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24/10/2008

Agreements and constructive trust

Parris v Williams [2008] EWCA Civ 1147 was an appeal against an order that Mr Williams had 100% beneficial interest in one of two flats to which legal title was held by Mr Parris. It is of interest because it contains a challenge to the ways in which a constructive trust can be found to arise.

The facts were, briefly, that Mr Parris and Mr Williams were friends. Mr Williams was subject to an IVA. Mr Parris bought two flats (originally knocked into one, but a dividing wall was put up shortly after purchase). Mr Williams contributed nothing to the purchase monies and the mortgages were paid by rent from tenants. Mr Williams could not hold legal title because of the IVA. Mr Williams claimed that there had been an agreement that one of the flats was his.

At trial, Mr Williams argued that there had been the agreement, following which he acted acted to his detriment in decorating both properties, paying service charge on on property, which were accepted by the Recorder, and other payments that weren’t believed. Mr Parris denied there was an agreement and that Mr Williams had paid any sums or done anything more than half a day’s decorating. The Recorder found that there was evidence that pointed towards an agreement and that Mr Williams had acted to his detriment on the basis of that agreement, sufficient to establish a common intention constructive trust and beneficial interest of 100% in one flat.

Mr Parris appealed, initially on the ground that the Recorder was wrong to divide up the flats in this way. At hearing at the Court of Appeal, the further ground of appeal that the Recorder was wrong to find that a constructive trust had arisen was given permission.

Mr Parris argued that in order for a constructive trust based upon an agreement to arise, there must be subsequent acts in accordance with the agreement. He cited Gissing v. Gissing [1971] AC 886 (para 905B)

What the court gives effect to is the trust resulting or implied from the common intention expressed in the oral agreement between the spouses that if each acts in the manner provided for in the agreement the beneficial interests in the matrimonial home shall be held as they have agreed.

In this case the point was that:

the evidence before the Recorder was that it was no part of the agreement or understanding between Mr Williams and Mr Parris that Mr Williams was expected or required to do anything. It followed that the acts that the Recorder found he had performed were not acts he was required to perform under the agreement and so their performance was ineffective to enable him to establish the claimed constructive trust. (para 26)

Midland Bank Plc v. Dobson [1986] 1 FLR 171 was also cited in support of this view. The upshot being that, absent an express agreement as to what it was Mr Williams would have to do to get his beneficial interest, any acts of his that might otherwise be considered as detrimental reliance were by the by.

The Court of Appeal didn’t agree. In a tour of subsequent authorities, Lloyds Bank Plc v. Rosset and Another [1991] 1 AC 107 and Grant v. Edwards [1986] Ch 638, the lack of strict requirement as argued by Mr Parris is identified, with Lord Bridge’s statement at para 132D taken as a clear guidance:

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 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 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 a proprietary estoppel.
In sharp contrast with this situation is the very different one where there is no evidence to support a finding or an agreement or arrangement to share, however reasonable it might 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 to the basis from which to infer a common intention to share the property 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.

This case would fall under the second of these categories, as an agreement had been found to have been made. Mr Parris, via Counsel Mr Glen, was effectively repeating arguments made to the House of Lords in Rosset and which were not accepted then. The Court of Appeal had adopted that approach to agreement cases, in Crossley v. Crossley [2006] 2 FLR 813.

The final line of appeal – that Mr Williams detriment was too insignificant to amount to establishing 100% beneficial interest in the flat, also failed. This was a decision for the Recorder at first instance on the facts, but given that the mortgage was paid by rent on both flats, there was no major discrepancy in value.

Appeal dismissed.

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

3 Comments

  1. simplywondered

    oh come now, vintage bass guitar – give us the benefit of your take on constructive trusts. we are dying to hear it, you know!

    Reply
    • NL

      Sorry, that was one of the 15,607 spam comments attempted on this blog. That one managed to sneak through the defences.

      Reply
  2. simplywondered

    i had kinda worked that one out!
    i can’t recall ever having seen spam on here before so you/the spam filter are doing a good job.

    Reply

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