Tag Archive for 'Constructive trust'

Estoppel - needs something to estop

Published
by
NL
on 4 August 2008
in Housing law
. 2 Comments

I’m not going to do a report on this one as it is a) epic, b) unprecis-able and thankfully c) pretty much off topic for housing law. But anyone who, like me, is a bit of an equity hobbyist on the side, the House of Lords judgment in Yeoman’s Row Management Limited (Appellants) and another v Cobbe (Respondent) [2008] UKHL 55 is a must read on proprietary estoppel and constructive trust.

The upshot is that

Proprietary estoppel requires, in my opinion, clarity as to what it is that the object of the estoppel is to be estopped from denying, or asserting, and clarity as to the interest in the property in question that that denial, or assertion, would otherwise defeat.  If these requirements are not recognised, proprietary estoppel will lose contact with its roots and risk becoming unprincipled and therefore unpredictable, if it has not already become so. [28]

and 

a claim for the imposition of a constructive trust in order to provide a remedy for a disappointed expectation engendered by a representation made in the context of incomplete contractual negotiations is, in my opinion, misconceived and cannot be sustained by reliance on unconscionable behaviour on the part of the representor.[38]

But there is lots of juicy stuff in there. Well, juicy if you are an equity geek, and I am, on the side.

Constructive trust and dodgy RTB

Published
by
NL
on 12 July 2008
in Housing law
. 0 Comments

There is an all too common situation. A tenant with the right to buy is offered a capital sum and the mortgage payments for the (in this case) three years needed to avoid repaying the RTB discount on transfer. In the meantime, they either get to stay or hand over control of the property to the shadow. Recent RTBs have provisions in the lease to make this more difficult, as well as a much reduced discount, but there remain a lot of sharks circling.

McGuane v Welch [2008] EWCA Civ 785 was an appeal of a County Court judgment awarding an equitable interest of 100% in a lease of the property concerned to Mr Welch (W), against the title of Mr McGuane (M), the erstwhile tenant.

I’ve not got time to do a detailed report, but the appeal succeeded, largely on the basis that there was an express trust, not a constructive trust, and that the claimant did not come to equity with clean hands. In particular the Claimant had engaged a not entirely reliable solicitor, May & Co, supposedly to act for the Defendant in the arrangement. They never met their supposed client or advised him directly in person or in writing. One trusts the SRA have taken note.

The Defendant pleaded the whole arrangment being the act of “a poor and ignorant man”, (Creswell v Potter (1968) [1978] 1 WLR 255, Backhouse v Backhouse [1978] 1 WLR 243). But the judgment left the erstwhile tenant liable to repay all the monies that the Claimant had spent on the property in mortgage and refurb, so effectively meaning a plague on both your houses.

There are a number of issues in this judgment that I want to return to - in particular the requirement for ’stamped’ trust deed and transfer for admission as evidence, and the way in which express trust is dealt with. But that will have to wait for a fortnight or so. No time now, I’m afraid.

In the meantime, it is clear that the Court deeply disapproves of the ‘transaction’, but absent evidence or argument on breach of statute, can’t say much more.

Stack v Dowden revisited

Published
by
NL
on 23 April 2008
in Housing law
. 7 Comments

The Court of Appeal has effectively given guidance on the application of Stack v. Dowden [2007] UKHL 17 where one is faced with a transfer into joint ownership and no express statements as to shares in the property in Fowler v Barron [2008] EWCA Civ 377 (23 April 2008).

At 21:

To recapitulate, the important points decided by the House for the purpose of this appeal were as follows. The legal technique that the court will use to ascertain whether both joint owners who had been co-habitees had a beneficial interest is that of the common intention constructive test, rather than that of resulting trust. This will enable the court to take a holistic view of the whole of the parties’ conduct so far as it illumines their shared intentions about the ownership of the property. The court will not impose any particular allocation of property on the parties. It is not a question of the court deciding what is fair as regards the division of ownership but of determining what the co-owners’ shared intentions were as regards beneficial ownership. This was a deliberate policy choice to make the law respond to current needs: see per Baroness Hale at [60]. Where, as here, a house is transferred into the joint names of two individuals as their home, without any declaration of trust, the transfer will indicate that the parties intended to own the house in equal shares and thus the onus will be on the one (here, Mr Barron) who asserts that property is owned by them other than in equal shares to show that they had a shared intention to own the property in some other shares. The conduct that the court will take into account will include, but is not limited to, the financial contributions that they made towards the acquisition of the property or repayment of any loan raised for such purpose. The onus will not be easy for that person to discharge.

Evidence purporting to rebut the presumption of joint beneficial ownership must be of the parties shared intentions, or of a later shared change of intention.

35. In determining whether the presumption is rebutted, the court must in particular consider whether the facts as found are inconsistent with the inference of a common intention to share the property in equal shares to an extent sufficient to discharge the civil standard of proof on the person seeking to displace the presumption arising from a transfer into joint names.

36. The emphasis is on the parties’ shared intentions. As Lord Diplock said in Gissing v Gissing [1971] AC 886 at 906B-C, “…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 or 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.” This would be broadly consistent with the principles applicable to the interpretation of a written document, if that had set out their intention.

When assessing evidence, attention should be given to Lady Hale’s warning at para 68 of Stack:

In family disputes, strong feelings are aroused when couples split up. This often leads the parties, honestly but mistakenly, to reinterpret the past in self-exculpatory or vengeful terms. They also lead people to spend far more on the legal battle and is warranted by the sums actually at stake. A full examination of the facts is likely to involve disproportionate costs. In joint names cases it is also unlikely to lead a different result, unless the facts are very unusual.

In this case, the lower Court’s finding of no interest for Ms Fowler in the property (on the basis of contribution to purchase and mortgage as a resulting trust issue) was overturned, and a 50% interest found. In particular, shared household expenses, although none directly related to property expenses, were found sufficient to infer that it was not important to the parties who paid for what specifically or respective size of contribution. Evidence of mutual wills also played a part.

It was noted that Stack v Dowden involved a quite unusual separation of finances.

From this, it is clear that the presumption of joint beneficial interest is to be taken seriously. Rebuttal evidence will have to be pretty strong.

Proprietary Estoppel yet again

Published
by
NL
on 11 December 2007
in Housing law
. 2 Comments

Blimey, who declared this Estoppel month? The latest is Powell & Anor v Benney [2007] EWCA Civ 1283. Although the case itself is not that interesting, the judgment is worth a look as it gives a clear overview of the Court of Appeal’s current thinking in this area. The only judgment is by Sir Peter Gibson.

Some points:

The distinction between a ‘bargain’ form of estoppel in which relief should vindicate the Claimant’s expectations and a ‘non-bargain’ form in which relief is open to a wider judicial discretion including proportionality with detriment, as proposed by Robert Walker LJ in Jennings v Rice, is followed in this case. However, interest is expressed in a critique of this distinction by Simon Gardner in ‘The remedial discretion in proprietary estoppel – again” in (2006) 122 LQR 492.

The bargain form is potentially close to constructive trust in that an effectively contractual arrangement has been reached which would be effective save for s 2 of the Law of Property (Miscellaneous Provisions) Act 1989, such that fulfilling the expectation is akin to establishing the beneficial ownership. Akin, but not the same. The Court adopts Lord Justice Walker’s comment in Stack v Dowden that:

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.

The Court is firm that where the claim is against the conscience of the ‘true’ owner, it is satisfied by the minimum award necessary to do justice. Where the elements of a common intention constructive trust are not made out, it cannot simply be used or pleaded interchangeably with proprietary estoppel, as apparently happened in this case.

Gardner argues that a wider judicial discretion should be available in all proprietary estoppel cases. On the case as pleaded here, the Court couldn’t pursue this further, but I think the indication that this is the direction in which it is leaning is clear, particularly in the distinction drawn against constructive trust.

What is more clearly indicated is that a detrimental reliance on a promise must be clearly established. Any benefit also obtained can and should be considered against the detriment (at least in a non-bargain case). The scale of the detriment is key and must be carefully pleaded.

Anyone looking to claim proprietary estoppel should be thinking very carefully about both pleadings and evidence, I’d say.

Constructive Trust and Proprietary Estoppel again

Published
by
NL
on 29 November 2007
in Housing law
. 13 Comments

In James v Thomas [2007] EWCA Civ 1212, the Court of Appeal fine-tuned some points on constructive trust and proprietary estoppel, with reference to shares in property. To note from Sir John Chadwick’s main judgment:

A constructive trust can arise some years after the purchase of the property by the sole title holder alone. There is no requirement for the claimed beneficial interest to arise at the time of purchase. However, in this situation, without an express post-acquisition agreement, the Court will be slow to to infer an agreement from conduct alone.

Contribution to mortgage capital repayment per se is not necessarily enough to infer agreement ot a beneficial interest.

It is not necessary for a specified share or part of the property to be mentioned in an assertion that a beneficial interest in the property would be given by the defendant to the claimant. It is sufficient that the property at issue is identifiable, pace Lissimore v Downing [2003] 2 FLR 308.

The judgment is also worth reading when considering what kinds of acts and statements, in what kind of context, will not give rise to a constructive trust or an estoppel.