assurances may influence the issue of reliance, that reliance and detriment are often intertwined and that whether there is a distinct need for a ‘mutual understanding’ may depend on how the other elements are formulated and understood. Moreover, the fundamental principle that Equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. In the end the court must look at the matter in the round.
This need to look at the matter ‘in the round’ has been stressed in subsequent cases – eg Murphy v Burrows [2004] EWHC 1900,
2. The Claimant’s Belief The claimant must have believed that they already had an interest in the property or a right to use it in some way, or that the defendant would grant such a right to them in the future. A belief based upon incomplete, non-binding negotiations would not suffice, according to AG of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114. This point was affirmed by the House of Lords in Yeoman’s Row Management v Cobbe [2008] UKHL 55. According to Lord Scott:
20. Lord Kingsdown’s requirement that there be an expectation of “a certain interest in land", repeated in the same words by Oliver J in the Taylors Fashions case, presents a problem for Mr Cobbe’s proprietary estoppel claim. The problem is that when he made the planning application his expectation was, for proprietary estoppel purposes, the wrong sort of expectation. It was not an expectation that he would, if the planning application succeeded, become entitled to “a certain interest in land". His expectation was that he and Mrs Lisle-Mainwaring, or their respective legal advisers, would sit down and agree the outstanding contractual terms to be incorporated into the formal written agreement, which he justifiably believed would include the already agreed core financial terms, and that his purchase, and subsequently his development of the property, in accordance with that written agreement would follow. This is not, in my opinion, the sort of expectation of “a certain interest in land” that Oliver J in the Taylors Fashions case or Lord Kingsdown in Ramsden v Dyson had in mind.
It was suggested in Taylor v Dickens [1998] 1 FLR 807, that a mere hope that the defendant might transfer an interest to them would similarly fail to found an estoppel claim. This decision was disapproved by the Court of Appeal in Gillett v Holt, where it was stressed that it was not necessary for a claimant to show that an irrevocable promise had been made to them. Further discussion of this issue is to be found in the two recent House of Lords cases of Yeomans v Cobbe and Thorner v Majors [2009] UKHL 18
In Yeomans v Cobbe, Lord Walker indicated that in all cases the claimant must believe that the assurance made to them was binding and irrevocable even if, in reality, it was not. He acknowledged that misunderstandings about the binding nature of assurances would be much more likely in the domestic context than in the commercial context.
In Thorner v Majors, it was held that the absence of a clear or express assurance by Peter Thorner that he would leave his farm to David (his cousin’s son) on his death did not prevent David’s proprietary estoppel claim succeeding. Peter had handed David his life insurance policies in 1990 and, over the remaining fifteen years of his life, made a series of oblique references to what would happen on his death which David had reasonably understood as a commitment to leaving him the farm. The Court of Appeal had found that there was no assurance sufficiently clear and unambiguous to found a proprietary estoppel. The House of Lords reversed this, Lord Walker (with whom the others agreed) observing that:
I would prefer to say (while conscious that it is a thoroughly question-begging formulation) that to establish a proprietary estoppel the relevant assurance must be clear enough. What amounts to sufficient clarity, in a case of this sort, is hugely dependent on context.
He acknowledged that the trial judge had found Peter to be “a man of few words, who generally maintained his privacy about his personal financial affairs … and who hardly ever spoke in direct terms" and went on to explain that:
59. In this case the context, or surrounding circumstances, must be regarded as quite unusual. The deputy judge heard a lot of evidence about two countrymen leading lives that it may be difficult for many city-dwellers to imagine—taciturn and undemonstrative men committed to a life of hard and unrelenting physical work, by day and sometimes by night, largely unrelieved by recreation or female company.
Just because the case arises in the domestic context, however, does not mean that the vagueness of an assurance will never present a problem In MacDonald v Frost 2009 and Shirt v Shirt 2010, proprietary claims which arose in the family context failed because the assurance was not sufficiently precise or definite.
The claimant’s belief must either have been encouraged by the defendant or have been known to and acquiesced in by the defendant. It was held in Crabb v Arun DC [1976] Ch 179 that the defendant need not know precisely how the claimant was proposing to act to their detriment in reliance on their belief, provided there was awareness of the general plans of the claimant. In that case, the claimant believed that the defendant would grant him access over his land. Because of this belief, he sold off part of his own land. Unless access over the land of the defendant was permitted, the land that he retained would have been completely landlocked. The defendant had not been aware of the sale of part of the claimant’s land but did know of his general plans for the land. This was sufficient. In cases where it would be reasonably foreseeable that the claimant would act to their detriment on the basis of a belief encouraged by some representation of, or joint assumption with, the defendant, the courts may well find in the claimant’s favour, even if the defendant had no knowledge whatsoever of the claimant’s subsequent detrimental conduct.
In Thorner, David had acted to his detriment in reliance on Peter’s oblique assurances by continuing to work for him unpaid for the rest of Peter’s life (fifteen years – having already worked for him without pay for fourteen years). He thus failed to take advantage of alternative work opportunities that presented themselves. The fact that Peter did not know that David was turning down these alternatives and may not necessarily have intended him to do so was, according to the House of Lords, irrelevant. It had been reasonable for David to believe the assurances and to act in reliance upon them.
3. Detrimental Conduct Consideration has already been given to cases where expenditure on land or unpaid labour upon it or in the business of the defendant have been held to be detrimental conduct sufficient to give rise to proprietary estoppel. Other types of conduct have also satisfied this test. In Jones v Jones [1977] 1 WLR 438, for example, the detrimental conduct lay in leaving a home and job. In Greasley v Cooke [1980] 1 WLR 1306, it lay in looking after the home and family of the defendant unpaid. In ER Ives Investments v High [1967] 2 QB 379, it lay in the claimants building a garage on their own land in such a way as to make it dependent on access over neighbouring land. In Gillett v Holt, Robert Walker LJ criticised the first instance judge for taking “too narrowly financial a view of the requirement for detriment” and was prepared to take into account the fact that the assurances had led the Gilletts to deprive themselves of the opportunity to better themselves financially by buying their own house or seeking alternative employment. Unpaid labour, and refraining from taking up other opportunities, also constituted the detrimental conduct in Thorner v Majors.
4. Reliance It would not be unconscionable for a defendant to assert their rights against a claimant, if the claimant’s detrimental conduct was not undertaken in reliance upon their belief in their own rights in the defendant’s land. Accordingly, no estoppel will arise unless reliance can be established. See the discussion of this aspect in relation to Lloyds Bank v Rosset on the main Co-Ownership handout.
5. The Remedy Proprietary estoppel can be an extremely useful concept in that it may operate regardless of formality requirements: Yaxley v Gotts [1999] 3 WLR 1217 (but cf Lord Scott’s observations about s 2 LP(MP)A in Cobbe, set out in Section 2 above). On the basis of proprietary estoppel, claimants have been awarded a fee simple (Dillwyn v Llewelyn 45 ER 1285; and Pascoe v Turner [1979] 1 WLR 431); a lease (JT Developments Ltd v Quinn (1990) 62 P&CR 33); an easement (Crabb v Arun DC; and ER Ives Investments v High); and many other types of interest in land. They have also frequently been awarded licences to continue living in a particular place (which are not necessarily interests in land) (Matharu v Matharu The Times, 13 May 1994).
The remedy is discretionary. Where the expectations are clear (and there is something like an agreement), the courts will usually give effect to those expectations – according to Robert Walker LJ in Jennings v Rice [2002] EWCA Civ 159; [2002] WTLR 367. Robert Walker LJ, in Jennings, went on to observe that a remedy falling short of the claimant’s expectation may be appropriate in cases where the expectations were unclear, or where they were extravagant or out of proportion with the detriment. In such cases, the court should look to all the circumstances to determine the remedy, but the importance of the link between the amount of detriment and the remedy was stressed. In Jennings, the remedy awarded reflected the amount of detriment suffered by the claimant – which was half the value of the expectation.
The courts have never awarded a remedy in excess of that expectation, even where the expenditure incurred by the claimant (their detrimental reliance) exceeds the value of the expectation itself (Baker v Baker & Baker (1993) 25 HLR 408). Indeed, the courts have sometimes refused to grant any remedy at all, on the basis that the benefits already received by the claimant outweigh the detriment incurred (Sledmore v Dalby (1996) 72 P&CR 196).
6. Do Estoppels Bind Third Parties? There has been a great deal of debate over recent years as to whether third parties will be bound by the rights of a claimant who is able to establish a proprietary estoppel, but has not yet been to court and obtained a remedy. There are cases which support the view that estoppels can bind third parties (see, eg, Dillwyn v Llewelyn; Voyce v Voyce (1991) 62 P&CR 290; and ER Ives Investments v High). However, in none of these cases was the third party concerned a bona fide purchaser without notice and there are indications in them that, in unregistered land, such purchasers would not be bound by the estoppel. Accordingly, it appears that estoppels are being treated as equitable interests in land which can be neither overreached nor registered as land charges.
That having been said, there is a view that estoppels cannot bind purchasers. Because the remedy is discretionary, it is not clear until the judgement of the court what interest the claimant will be awarded and, therefore, it would be impossible to bind a purchaser with an as yet unidentified interest. This argument was accepted by the Court of Appeal in United Bank of Kuwait v Sahib [1997] Ch 107, although the cases supporting the contrary view were not dealt with in any depth (see Critchley, [1998] Conv 502). The treatment of this issue under the Land Registration Act 2002 will be dealt with later in the course.
There are two ways of creating trust: express declaration, which is made by the person creating the trust that they intend to create a trust. It will only be effective if it complies with the formalities (it must be in writing (s 53(1)(b) LPA)). The second way is by implied trust.
The Acquisition and Quantification of Interests under Express and Implied Trusts:
- Presumption that equity follows the law; if you can imagine that one person is the sole legal owner of a property, presumption that he would be the equitable owner. If there are two owners of the fee simple the presumption that equity follows the law has a different outcome, the legal owners are also equitable owners - will be presumed that they will be joint tenants unless survivorship applies (one T dies therefore all ownership goes to the other). Unless the relationship is commercial in nature which would be equitable tenants in common.
- This can be rebutted by evidence of contrary intention.
- Express Trust:
- Express declaration of intention to create a trust - will only be effective if it complies with the correct formalities, must be evidenced in writing S53(1)(b) LPA - if a trust is created, if he decides he wants to give half the equity of interest to someone else. He can retain the legal title on his own, he could share the equitable interest with someone else or give it as a whole to someone else.
- It will articulate how much be owned in equity - this is the best evidence of there intention they could get. Always look to see if there is anything in writing which sets out what should happen to the equitable ownership. If this is vague, this is a question of construction, analyse and decide what was supposed to be intended. certain words such as jointly or shares could identify what the trust is.
- Implied Trusts and Proprietary Estoppel:
- Resulting trust - an equitable interest resulting back to someone e.g. Ella is the sole owner of the house, Charlie will pay for the house - in this situation unless it is clear that it is a gift Charlie will become the equitable owner.
- Constructive trust - stopping unfairness, stopping the legal owner claiming they own the entire equitable interest. Linked to intention.
- Proprietary Estoppel - Can give rise to all sorts of equitable interests in land.
- Implied trust do not need any formalities. There are different types of implied trusts as above. The relationships between these three types is perpetually moving in case law and hard to follow. tracking what the law is in this area is quite a challenge, people have different perspectives on how it stands and where it should go too. •
- A Witches Brew History:
- Up until the 1970's there weren't that many cases about the family home. Huge increase in cases between married couples arguing about who owned what in the matrimonial home.
- Pettit v Pettit and Gissing v Gissing: Courts did not have a general discretion to reallocate property rights between married couples on divorce.
- Martimonial Causes Act - Wide discretionary powers to judges.
- Rosset 1991 (man entitled for a a trust fund, will only release money if it was in his sole name, this was a derelict farm house, whilst he was working abroad Mrs Rosset would spend time on the farm house helping out whenever she could with the builders, and did a lot of the design work and decorated a number of rooms - Mr Rosset mortgaged the house, which wasn't paid wanted to get hold of the equivalent value from getting the house, Mrs Rosset said that I have an interest in this house. HOL: No she has not got an interest. Two limbed formula which you can acquire the title.
- Lord Bridge Formula.
- Too narrow, too restrictive.
- Single Legal Owners cases: some of following cases don't apply as they are joint legal owners - general rule is Rosset with some expansions and softening to help decide whether an equitable interest in land occurs. Once you have decided on the basis they have acquired the interest - you must decide how much they have, this is where the Stack and Jones cases come into play.
- Joint Legal Owner Cases: No need for the acquisition stage as you are entitled as equity follows lie.
- Stack v Dowden 2007
- Jones v Kernott 2011
- Constructive Trusts Acquisition Stage (Single legal owner cases)
- Rosset:
- Method 1 - two main conditions - common intention and detrimental reliance.
- Common Intention: to co-own the equitable interest Can Charlie show that they had a common intention to share the land - Rosset could only show that they was going to live together and decorate the house together not that they have an agreement of co-ownership. Proof? Oral discussion may expressly articulate joint tenancy - enough to evidence the existence. Eves v Eves - Unmarried couple, Man was the sole owner - Said that they wouldn't put there legal title as she was too young. Oral discussion which evidences that they are co-owners excuses can be evidence that they are co-owners.
- Detrimental Reliance
- Quantification Stage:
- Applies to both types of case: the stack presumption is usually about joint legal owner cases - equity follows the law.
- In single legal ownership - the equitable ownership is owned by the same person as the legal title - to rebut this you must go through the acquisition stage (go through Rosset 1 and 2).
- Rosset 1 - would look for an oral agreement - must infer from the course of dealing what they would have intended - would have intended what is fair.
- Rosset 2 - no oral agreement - the courts must look at the whole conduct of the parties how much each of them should own - Cooke 1995: she had contributed 6.7% of the purchase price - decided when they looked at the whole course and conduct of the parties they could infer the intention that they should be joint owners - got 50%.
- Looks beyond the financial contribution - how much they intended that each of them should own in the equitable interest.
- Oxley v Hiscock 2004 - criticised the law. - not appropriate where the parties weren't married.
- Stack v Dowden 2007 - wanted a greater share than half as she had put more money into the property - HOL decided that the presumption should be that equity follows the law.
- In joint legal owner cases they will become joint equitable owners - in single legal owner cases the sole legal owner is sole equitable owner.
- What isn't entirely clear is whats the starting point on how to get it quantified? it is not clear for quantifying the interest Sphere of application
- HOL said it should apply at least in domestic and consumer cases but where it is a commercial case - resulting trust.
- Laskar v Laskar 2008 - decided that because the purpose of the trust was commercial and was to use the property as a investment - should not apply Stack - would own exactly what for.
- Telling the difference - do not look at the relationship of the parties - look at the purpose of the trust.
- Rebuttal: look for evidence of a contrary intention - that they should not have equal shares in the property - in Stack itself it was found that it was rebutted. Kept all there finances very separate - was regarded as significant in that case.
- Women had a 65% share and Man 35% share as tenants in common. This also reflected there financial contributions to the price.
- Can look for an express intention, inferred intention (from the conduct of the parties, examining the details of the conduct of the parties) or imputed intention (imputing the knowledge of the agent to the purchaser, in this context whether we should impute to the parties a intention they never had, that we think they should have had because it would have been fair). in stack this was unclear, they were critical on Oxley's expression of fairness - you impute to them what would have been fair. There were a couple of references to imputed intention by baroness Hale.
- Jones v Kernott 2011 - couple who lived together and had children - they bought a house which was put into their joint names - man moved out and stopped making a financial contribution to the family, bought another house with another family - at that time they understood they were both equal owners in equity. 12 years later the man claimed that he owned half a share in the house and wanted it to be sold, in the COA he succeeded as they could not find an express and inferred intention that rebutted the presumption - at the SC this was reversed - great stress that there was no evidence of how much he would own of the house - once he left they could infer an intention that there ownership should change. this was enough to rebut the assumption. - Seems from the judgements that you can't rely on imputed to rebut the stack presumption, must be an expressed or inferred intention.
- After Rebuttal - Quantification:
- Must look at expressed intention, or inferred - must look at the whole course dealing - how much they paid, bills, children, personalities, how they kept their money.
- At this stage you can impute how much they intended each of them should have. - what would be fair for each of them to have, can not impute if there is evidence regarding the contrary.
There are various ways in which a person might acquire an equitable interest in property (when the legal title to it does not belong exclusively to them). The intention of the parties plays a crucial role in all of these methods, at least where that intention can be ascertained. In some cases, a successful claimant might be able to prove that they own the entire beneficial interest. More usually, however, a successful claimant will establish only that they have an interest as a beneficial joint tenant or tenant in common, thus giving rise to equitable co-ownership.
In the absence of any indications as to a contrary intention of the parties (along the lines set out in the following sections of this handout), there is a rebuttable presumption that equity follows the law. Thus, A would be presumed to be the sole equitable owner if he was the sole legal owner whereas A and B would be presumed to be the equitable joint tenants if they were the legal joint tenants. It should be noted, however, that equity assumes that, if the relationship is that of business partnership, mortgagees etc, equity would presume that they would rather have intended to become beneficial tenants in common with equal shares. Survivorship would not be appropriate in such cases.
Thus, it is important to remember that, if no express trust, implied trust or proprietary estoppel alters the situation, the fallback position is that equitable ownership reflects legal ownership – Stack v Dowden. In single legal owner cases, claimants therefore face the twofold task of first establishing that they have acquired an equitable interest and second persuading the court that it should be quantified at the desired amount. By contrast, claimants in joint legal owner cases will not need to establish acquisition of an equitable interest (as this is assumed from ownership of the legal title) and their argument will relate solely to quantification.
2. Express Trust A trust will be ‘express’ if it comes into existence as a result of an express declaration of trust by the legal owner. It is extremely important to remember that, if the property concerned is land, an express declaration of trust will not be effective unless it is evidenced in writing and signed by the person parting with beneficial ownership - s 53(1)(b) Law of Property Act 1925 (LPA). If there is an express declaration which complies with s 53(1)(b), it will be conclusive. In Pettitt v Pettitt [1970] AC 777 Lord Upjohn observed that:
If the property in question is land, there must be some lease or conveyance which shows how it was acquired. If that document declares, not merely in whom the legal title is to vest, but in whom the beneficial title is to vest, that necessarily concludes the question of title ... for all time, and in the absence of fraud or mistake at the time of the transaction the parties cannot go behind it at any time thereafter.
The use of the phrase "joint tenancy" or "tenancy in common" is not essential. The form of co-ownership intended is a question of construction. The use of a word such as "jointly” tends to indicate that a joint tenancy was intended. Words such as "equally" or "shares" will tend to indicate a tenancy in common. If conflicting expressions are used, which prevails is a question of construction for the court: Martin v Martin (1987) 54 P & CR 238.
3. Implied Trusts and Proprietary Estoppel
3.1 Underlying Concepts
Despite the fact that there is no express trust, a trust may nevertheless arise. It might be implied, either as a “resulting” or a “constructive” trust. Alternatively, it may come into being as a result of a court order in a proprietary estoppel action. In the context of the informal acquisition of interests in equitable estates in land, all these concepts play a role. However, there is considerable uncertainty and confusion as to the extent to which they overlap and the ambit of any distinctive roles possessed by each of them. This confusion has been exacerbated by a judicial tendency to use the terms interchangeably. The resulting chaos was described by Carnwath LJ in Stack v Dowden [2005] EWCA Civ 857, 75 as follows:
To the detached observer, the result may seem like a witch's brew, into which various esoteric ingredients have been stirred over the years, and in which different ideas bubble to the surface at different times. They include implied trust, constructive trust, resulting trust, presumption of advancement, proprietary estoppel, unjust enrichment, and so on. These ideas are likely to mean nothing to laymen, and often little more to the lawyers who use them.
In subsequent sections of this handout, issues such as the relationship between constructive trusts and proprietary estoppel (Section 4.1.1) and the relationship between resulting and constructive trusts (Section 4.2.5) will be explored in more depth. The operation of the doctrine of proprietary estoppel (in contexts extending beyond the acquisition of interests in equitable estates in land) will be examined in Part II. At this stage, however, it is helpful to have a preliminary idea of what is generally understood by the terms “resulting trust”, “constructive trust” and “proprietary estoppel”.
A resulting trust is a type of implied trust. It comes into being in two or three main situations, only one of which is relevant for current purposes. In all resulting trusts, the equitable interest ‘results’ back to a person who previously had some claim to the property in question or the consideration with which it was purchased. It is often said to allow effect to be given to what was assumed to be the intention of the parties. For our purposes, the only relevant type of resulting trust is one in which a person has paid towards the cost of property of which somebody else is the legal owner. According to what is known as “the presumption of resulting trust”, in the absence of evidence or presumptions to the contrary, it is presumed that the parties intended that the legal owner would hold the property on trust for him/herself and the person who contributed toward the price. Their respective shares in the equitable ownership should reflect their respective contributions to the purchase price. (For a detailed analysis of resulting trusts, see W Swadling, ‘Explaining Resulting Trusts’ (2008) 124 LQR 72.). Increasingly, resulting trusts are becoming viewed as mechanisms which are more appropriate to the commercial than the domestic context (see below).
A constructive trust is also a form of implied trust. Constructive trusts will arise in a variety of situations in which it would, for some reason, be unjust or unconscionable to allow the owner of the legal title to retain the entire equitable interest.
Proprietary estoppel is a doctrine which may result in a court order requiring a legal owner of land to acknowledge the claims of another – whether by way of a trust in their favour, by an award of damages or some other remedy.
3.2 History It is only in the latter half of the last century that the question of how a person might acquire an interest in their home under an implied trust, or by means of a proprietary estoppel, has become very important. It initially became important in the context of married couples who divorced. Wide discretionary powers to re-allocate property on divorce were only conferred on the judges in 1973 by the Matrimonial Causes Act. This followed the ruling by the House of Lords in Pettitt v Pettitt and Gissing v Gissing [1971] A 886 that (contrary to the approach advocated by Lord Denning in various cases) courts did not have a general discretion to reallocate property rights between married couples on divorce
Although the question of entitlement to equitable ownership still arises in connection with married couples in some cases (eg where one of them has been declared bankrupt and the trustee in bankruptcy needs to establish the precise extent of their interest, if any, in the matrimonial home), it usually arises today (after the MCA) in disputes between formerly cohabiting but unmarried couples or in disputes between other family members.
The House of Lords in Pettitt and Gissing provided some guidance on how the proprietary interests of the couple should be identified. In essence, if there had been no express declaration as to the beneficial ownership, duly evidenced in writing and signed by the person parting with the beneficial ownership, consideration must be given to whether a claimant had acquired an interest under an implied trust or proprietary estoppel. Whether a claimant had acquired an interest under a constructive or a resulting trust (between which their Lordships thought it unnecessary to differentiate in those cases) depended on the common intention of the parties. The two cases did not spell out all the situations in which judges should find and give effect to such a common intention. However, two such situations did emerge. First, where there had been an oral agreement between the parties to share the beneficial interest, on which the claimant had relied to his or her detriment. Second, where the claimant had contributed to the purchase price. The precise boundaries of these situations, however, were not defined with clarity.
Despite criticism of his approach by their Lordships in Pettitt and Gissing, Lord Denning continued to exercise a wide discretion in deciding on the property rights of couples in their former home.
It was against this background that the matter again came to the House of Lords in Lloyds Bank v Rosset [1991] 1 AC 107 (Dixon [1991] CLJ 38; Clarke [1990] All ER Rev 154; Davies (1990) 106 LQR 539; Gardner (1991) 54 MLR 126; Gardner (1993) 109 LQR 263; and Halliwell (1991) 20 A-A LR 500). Lord Bridge delivered the sole judgement, with which all the other members of the panel concurred. Lord Bridge's judgement was orthodox in approach and designed to achieve greater certainty and clarity. He set out two methods by which a claimant, who did not own the legal title and could not establish an express trust, might acquire an equitable interest under a trust. This two-limbed formula became the guiding template governing disputes concerning the informal acquisition of interests in land and, although its continued application has been thrown into some doubt by Stack v Dowden (and subsequent developments), still seems (subject to some amendments) to play the pivotal role at the acquisition stage of single legal owner cases. According to Lord Bridge in Rosset:
I … draw attention to one critical distinction which any judge required to resolve a dispute between former partners as to the beneficial interest in the home they formerly shared should always have in the forefront of his mind.
The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to the acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or an arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made, it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or proprietary estoppel.
In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or an arrangement to share, however reasonable it may have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do.
As mentioned above, this two-limbed Rosset formula provides a useful starting-point for the analysis of scenarios in which disputes focus on the acquisition of beneficial interests in properties where legal title is vested in a single legal owner. Its continued application after Stack v Dowden, however, has been doubted. Stack concerned a different type of scenario – that in which legal title to a property was vested in the names of both parties and the dispute concerned how the equitable entitlement (which both were acknowledged to have acquired) should be quantified.
The decision in Stack as regards quantification undoubtedly affects quantification of interests in the single legal owner context. The question of whether the Rosset formula should govern at the acquisition stage of single legal owner cases, however, continues to attract debate and divergent perspectives. Baroness Hale, who was uncomfortable with the potential restrictiveness of this formula, cast some doubt on its continued relevance in the Privy Council case of Abbott v Abbott 27 July 2007, Privy Council Appeal No 142 of 2005 (M Dixon [2007] Conv 456). In Thomson v Humphrey [2009] EWHC 3576, however, the question was addressed head-on by a first instance court and Warren J decided that Stack applied only to the quantification stage of single owner cases –
The rules governing quantification of interests in joint legal owner cases were traditionally thought to be those of resulting trust - see eg Springette v Defoe [1992] 2 FLR 388. This meant that shares were quantified so that each party was awarded a share proportionate to their contribution to the price. In Stack, however, the House of Lords held that the starting point should be the presumption that both parties were jointly entitled in equity as well as at law. This approach was further refined and developed by the Supreme Court in Jones v Kernott. This will be discussed further in Section 5 below.
4. Constructive Trusts - Acquisition Stage (Single Legal Owner Cases Only) NB IN joint legal owner cases a common intention to share the equitable interest is assumed because of the shared legal ownership. In single legal owner cases, however, claimants who do not own the legal title have to prove that this common intention exists by other means. The Rosset formula (as expanded and softened by subsequent caselaw) still appears to provide a useful formula to guide assessments of whether such a common intention can be established.
4.1 The First Limb of the Rosset Formula (Actual Common Intention Constructive Trusts) 4.1.1 Relationship with Proprietary Estoppel Lord Bridge stated that if a claimant satisfied the conditions set out in the first limb of his formula, an interest would be acquired under a constructive trust or proprietary estoppel. The relationship between a constructive trust (in this context) and a proprietary estoppel has been the subject of some debate.
The most important difference between them appears to be that, once a proprietary estoppel has been raised, the court has a discretion as to what remedy to award and generally awards what it considers the minimum equity needed in order to address the relevant unconscionability (see discussion of this below). If a constructive trust is found to exist, the court has no discretion because it is simply recognising the existence of a pre-existing trust.
Another difference between proprietary estoppel and the common intention constructive trust relates to the claimant’s belief. In the actual common intention constructive trust there must have been a common intention that the claimant should have a beneficial interest, evidenced by oral discussions. Generally, estoppel does not require such evidence, it being sufficient for claimants to believe that they have or would have a right in the property; for defendants to acquiesce in that belief (possibly through silence); and for there to be detrimental reliance.
The Court of Appeal in Yaxley v Gotts [1999] 3 WLR 1217 accepted that, although there are many areas in which the doctrines do not overlap, ‘in the area of a joint enterprise for the acquisition of land ... the two concepts coincide’ (per Robert Walker LJ). In Stack v Dowden, however, Lord Walker adopted a more cautious approach – stressing the fundamental differences between the two doctrines. He said of the tendency to assimilate them (at para 37):
I have myself given some encouragement to this approach (Yaxley v Gotts [2000] Ch 162,177) but I have to say that I am now rather less enthusiastic about the notion that proprietary estoppel and "common intention" constructive trusts can or should be completely assimilated. Proprietary estoppel typically consists of asserting an equitable claim against the conscience of the "true" owner. The claim is a "mere equity". It is to be satisfied by the minimum award necessary to do justice (Crabb v Arun District Council [1976] Ch 179, 198), which may sometimes lead to no more than a monetary award. A "common intention" constructive trust, by contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests.
In summary, if the conditions of the first limb are satisfied, a claimant will succeed on the basis of either a constructive trust or a proprietary estoppel. However, it should be noted that a proprietary estoppel, the estoppel might be satisfied by a remedy falling short of equitable ownership – eg a licence to occupy the property (Jones v Jones; and Matharu v Matharu (The Times, 13 May 1994)). Estoppel will be discussed more fully below, in Part II of this handout.
In order to acquire an equitable interest under the first Rosset limb, two requirements must be satisfied. These will now be considered in turn.
4.1.2 Common Intention/Agreement (1) Nature of the agreement/understanding The agreement must be to share the beneficial ownership of the house. It need not specify the precise interests of each party. Provided that it is clear that each is intended to have some interest, the court will scrutinise the words used and any other relevant circumstances to determine the shares that were intended: Eves v Eves [1975] 1 WLR 1338; and Grant v Edwards. An agreement to live in the property together or to renovate it as a joint venture will not suffice - Rosset. Neither will a common intention to run a business together - Geary v. Rankine (2012 EWCA Civ 555. Nor will vague assurances not intended to confer interests in property (such as that improvements ‘will be for the benefit of both of us’ or ‘I will take care of you’) – James v Thomas [2007] EWCA Civ 1212.
(2) Proof In Lloyds Bank v Rosset Lord Bridge indicated that:
The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been.
This was echoed by Dillon LJ in Springette v Defoe [1992] 2 FLR 388:
It is not enough to establish a common intention which is sufficient to found an implied or constructive trust of land that each of them happened at the same time to have been thinking on the same lines in his or her own uncommunicated thoughts, while neither had any knowledge of the thinking of the other.
NB The oral discussions need only evidence the agreement/understanding. They do not need to make it explicit. Thus, excuses by the legal owner for not putting the house into joint names will suffice - Eves v Eves; Grant v Edwards; and Hammond v Mitchell [1991] 1 WLR 1127. Note, however, that Mr Rankine’s explanation to Mrs Rankine that he did not want her name on the legal title until she had been divorced from her husband was not treated as an ‘excuse’ but as a genuine reason in Geary v Rankine 2012.
4.1.3 Detrimental Reliance (1) Detriment Where the legal owner does not specify the quid pro quo for the assurance of ownership, the courts appear to have adopted a prima face objective test for determining whether or not conduct is detrimental. In order to qualify, in the words of Nourse LJ in Grant v Edwards, ‘... it must be conduct on which the [claimant] could not reasonably have been expected to embark unless she was to have an interest in the house’.
(a) Conduct satisfying the objective test Financial contributions to the property have been held to qualify as detrimental conduct: eg Drake v Whipp [1996] 1 FLR 826. It was accepted in Grant v Edwards that contributions to the mortgage, or substantial contributions to housekeeping expenses without which the legal owner could not have paid the mortgage, would suffice. Payments for improvements will also suffice: Pascoe v Turner [1979] 1 WLR 431.
Women have been held to act to their detriment by undertaking heavy physical labour upon the property in question. The claimant succeeded in establishing detrimental conduct in Cooke v Head [1972] 1 WLR 518 where, according to Denning MR, she ‘...did much more than most women would do’. (She had helped her former partner in the building of their bungalow by, eg, knocking down part of a building using a sledgehammer, removing rubble using a wheelbarrow and working an awkward cement mixer). Similarly, the claimant in Eves v Eves acted to her detriment. According to Denning MR, she did ‘much more than many wives’. (She had, for instance: stripped wallpaper; painted; broken up concrete in the front garden with a fourteen pound sledgehammer; demolished a shed and put up a new one; and prepared the front garden for turfing (see Bottomley and Connaghan (1993) 20 Jo of Law & Soc 58). Proving unusual/abnormal behaviour may be difficult. In Ungurian v Lesnoff [1990] Ch 206, Vinelott J observed that:
Mrs Lesnoff gave a graphic account of wielding a pickaxe. No doubt her solicitors had retailed to her the facts in Eves v Eves, which they drew to the attention of Mr Ungurian's solicitors ... I doubt whether Mrs Lesnoff used a tool as clumsy as a pickaxe at all, unless possibly she picked one up that had been left lying around by workmen and put it to some temporary and possibly inappropriate use.
Unpaid labour in a business belonging to the legal owner has amounted to detrimental conduct: Re Basham [1986] 1 WLR 1498; and Wayling v Jones (1993) 69 P & CR 170 (see Davies [1995] Conv 409; Cooke (1995) 111 LQR 389) demonstrate this in relation to proprietary estoppel. The claimant was found to have acted to her detriment, so as to raise a constructive trust, in Hammond v Mitchell. Waite J's reason for so holding is not entirely clear. Miss Mitchell's unpaid labour in relation to Mr Hammond's business activities may provide the best explanation.
Depriving oneself of opportunities of financial improvement may amount to detrimental conduct, at least in relation to proprietary estoppel: Gillett v Holt [2000] 3 WLR 815 (on which see Part II below).
(b) Conduct failing the objective test
Claimants who simply behave as they might have been expected to, had they never been assured of an interest in their home, will probably not be regarded as having acted to their detriment so as to raise a constructive trust: Midland Bank v Dobson; and Lloyds Bank v Rosset. They may also fail to establish a beneficial interest under proprietary estoppel: Coombes v Smith [1986] 1 WLR 808. However, Matharu v Matharu indicates that proprietary estoppel may afford them a lesser interest, such as a licence to live in the property.
Christian v Christian (1981) 131 NLJ 43 demonstrates that agreeing to a course of conduct which is embarrassing or emotionally unpleasant will not suffice.
(2) Reliance Once detriment has been proved by the claimant, it is presumed to have been performed in reliance on the common intention. It is then up to the legal owner to disprove reliance: Greasley v Cooke [1980] 1 WLR 1306. This can be done only if the legal owner can prove that the claimant would still have performed the detrimental conduct had the assurance been retracted: Wayling v Jones (see M. Thompson [2003] Conv 157). This means that claimants will not be denied a chance to raise an estoppel just because they are motivated by a mixture of considerations, not all of which take the form of a belief in ownership – see also Campbell v Griffin 2001 and Chun v Ho 2001.
4.2 The Second Limb of the Rosset Formula (Inferred Common Intention Constructive Trusts) 4.2.1 Relationship with Resulting Trusts Trusts established under limb 2 of Rosset are constructive trusts, not resulting trusts. This means that (particularly because of post-Rosset caselaw) there is much more flexibility about the type of conduct from which an intention to acquire an interest will be inferred. It also means that the court’s approach to quantifying the relevant interest will be much more flexible. Further, In resulting trusts, in resulting trusts the common intention must exist at the date the property is bought; whereas, in constructive trusts, it may arise at a later date.
The resulting trust is now likely to apply only where the dealings between the parties have been commercial in nature. Where the property in dispute is their home, the constructive trust approach is likely to apply.
4.2.3 Conduct from which an Intention to Acquire will be Inferred (1) Direct Contributions to the Purchase Price Direct contributions to the purchase price (in the form of the deposit or the mortgage) will suffice.
In addition to payments to the deposit, direct contributions may take less obvious forms - Springette v Defoe; and Tinsley v Milligan [1992] Ch 310.
It was established in Gissing v Gissing that payments towards the mortgage should be treated as payments towards the purchase price.
(2) Indirect Contributions Since Gissing v Gissing there has been considerable debate as to whether indirect financial contributions to the purchase price will suffice. Such payments include payment of household bills and unpaid/poorly paid work in the legal owner's business from the proceeds of which the property is bought.
Lord Bridge in Lloyds Bank v Rosset, however, suggested that the authorities indicated that it was ‘at least extremely doubtful’ whether anything less than direct contributions would do. This remark was purely obiter and was not based on any painstaking review of the conflicting authorities or arguments. Considerable weight was placed upon it, however, by the Court of Appeal in Ivin v Blake [1995] 1 FLR 70. It was there decided that indirect contributions could not give rise to an implied trust (no distinction was made between resulting and constructive trusts).
More recently, however, the courts have moved away from the narrowness of the Rosset limitations and indicated that indirect contributions to the purchase price will also suffice to ground an inference of a common intention to share equitable ownership. In Le Foe v Le Foe [2001] 2 FLR 970, Nicholas Mostyn QC suggested that indirect contributions should suffice. In Stack v Dowden, Lords Hope and Walker favoured the approach taken to indirect contributions in Le Foe. Lord Walker doubted whether Lord Bridge’s observations in Rosset took full account of the relevant dicta in Gissing. Whether or not Lord Bridge’s observations had been well-founded at the time, however, he took the view that the law had now moved on and Lord Hope considered that indirect contributions ought to be taken into account.
(3) Other Factors, Not Amounting to a Contribution to the Purchase Price
The question of whether conduct which does not amount to a direct or indirect contribution to the price can ever give rise to an inferred intention constructive trust remains unanswered. After Stack and Jones v Kernott, however, this argument is gaining increasing support. Nevertheless, the Court of Appeal in Geary v Rankines 2012 was clear that, at this acquisition stage, courts would be permitted only to infer an intention from the parties’ conduct and not to impute to them an intention which they never actually had. In that case, the fact that Mrs Geary had gone to live with Mr Rankines and that they had formed the intention to be business partners was not sufficient to found an inference that they intended to be equitable co-owners, Mr Rankine’s insistence that Mrs Geary should not become a co-owner until after her divorce also being a relevant consideration.
4.2.4 Detrimental Reliance
In Rosset 2 cases, the conduct which provides the basis for the inference of a common intention to share equitable ownership also appears to constitute the detrimental reliance on that intention which allows a constructive trust to come into being. There seems to be no separate detrimental reliance requirement. Nevertheless, some regard to cases on detrimental reliance may help to provide guidance as to what types of conduct will prove sufficient to found a constructive trust of this type.
5. Constructive Trusts - Quantification Stage (Single and Joint Legal Owner Cases) 5.1 The Stack v Dowden Presumption Once it is clear that there is an intention to share equitable ownership in some way (in single owner cases, derived from an express or inferred intention; and, in joint legal owner cases, derived from presence on the legal title) the issue of the quantification of the shares of each of the co-owners must be addressed.
Until Stack v Dowden, the quantification of shares in joint legal owner cases received little attention from the courts. In single legal owner cases, however, some guidance had emerged, and this may be summed up as follows:
If there was an oral agreement which had specified how interests should be quantified (much more likely in Rosset 1 than in Rosset 2 cases) this would prevail. If, however, there had been no agreement as to quantification, it was established in Eves v Eves and Grant v Edwards (for Rosset 1 cases) and Midland Bank v Cooke (for Rosset 2 cases) that the court would have regard to the whole course of dealing between the parties in an attempt to ascertain what their intentions were. Thus, in Midland Bank v Cooke [1995] 2 FLR 915 (see Battersby [1996] CFLQ 261; and Pawlowski [1996] Fam Law 484) the Court of Appeal held that Jane Cooke, who had contributed only 6.7% of the purchase price (her half of a wedding present from her in-laws) owned a 50% beneficial interest in the former matrimonial home.
The issue of quantification in single legal owner cases was examined, in some depth, by the Court of Appeal in the pre-Stack case of Oxley v Hiscock [2004] EWCA Civ 546. Chadwick LJ stressed that the court would not be bound to quantify the interests by reference only to the proportions of the purchase price provided. It would instead consider the entire course of dealing between the parties and, where they had not themselves agreed what their exact shares would be, the Court would decide on the basis of what it considered would be fair. Chadwick LJ went on to explain that the courts had not found this broad discretionary test an easy one to apply. He criticised the emphasis placed, in cases such as Cooke, on the intention of the parties at the date of the acquisition. Making such intentions determinative of the shares to be awarded in cases where no express agreement had been made was both artificial and inconsistent with the need to take into account subsequent events and the entire course of dealing. Guidance should be derived from principles of proprietary estoppel.
The issue of quantification has now been addressed by the House of Lords, in Stack v Dowden [2007] UKHL 17, and by the Supreme Court, in Jones v Kernott – both of which were joint legal owner cases.
In Stack v Dowden [2007] UKHL 17, a majority of their Lordships held that, in the family/consumer context, the presumption that equity follows the law should be the starting-point. In joint legal owner cases, such as Stack, this would result in the parties becoming joint owners in equity as well as in law. Equitable joint tenancies may be ‘severed’ with the result that the parties generally become tenants in common with equal shares (see previous lecture handout). This was confirmed by the Supreme Court in Jones, where further guidance was provided as to when this Stack presumption should be abandoned in favour of unequal shares.
The Stack presumption was set out in the context of joint legal owner cases. In that context, the presumption that equity follows the law results in equitable joint tenancy or in equal shares. In single legal owner cases, however, the presumption that equity follows the law results in the claimant having no equitable interest – a fall-back position which can be overcome by satisfaction of the requirements of the acquisition stage discussed above.
Some uncertainty still surrounds the question of the extent to which any presumption of equality operates in single legal owner cases where an express or inferred intention to co-own can be shown. In Midland Bank v Cooke, it was suggested that, unless the entire course of dealing between the parties could found an inference that they intended to have different shares, the fall-back position should be that they had equal shares. This would suggest something like the Stack presumption in single legal owner cases. In Oxley v Hiscock, however, Chadwick LJ placed more emphasis on the respective financial contributions made by the parties, suggesting that equality was more likely to be appropriate in cases like Cooke where the parties were married and had a joint bank account.
NB The term the ‘Stack presumption’ is often used. This is sometimes used to refer to the presumption that equality follows the law and sometimes to the presumption of equality – in joint legal owner cases, both presumptions produce the same result. In single legal owner cases, however, these latter two presumptions produce different results.
5.2 Sphere of Application of the Stack Presumption An issue which has caused some confusion since Stack is the identification of cases in which the Stack presumption (that equitable ownership reflects legal ownership) should apply and those in which the presumption of resulting trust should apply instead. Baroness Hale, in Stack, suggested that the Stack presumption should represent the starting-point to the quantification of equitable ownership at least in the domestic or consumer context. This left open the question of what should happen in cases falling outside that context.
According to the resulting trust approach, the parties would be presumed (in the absence of evidence to the contrary) to have acquired shares reflecting their contributions to the purchase price. Lord Neuberger, in Stack itself, had favoured adopting the resulting trust approach in all joint legal owner cases. Interestingly, relying on that presumption on the facts of Stack brought him to the same result as the majority – a 65%-35% split.
In Laskar v Laskar [2008] EWCA Civ 347 (N Piska [2008] Conv 441), Mrs Laskar wished to purchase the council house she had rented for many years. She could not afford to do so alone. Her daughter agreed to provide £3,400 (the total purchase price being £79,500) and to assume joint liability for the mortgage. The house was transferred into their joint names. When they fell out, the daughter claimed that she owned a half share in the house on the basis of the Stack presumption that equity follows the law.
The Court of Appeal (in which Lord Neuberger sat) distinguished Laskar from Stack – drawing attention to the fact that the relationship between the parties in this case was not a long-term sexual relationship and that it was more commercial in nature as neither of the parties had planned to live in the house which had been purchased primarily as an investment (Mrs Laskar was renting it out to tenants). It was held that, in commercial arrangements such as this, the presumption of resulting trust should be applied instead of the Stack presumption of equality.
The Stack presumption thus applies only in the domestic/consumer context. Ascertaining whether the case is of a domestic/consumer nature is therefore a necessary first step in joint legal owner cases. The fact that the line between domestic cases and commercial cases will not always be easy to draw is demonstrated by the fact that, in Laskar, a mother-daughter relationship was held to be commercial whereas, in the earlier case of Adekunle v Ritchie [2008] BPIR 77, the Stack presumption was considered to have been appropriately applied to a mother-son relationship. In Adekunle, however, the primary purpose had been to buy the property as a home rather than as an investment.
5.3 Rebutting the Stack Presumption Baroness Hale, who delivered the leading judgement in Stack, stressed that the presumption that equity followed the law could not be rebutted in joint legal owner cases without the showing of unusual or exceptional circumstances. It would be rebutted only if the party alleging a different ownership division could establish, on the basis of the entire course of dealing between the parties, that an unequal split was intended.
Stack made it clear that intention (actual or inferred) was a key factor in this process but contained some apparently contradictory observations about the possibility of imputing an intention. The issue of imputation was addressed more fully in Jones v Kernott.
On the particular facts of Stack, it was held that Ms Dowden had demonstrated that the course of dealing between the parties did indicate that their intention had been to share ownership on an unequal basis. Particularly significant was the fact that they had kept their financial arrangements largely separate. Consequently, Stack fell into the category of cases that were sufficiently unusual or exceptional to merit a departure from the presumption that equity follows the law. Ms Dowden was therefore held to own a 65% share as an equitable tenant in common and Mr Stack, a 35% share.
Stack clearly raises the question of how it should be decided whether the facts of a particular case are sufficiently exceptional to warrant a departure from the Stack presumption. For arguments that the financial arrangements made between Ms Dowden and Mr Stack are in fact quite common amongst cohabiting couples, despite the assertions of their Lordships that they were ‘unusual’, see eg G Douglas et al [2008] Conv 365). In Adekunle v Ritchie [2008] BPIR 77 it was again held that the facts were sufficiently unusual to require a departure from the Stack presumption. Indeed, that case suggests that where the parties are not a couple, it will require very little evidence to rebut the presumption.
An example of a case in which the Stack presumption has been applied strictly without any departures is Fowler v Barron [2008] EWCA Civ 337. This concerned a home which was vested in the joint names of an unmarried couple. Ms Fowler had not made any direct contributions to the purchase price. However, their relationship was a sexual one, they had bought the house at the time of the birth of their first child and she had used earnings on family purposes (such as school trips and children’s clothes). Their finances had not been kept as separate as those of Ms Dowden and Mr Stack. Ms Fowler was therefore held to have a half share in the house.
The Court of Appeal, in Jones v Kernott, addressed the issue of when the presumption should be rebutted. It ruled that, no matter how exceptional the facts might be, the presumption would apply unless there was evidence of an expressed or inferred intention that the house should not be owned equally. In other words, it ruled that unfairness alone would not rebut the presumption – genuine intention was needed. In the Supreme Court, however, it was held that the judge in that case had found that the parties had, after their relationship break-up and Mr Kernott’s subsequent property transactions, formed an intention that shares in their former quail-matrimonial home should be altered without quantifying what they should be. This, they held, was a sufficient intention to rebut the Stack presumption and allow the court to proceed to quantifying their interests on the basis of the entire course of dealing between them and the imputation of an intention to share in certain proportions.
Lord Wilson flagged the question of whether it should be possible to rebut the Stack presumption on the basis of an imputed intention as one that required further reflection but one which had not yet been addressed. On the current state of the authorities, it seems that only an express or inferred intention will serve to rebut the Stack presumption by demonstrating that the parties did not intend equal shares (Jones v Kernott, Geary v Rankines).
5.4 Quantification after Rebuttal of the Presumption that Equity Follows the Law Once the presumption that equity follows the law has been rebutted, it falls to the court to quantify exactly how much is owned in equity by each of the legal owners. It appears from Jones that, at this stage, if there is no evidence of an express intention as to the shares intended and no evidence (based on the entire course of dealing between the parties and all the circumstances of the case) from which such an intention can be inferred, the court may impute an intention to them to have shares that would be fair in the circumstances.
This quantification process has generated considerable debate about the appropriate roles of intention and fairness. In Oxley, as already mentioned, Chadwick LJ was critical of the emphasis on intention and suggested that principles of fairness should play a greater role. His emphasis on fairness, as opposed to genuine intention, has proved highly contentious. In Stack, their Lordships stressed that it was the intention of the parties that mattered and not principles of fairness. However, confusion resulted from reconciling this stress on intention with the fact that some of their Lordships (in particular Baroness Hale) referred to intention as including ‘imputed’ intention. An ‘imputed’ intention is, in reality, not a genuine intention of the parties at all but one which is attributed to them and the obvious basis on which such an intention would be attributed is fairness.
This tension came before the Supreme Court in the case of Jones v Kernott [2011] UKSC 53. This case concerned a house which was bought by, and transferred into the joint names of, Mr Kernott and Ms Jones. They lived together in that house with their children until their relationship broke down and Mr Kernott moved out in 1993. No express agreement had been made as to the equitable ownership but Ms Jones subsequently accepted that, in 1993, they had equal shares. Once Mr Kernott moved out, he bought a property of his own and ceased to make any contribution to the mortgage or other outgoings associated with the house and the children – leaving Ms Jones to pay them all. Twelve years later, he claimed that he had an equal share in the equitable ownership of the house but Ms Jones argued that his share had decreased in light of the events after 1993.
The Court of Appeal stressed the need to act only on the expressed or inferred intention of the parties. Baroness Hale’s reference to imputed intentions in Stack was disapproved and regarded as confusing. There was, their Lordships considered, no evidence of an actual or inferred intention that the shares should be varied according to the parties’ contributions to outgoings after separation. Their Lordships therefore ruled that the ownership situation of 1993 had not been changed and that the parties were tenants in common with equal shares.
In the Supreme Court, however, a different approach was taken. Their Lordships all accepted that, if it were clear that the parties intended unequal shares but not possible to identify an actual or inferred intention as to the size of their respective shares , then it would be permissible to impute an intention to the parties as to the size of their shares. According to Lady Hale and Lord Walker (who delivered a joint judgement):
“In a case such as this, where the parties already share the beneficial interest, and the question is what their interests are and whether their interests have changed, the court will try to deduce what their actual intentions were at the relevant time. It cannot impose a solution upon them which is contrary to what the evidence shows that they actually intended. But if it cannot deduce exactly what shares were intended, it may have no alternative but to ask what their intentions as reasonable and just people would have been had they thought about it at the time.” (para 47)
They also suggested (as did Lord Collins) that, in practice, the line between inferring and imputing an intention was unclear and that, to some extent, the two merged together.
According to Lords Kerr and Wilson, however, it was important to maintain a clear division between inferring and imputing intention because the former involved hunting for the views of the parties whereas the latter involved hunting for what was fair – two exercises which they regarded as very different.
The steps that should be taken by the court were summed up by Lady Hale and Lord Walker in Jones as follows:
“(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.
(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.
(3) Their common intention is to be deduced objectively from their conduct: "the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party" (Lord Diplock in Gissing v Gissing [1971] AC 886, 906). …
(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, "the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property": Chadwick LJ in Oxley v Hiscock [2005] FAM 211 para 69. In our judgment, "the whole course of dealing … in relation to the property" should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties' actual intentions.
(5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).” (para 51)
6. Resulting Trusts 6.1 The Presumption of Resulting Trust In commercial type cases, where there has been no express declaration as to beneficial ownership (either orally or in writing), equity may impose a resulting trust to give effect to what it presumes to have been the intention of the parties at the time the property was acquired. The presumption is expressed in Dyer v Dyer (1788) 2 Cox Eq Cas 92, by Eyre CB. In his words, equitable ownership "... results to the man who advances the purchase money".
Thus, a person who contributes the whole of the purchase price would be presumed to have been intended to become the sole beneficial owner. A person who contributes half of the purchase price would be presumed to have been intended to acquire half of the beneficial interest (whether as a joint tenant or as a tenant in common would depend upon the relationship between the parties). A person who contributes a quarter of the purchase price would be presumed to acquire a quarter share of the beneficial interest as a tenant in common.
6.2 Conduct from which the Intention will be Inferred The presumption of resulting trust will be raised only if there is a contribution to the purchase price. This means that subsequent payments (eg to mortgage instalments) will be relevant only if they evidence an intention at the date the property was acquired. It also seems likely that indirect contributions will have no role to play in resulting trusts. Were they to be included, the strict arithmetical quantification required in resulting trusts would prove highly problematic.
6.3 Quantification Under resulting trust principles, as explained above, the court must quantify the successful claimant's interest by reference to the amount they contributed to the purchase price. This approach was summed up by Dillon LJ in Springette v Defoe as follows:
The common intention must be founded on evidence such as would support a finding that there is an implied or constructive trust for the parties in proportions to the purchase price. The court does not yet sit, as under a palm tree, to exercise a general discretion to do as the man in the street, on a general overview of the case, might regard as fair.... Since, therefore, it is clear in the present case that there never was any discussion between the parties about what their respective beneficial interests were to be, they cannot, in my judgement, have had in any relevant sense any common intention as to the beneficial ownership of the property.... The presumption of a resulting trust is not displaced.
6.4 Displacement of the Presumption of Resulting Trust The presumption of resulting trust will be rebutted by any evidence that the parties intended to own the property in question differently.
In the absence of evidence of a contrary intention, the presumption historically gave way to a contrary presumption (the presumption of advancement) in certain circumstances. The role played by the presumption of advancement in recent years has been fairly minimal: Pettitt v Pettitt. It operated where a father contributed towards the cost of property bought in the name of his child; and where a husband contributed towards the cost of property bought in the name of his wife. It was therefore based on sexist assumptions and was probably inconsistent with Article 5 of Protocol 7 of the European Convention on Human Rights (which the UK has not yet ratified). According to this:
“Spouses shall enjoy equality of rights and responsibilities of a private law character between them, and in their relations with their children, as to marriage, during marriage and in the event of its dissolution…”
The presumption of advancement was abolished by the Equality Act 2010.
7. Reform The rules governing the acquisition of equitable interests under Pettitt, Gissing, Rosset and Stack have caused a great deal of concern and attracted considerable criticism, not least from the judiciary. The issue has recently been considered by the Law Commission, twice.
In its discussion paper ‘Sharing Homes’, July 2002 http://www.lawcom.gov.uk/docs/lc278.pdf
the Law Commission set out a scheme which it devised in an attempt to replace the current system of property entitlement with one which operated in a fairer, more realistic way, regardless of the type of relationship between the parties and which was not restricted to financial contributions. It concluded, however, that this scheme would be unworkable and create anomalies. The variety of situations and relationships covered was too large. In Stack (para 46) Baroness Hale referred to this conclusion and observed that:
While this conclusion is not surprising, its importance for us is that the evolution of the law of property to take account of changing social and economic circumstances will have to come from the courts rather than Parliament.
The Civil Partnerships Act 2004 contains provisions which allow for the application of principles similar to those applying on divorce on the breakdown of registered partnerships. The Act, however, is limited to same sex couples who have entered into a civil partnership, and therefore leaves the current law intact for heterosexual couples. This apparent anomaly led to a further referral to the Law Commission from the Government which, after a lengthy Consultation Paper, resulted in the publication of ‘The Financial Consequences of Relationship Breakdown’ (Law Comm Report No 307) on 31 July 2007 (Hughes et al [2008] Conv 197). .
In its 2007 report, the Law Commission proposed the introduction of a structured judicial discretion to order property adjustment on the breakdown of the relationships of couples who are not married or in a civil partnership and who satisfy specified eligibility criteria. Thus, couples who do not satisfy the eligibility criteria (which relate broadly either to having children or to a minimum period of cohabitation) will fall outside the proposed scheme. So too will situations in which the disputants are not in an intimate relationship (eg where they are siblings or parent and child). Cases in which the dispute as to beneficial ownership involves a third party (such as a bank, as in the Rosset type of scenario) will also fall outside the scope of the Law Commission’s proposals.
The Law Commission’s proposals have not been given a high priority by the Coalition Government and may not be translated into law in England and Wales. It is interesting to note that statutory reform in this area has been introduced in Scotland by the Family Law (Scotland) Act 2006.
Part II Proprietary Estoppel Reading
Essential Dixon, Modern Land Law, ch 9.4 – 9.8; or
Smith, Property Law, ch 10.1-10.4
Supplementary Gray and Gray (Elements), ch 9.2
McFarlane et al (Casebook), ch 13
Thorner v Majors [2009] UKHL 18
T Etherton, ‘Constructive Trusts and Proprietary Estoppel: The Search for Clarity and Principle’ [2009] Conv 104
N Piška, ‘Hopes, Expectations and Revocable Promises in Proprietary Estoppel’ (2009) 72 MLR 998
M Dixon, 'The Reach of Proprietary Estoppel: A Matter of Debate' [2009] Conv 85.
M Thompson [2003] Conv 157
M Balen and C Knowles, ‘Failure to Estop: Rationalising Proprietary Estoppel Using Failure of Basis’ [2011] Conv 176
1. General According to Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129:
If a man, under a verbal agreement with [an estate owner] for a certain interest in land, or ... under an expectation, created or encouraged by the [estate owner], that he shall have a certain interest, takes possession of such land, with the consent of the [estate owner], and upon the faith of such promise or expectation, with the knowledge of the [estate owner], and without objection by him, lays out money upon the land, a Court of Equity will compel the [estate owner] to give effect to such promise or expectation.
His judgement is often referred to today and commonly thought to mark the beginning of the modern law of proprietary estoppel. Some years later, in Willmott v Barber (1880) 15 Ch D 96, Fry J identified five conditions to be satisfied in order to raise a proprietary estoppel. These became known as “the five probanda”. They may be summarised as follows:
(1) The claimant must have made a mistake as to their rights.
(2) The claimant must have spent money or done some act (not necessarily on the defendant’s land) because of the mistake.
(3) The defendant must be aware of their (the defendant’s) right.
(4) The defendant must be aware of the claimant’s mistake.
(5) The defendant must have encouraged the claimant’s expenditure, either directly or by refraining from asserting the defendant’s own rights.
Today, these probanda are not applied strictly by the courts in determining whether or not an estoppel has arisen. Oliver J in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133, stressed that they should not be treated as strict rules unless, possibly, in cases in which there had simply been acquiescence by the land owner in the detrimental reliance, as opposed to ones in which there had been some form of representation or encouragement. Oliver J’s broad approach, focusing on “whether, in all the circumstances of [the] case, it was unconscionable for the defendant to seek to take advantage of the mistake” has been adopted by the Court of Appeal (see, eg, John v George (1995) 71 P&CR 375 and Lloyds Bank plc v Carrick [1996] 4 All ER 630). It was approved by the House of Lords in Yeoman’s Row Management v Cobbe [2008] UKHL 55 where, however, it was stressed that it was “emphatically not a licence for abandoning careful analysis for unprincipled and subjective judicial opinion” (per Lord Walker at [59]).
Indeed, in Yeoman’s Row Management v Cobbe [2008] UKHL 55, the House of Lords repeatedly emphasised that unconscionability alone must not be regarded as sufficient to allow a claim to succeed on the basis of proprietary estoppel. In the words of Lord Scott (at [16]):
“My Lords, unconscionability of conduct may well lead to a remedy but, in my opinion, proprietary estoppel cannot be the route to it unless the ingredients for a proprietary estoppel are present. These ingredients should include, in principle, a proprietary claim made by a claimant and an answer to that claim based on some fact, or some point of mixed fact and law, that the person against whom the claim is made can be estopped from asserting. To treat a “proprietary estoppel equity” as requiring neither a proprietary claim by the claimant nor an estoppel against the defendant but simply unconscionable behaviour is, in my respectful opinion, a recipe for confusion.”
Similarly, Lord Walker observed (at [46]) that:
“Equitable estoppel is a flexible doctrine which the Court can use, in appropriate circumstances, to prevent injustice caused by the vagaries and inconstancy of human nature. But it is not a sort of joker or wild card to be used whenever the Court disapproves of the conduct of a litigant who seems to have the law on his side. Flexible though it is, the doctrine must be formulated and applied in a disciplined and principled way. Certainty is important in property transactions.”
In order to raise a proprietary estoppel today, then, it must be unconscionable for a defendant to deny the claimant’s assumption or expectation but this must be because of the occurrence of the essential elements necessary to found a proprietary estoppel claim. The following three sections will focus upon the broad conditions which must be satisfied before a proprietary estoppel can be raised. However, in the words of Robert Walker LJ in Gillett v Holt [2000] 3 WLR 815 (see Wells, [2001] Conv 13):
[I]t is important to note at the outset that the doctrine of proprietary estoppel cannot be treated as subdivided into three or four water-tight compartments... that the quality of the relevant assurances may influence the issue of reliance, that reliance and detriment are often intertwined and that whether there is a distinct need for a ‘mutual understanding’ may depend on how the other elements are formulated and understood. Moreover, the fundamental principle that Equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. In the end the court must look at the matter in the round.
This need to look at the matter ‘in the round’ has been stressed in subsequent cases – eg Murphy v Burrows [2004] EWHC 1900,
2. The Claimant’s Belief The claimant must have believed that they already had an interest in the property or a right to use it in some way, or that the defendant would grant such a right to them in the future. A belief based upon incomplete, non-binding negotiations would not suffice, according to AG of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114. This point was affirmed by the House of Lords in Yeoman’s Row Management v Cobbe [2008] UKHL 55. According to Lord Scott:
20. Lord Kingsdown’s requirement that there be an expectation of “a certain interest in land", repeated in the same words by Oliver J in the Taylors Fashions case, presents a problem for Mr Cobbe’s proprietary estoppel claim. The problem is that when he made the planning application his expectation was, for proprietary estoppel purposes, the wrong sort of expectation. It was not an expectation that he would, if the planning application succeeded, become entitled to “a certain interest in land". His expectation was that he and Mrs Lisle-Mainwaring, or their respective legal advisers, would sit down and agree the outstanding contractual terms to be incorporated into the formal written agreement, which he justifiably believed would include the already agreed core financial terms, and that his purchase, and subsequently his development of the property, in accordance with that written agreement would follow. This is not, in my opinion, the sort of expectation of “a certain interest in land” that Oliver J in the Taylors Fashions case or Lord Kingsdown in Ramsden v Dyson had in mind.
It was suggested in Taylor v Dickens [1998] 1 FLR 807, that a mere hope that the defendant might transfer an interest to them would similarly fail to found an estoppel claim. This decision was disapproved by the Court of Appeal in Gillett v Holt, where it was stressed that it was not necessary for a claimant to show that an irrevocable promise had been made to them. Further discussion of this issue is to be found in the two recent House of Lords cases of Yeomans v Cobbe and Thorner v Majors [2009] UKHL 18
In Yeomans v Cobbe, Lord Walker indicated that in all cases the claimant must believe that the assurance made to them was binding and irrevocable even if, in reality, it was not. He acknowledged that misunderstandings about the binding nature of assurances would be much more likely in the domestic context than in the commercial context.
In Thorner v Majors, it was held that the absence of a clear or express assurance by Peter Thorner that he would leave his farm to David (his cousin’s son) on his death did not prevent David’s proprietary estoppel claim succeeding. Peter had handed David his life insurance policies in 1990 and, over the remaining fifteen years of his life, made a series of oblique references to what would happen on his death which David had reasonably understood as a commitment to leaving him the farm. The Court of Appeal had found that there was no assurance sufficiently clear and unambiguous to found a proprietary estoppel. The House of Lords reversed this, Lord Walker (with whom the others agreed) observing that:
I would prefer to say (while conscious that it is a thoroughly question-begging formulation) that to establish a proprietary estoppel the relevant assurance must be clear enough. What amounts to sufficient clarity, in a case of this sort, is hugely dependent on context.
He acknowledged that the trial judge had found Peter to be “a man of few words, who generally maintained his privacy about his personal financial affairs … and who hardly ever spoke in direct terms" and went on to explain that:
59. In this case the context, or surrounding circumstances, must be regarded as quite unusual. The deputy judge heard a lot of evidence about two countrymen leading lives that it may be difficult for many city-dwellers to imagine—taciturn and undemonstrative men committed to a life of hard and unrelenting physical work, by day and sometimes by night, largely unrelieved by recreation or female company.
Just because the case arises in the domestic context, however, does not mean that the vagueness of an assurance will never present a problem In MacDonald v Frost 2009 and Shirt v Shirt 2010, proprietary claims which arose in the family context failed because the assurance was not sufficiently precise or definite.
The claimant’s belief must either have been encouraged by the defendant or have been known to and acquiesced in by the defendant. It was held in Crabb v Arun DC [1976] Ch 179 that the defendant need not know precisely how the claimant was proposing to act to their detriment in reliance on their belief, provided there was awareness of the general plans of the claimant. In that case, the claimant believed that the defendant would grant him access over his land. Because of this belief, he sold off part of his own land. Unless access over the land of the defendant was permitted, the land that he retained would have been completely landlocked. The defendant had not been aware of the sale of part of the claimant’s land but did know of his general plans for the land. This was sufficient. In cases where it would be reasonably foreseeable that the claimant would act to their detriment on the basis of a belief encouraged by some representation of, or joint assumption with, the defendant, the courts may well find in the claimant’s favour, even if the defendant had no knowledge whatsoever of the claimant’s subsequent detrimental conduct.
In Thorner, David had acted to his detriment in reliance on Peter’s oblique assurances by continuing to work for him unpaid for the rest of Peter’s life (fifteen years – having already worked for him without pay for fourteen years). He thus failed to take advantage of alternative work opportunities that presented themselves. The fact that Peter did not know that David was turning down these alternatives and may not necessarily have intended him to do so was, according to the House of Lords, irrelevant. It had been reasonable for David to believe the assurances and to act in reliance upon them.
3. Detrimental Conduct Consideration has already been given to cases where expenditure on land or unpaid labour upon it or in the business of the defendant have been held to be detrimental conduct sufficient to give rise to proprietary estoppel. Other types of conduct have also satisfied this test. In Jones v Jones [1977] 1 WLR 438, for example, the detrimental conduct lay in leaving a home and job. In Greasley v Cooke [1980] 1 WLR 1306, it lay in looking after the home and family of the defendant unpaid. In ER Ives Investments v High [1967] 2 QB 379, it lay in the claimants building a garage on their own land in such a way as to make it dependent on access over neighbouring land. In Gillett v Holt, Robert Walker LJ criticised the first instance judge for taking “too narrowly financial a view of the requirement for detriment” and was prepared to take into account the fact that the assurances had led the Gilletts to deprive themselves of the opportunity to better themselves financially by buying their own house or seeking alternative employment. Unpaid labour, and refraining from taking up other opportunities, also constituted the detrimental conduct in Thorner v Majors.
4. Reliance It would not be unconscionable for a defendant to assert their rights against a claimant, if the claimant’s detrimental conduct was not undertaken in reliance upon their belief in their own rights in the defendant’s land. Accordingly, no estoppel will arise unless reliance can be established. See the discussion of this aspect in relation to Lloyds Bank v Rosset on the main Co-Ownership handout.
5. The Remedy Proprietary estoppel can be an extremely useful concept in that it may operate regardless of formality requirements: Yaxley v Gotts [1999] 3 WLR 1217 (but cf Lord Scott’s observations about s 2 LP(MP)A in Cobbe, set out in Section 2 above). On the basis of proprietary estoppel, claimants have been awarded a fee simple (Dillwyn v Llewelyn 45 ER 1285; and Pascoe v Turner [1979] 1 WLR 431); a lease (JT Developments Ltd v Quinn (1990) 62 P&CR 33); an easement (Crabb v Arun DC; and ER Ives Investments v High); and many other types of interest in land. They have also frequently been awarded licences to continue living in a particular place (which are not necessarily interests in land) (Matharu v Matharu The Times, 13 May 1994).
The remedy is discretionary. Where the expectations are clear (and there is something like an agreement), the courts will usually give effect to those expectations – according to Robert Walker LJ in Jennings v Rice [2002] EWCA Civ 159; [2002] WTLR 367. Robert Walker LJ, in Jennings, went on to observe that a remedy falling short of the claimant’s expectation may be appropriate in cases where the expectations were unclear, or where they were extravagant or out of proportion with the detriment. In such cases, the court should look to all the circumstances to determine the remedy, but the importance of the link between the amount of detriment and the remedy was stressed. In Jennings, the remedy awarded reflected the amount of detriment suffered by the claimant – which was half the value of the expectation.
The courts have never awarded a remedy in excess of that expectation, even where the expenditure incurred by the claimant (their detrimental reliance) exceeds the value of the expectation itself (Baker v Baker & Baker (1993) 25 HLR 408). Indeed, the courts have sometimes refused to grant any remedy at all, on the basis that the benefits already received by the claimant outweigh the detriment incurred (Sledmore v Dalby (1996) 72 P&CR 196).
6. Do Estoppels Bind Third Parties? There has been a great deal of debate over recent years as to whether third parties will be bound by the rights of a claimant who is able to establish a proprietary estoppel, but has not yet been to court and obtained a remedy. There are cases which support the view that estoppels can bind third parties (see, eg, Dillwyn v Llewelyn; Voyce v Voyce (1991) 62 P&CR 290; and ER Ives Investments v High). However, in none of these cases was the third party concerned a bona fide purchaser without notice and there are indications in them that, in unregistered land, such purchasers would not be bound by the estoppel. Accordingly, it appears that estoppels are being treated as equitable interests in land which can be neither overreached nor registered as land charges.
That having been said, there is a view that estoppels cannot bind purchasers. Because the remedy is discretionary, it is not clear until the judgement of the court what interest the claimant will be awarded and, therefore, it would be impossible to bind a purchaser with an as yet unidentified interest. This argument was accepted by the Court of Appeal in United Bank of Kuwait v Sahib [1997] Ch 107, although the cases supporting the contrary view were not dealt with in any depth (see Critchley, [1998] Conv 502). The treatment of this issue under the Land Registration Act 2002 will be dealt with later in the course.