Maybe I’ve been doing this job too long but there are some things which just seem so obvious to me. I know that the common intention constructive trust is really interesting – empirically as well as in law – but you can’t just jump straight in.
Pankhania v Chandegra [2012] EWCA Civ 1438 is, I’m afraid, a pretty obvious case which should never have been resisted; that it got to the Court of Appeal is an object lesson to advocates and judges not to jump straight in with your fancy arguments about constructive trusts. Why? Because, although the judge proceeded to consider the case largely around the law on constructive trusts, there was, in fact, an express trust made at the time of acquisition of the property. The express trust essentially said that the parties were tenants in common in equal shares. Patten LJ rather nicely protects the judge by saying that the procedure used (a Part 8 claim which proceeded as a Part 7 claim) meant that there were no pleadings as such. Now, it is also fair to say that the circumstances around the purchase of the property did not exactly support the express declaration of trust. But the way the case proceeded meant that the basic question was ignored by the judge. As Patten LJ put it: “The whole of [the judge’s] judgment proceeds upon the footing that he had a free hand to decide what was the common intention of the parties at the relevant time but that inquiry was simply not open to him unless the defendant had established a case for setting the declaration of trust aside”.
That basic question was whether the express declaration of trust was vitiated in one of the classic ways – mistake, fraud, undue influence – as outlined by (for example) the Court of Appeal in Goodman v Gallant [1986] 1 FLR 513. Nothing approaching any of those ways had been asserted by the parties. there was a potentially interesting question as to whether the express declaration of trust was a sham (in essence to get a mortgage for the purchase of the property), but there was no evidence sufficient to get close to the narrow definition of sham (see the problematic case of Snook v London and West Riding Investments Ltd [1967] 2 QB 786).
So, the key message is this: where there is an express declaration of trust, the only ways to avoid its outcome are to vary the trust or apply to set it aside or rectify it.