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Equity and Trust LawClient Advice

Introduction

This client advice addresses Holy’s (claimant ‘H’) legal issues concerning whether she has a beneficial interest in a property held under the defendant’s name (‘P’). A title to the property can be held in one name, or it can be held by joint names in the legal estate. In these cases, the owners are owners in common law. In certain cases, interest in the property may arise without there being a title in the name of a person. Such interest is beneficial interest.

In order to prove a beneficial interest, express trust or resulting trust or constructive trust or proprietary estoppel will have to be proved by the claimant. This essay considers all four areas in relation to the client advice.

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Expressed Trust

Expressed trust can be define as the trust “created intentionally by the act of the settlor”. Expressed trust are manifested through a written deed, in compliance with LPA 1925, s 53 (1) (b). Furthermore, a number of legal formalities must be fulfilled for a valid creation of an expressed trust, in particular three certainties. These three certainties are: certainty of intention; certainty of subject matters; and certainty of objects. Alternatively, TRI form can be used to transfer legal title. Once completed this form constitutes a deed.

Minors are unable to acquire the positon of a legal owner of land nor can they create a trust of a legal estate. A person who lacks capacity in accordance with the Mental Capacity Act 2005, and who does not have an appointed receiver will be unable to acquire the position of a legal owner of land or create a trust.

The claimant does not fall into this category as there appears to be no evidence indicating a written documentation of her having the legal title to the property. Therefore, in the interest of

  • Stack v Dowden [2007] UKHL 17
  • David Hayton, Paul Mathews and Charles Mitchell, Underhill and Hayton - Law Relating to Trusts and Trustees (London: Butterworths LexisNexis 2003) 53.
  • Land Property Act 1925 s 53 (1) (b) defines Express trust as “a declaration of trust respecting any land or any interest therein, which must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.
  • Lord Eldon in Wright v Atkyns (1823) Turn. & R. 143 said “the words must be imperative”. In other words, the words expressing trust must be clear and concise. It is fundamental that the settlor makes his/her intention clear in order for there to be a legally binding trust.

  • Subject matter of the trust must be clear. The settlor must not use vague or ambiguous statements when creating a trust. For instance, statements such as “a bulk of my estate ”, which was used in Plamer v Simmonds (1854) 2 Drew 221, cause confusion and can be interpreted in different ways. This also illustrated in Boyce v Boyce 1849 16 Sim 476.
  • Certainty of object relates to a clear identification of the persons who will benefit from the trust.
  • The TR1 is widely used in majority of the transactions, as this is for a transfer of the whole of a title by the registered proprietors of the title.

the claimant it will be advised she avoid seeking a claim in this area as she will be unsuccessful.

Establishing a Trust

If the property is in the sole name of one person, and there is no evidence of an express declaration of trust in favour of another, the other person will have to show beneficial interest in the property. Accordingly, client H must adduce credible evidence in order for a determination in her favour that there is a beneficial interest. Claims in this area are generally framed in resulting trust and constructive trust.

Resulting Trust

Resulting trust refers to a trust that has not been expressly created, and which fails to comply with LPA 1925, s 53(1). Such trust stems from the Latin “resultare “ (spring back), which aims to redirect the beneficial interest of trust property back to the former title owner. The doctrine of resulting trust arises in two contexts, which are, failed trusts or apparent gifts. An example of a resulting trust is seen in Hodgson v Marks. This case concerned the equitable interest of a person in a home in which he remained in actual occupation throughout the transactions. The case was ruled in Hodgson’s favor.

Resulting trust arises due to the attempt to create an express trust which failed to comply with LPA 1925, s 53 (1). Trust fails due to the uncertainty as to the beneficiaries, or a lack of clarity as to what their interest should be.An example of this is the ruling in Boyce v Boyce, wherein the trust failed due to the uncertainty leading the property to spring back to the settlor estate.

Another form of resulting trusts are apparent gift cases, which arise when a party, which is not the title owner, nevertheless contributes towards the purchase price of the property. In Curly v Parks and Tinsley v Milligan a direct contribution towards the purchase price led to the constituting of the resultant trust. However, contribution to the purchase price is distinguished from subsequent payments of the mortgage. The latter is not a form of contributing towards the purchase price. Although there is evidence that the client H has made subsequent payment towards the mortgage, Curly principle confirms that this will not be deemed as a valid form of a direct contribution towards the purchase of the property, therefore will not lead to a constitution of a resulting trust. If the client H can produce evidence of contribution to the deposit for the purchase of the house, she may claim a resulting trust in the property. However, there is no evidence of such a contribution to the

  • Hodgson v Marks [1971] 2 WLR 1263 CA.
  • The maxim, "equity abhors a vacuum", is applicable here as this principle disapproves of the idea of property having no owner.
  • Boyce v Boyce (1849) 60 ER 959.
  • Curly v Parks (2004) EWCA Civ 151.
  • Tinsley v Milligan (1993) 3 WLR 125 HL
  • I am aware that there is no evidence provided in the case information that client H has not paid towards the contribution for the property, as she was invited to move into the flat. However, there can be a possibility that Philp may have been renting at the time and they both bought the property together.

deposit.

Client H is advised to avoid making a claim under resulting trust as she does not meet the requirements. In the instance she is able to show contribution of deposit, she will only receive the portion of interest based on her contribution.

Constructive Trust

If client H wants to prove that she has a beneficial interest in the property, she may be able to show such interest under a constructive trust. This is the main mechanism for determining a beneficial interest in the context of a family home.

Constructive trust arises by operation of law, and need not to be in compliance with LPA 1925, s 53 (1) , as it is neither expressly subject to any trust nor subject to a resulting trust. It arises in circumstances where a person has been acted upon unconscionably by the legal owner, resulting in depriving a person to assert a beneficial interest, or where claimant has acted to their detriment. There are various ways constructive trust can arise through unconscionable dealing with property, unlawful acts and profits. For the benefit of this discussion, this area will solely concentrate on the behaviour of the legal proprietor who denies or impedes the rights of the other person over that property. Notwithstanding ownership rights, the court will order the legal owner to hold the property in constructive trust for the claimant.

The first step is to determine the legal title of the property. Constructive trust arises when the legal title is vested in one party only, as in the instance of client H and P, with P being the sole holder of the legal title. The landmark case, Lloyds Bank v Rosset illustrated the point that where there is an expressed common intention and the party which has acted on reliance of the expression to his detriment, can be the beneficial interest holder under a constructive trust. Lord Bridge states

“The first and fundamental question which must always be resolved is whether …. 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.”

  • An automatic resulting trust arises when the settlor’s transfer of property to a trustee fails. The trustee will hold the acquisition of the trust by upholding the legal title. There are two ways a presumed resulting trust can arise, through a voluntary transfer of the legal estate, and through a contribution towards purchase price. Presume resulting trust was supported by Lord Brown- Wilkinson in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] UKHL 12: "...the presumption of resulting trust is rebutted by evidence of any intention inconsistent with such a trust, not only by evidence of an intention to make a gift”.
  • English Law has not provided a definition as to what a constructive trust is. This may be the case as it is used in different ways. Edmund Davies LJ in Carl Zeiss Stiftung v Herbert Smith & Co [1969] 2 Ch. 276, confirms that there is no legal definition as it used in different context as well as permits the courts to be flexible.
  • Lloyds Bank v Rosset [1990] UKHL 1.

When referring to Holy’s case, the defendant suggests this orally, stating “I will put your name on the house”. The defendant is using the outcome of the EU referendum (Brexit) as an excuse to not put client H’s name as the legal owner of the property.

In Eves v Eves concerning ‘excuse case’, D informed his partner that she is too young to hold a legal title over the property as an excuse to avoiding putting her name in the title. It was held that this is an excuse case manifested through a common intention to share the beneficial interest. In that case, the claimant did not make any financial contribution, but she carried out substantial physical labour in the development of the property. It was held the claimant was entitled to one quarter of the beneficial interest under a constructive trust. Lord Denning added that considering the conduct of the defendant, it would be inequitable for the defendant to deny the claimant any share in the property.

In relation to client H, once she can prove that there is an expressed common intention, client H will then need to show that she relied on the agreement between her and defendant P to her detriment. Grant v Edwards illustrates a similar point. The case involved the defendant expressing to the claimant that she couldn’t hold the title deed as this may have an adverse effect on his divorce proceedings. The court examined the case and inferred from facts that there was an expressed common intention, due to which the beneficial interest was to be shared. The claimant had paid all the house expenses which enabled the defendant to pay the mortgage payments. Subject to this reliance, the claimant was caused a detriment.

When applying Grant case to client H, there is an agreement between client H and defendant and based on that agreement, client H has relied upon it, resulting in making subsequent mortgage payments, council tax bill, supermarket deliveries, gas, electric and water. This is a clear indication that client H will succeed in a claim under constructive trust as she qualifies in constructive trust under express common intention. Similarly, in Hammad v Mitchel claimant was held entitled to half of the share of the property due to detrimental reliance.

In Rosset Lord bridge added that common intention can be inferred the conduct of the parties. There are two specifications needed to infer such common intention: inferred intention and detrimental conduct. This is to say that agreement to share mortgage and other household outgoings will be deemed as an inferred intention. Coupled with other outgoings, these are substantial enough to suffice for detrimental reliance satisfaction. In Oxly v Hiscook Chadwick LJ states “where there is no evidence of any discussion between them of the share which each was to have … 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.”

In the light of client H’s conduct, it is justified to proclaim that client H will qualify in this area. There is clearly inferred common intention. Above all, this will strengthen client H’s

  1. Eves v Eves [1975] 1 W.L.R 1338
  2. Grant v Edwards [1986] Ch. 638
  3. Hammad v Mitchell (1992) 1 WLR 1127.
  4. Lloyds Banks v Rosset [1990] UKHL 1.
  5. Oxley v Hiscock 2004 EWCA CIV.
  6. In Stack v Dowden (2007) 2 AC 432, a property is conveyed into joint names of cohabitants without a declaration of trust in the case. The courts identified that Dowden contributed far more to the acquisition of the house. It was found that there was an inferred common intention.

bargaining position with the intention to seek a claim under constructive trust. Constructive trust also gives the court a lot of flexibility to quantify on what client H’s interest should be.

In Le Foe v Le Foe the court applied a flexible approach towards constructive trust, where the wife paid for the domestic expenditures, the husband paid the mortgage payments. The court held that inferred common intention was seen due to wife’s domestic expenditure which is an indirect payment of the mortgage. Following from this ruling this will strengthen client H legal stance under constructive trust.

Proprietary Estoppel

The doctrine of proprietary estoppel is a method of acquiring rights over a property. Proprietary estoppel is an equitable remedy that does not follow legal formalities, and it is operated by preventing the legal owner of the property from asserting their legal rights over a property. The modern case law suggests that three factors are required to establish a proprietary estoppel: representation of assurance, reliance and detriment. Client H must demonstrate entitlement by way of estoppel, and subject to evidence shown, an appropriate remedy will be awarded.

For client H to make a claim there are three areas that she must satisfy; assurance, reliance and detriment. Assurance can be passive or active. For the purpose of this essay, only active assurance is considered. An active assurance can be in form of words or conduct of the title owner, resulting to the claimant to have faith and belief that they will have an interest over the property. Referring to client H, through her conduct, assurance element will be satisfied. In Pascoe v Turner an express active assurance can be seen, where the claimant left the property shared between both the claimant and defendant and stated that the defendant can continue living there and also that they will transfer the title to the defendant name. The claimant redecorated and made improvements to the property. It was held that the defendant can remain in the property a transfer of title was also allowed. By contrast, in Thorner v Major, the assurance given to the claimant was not clear and unequivocal, and so the court held that no proprietary estoppel was created.

Quantifying the award under a claim in proprietary estoppel, it is seen that courts tend to give a minimum amount. This can be seen in the decision made in Jennings v Rice, where the property was valued at £435,000, butthe court awarded the claimant £200,000. Therefore, client H must factor this in the decision to claim under a proprietary estoppel, as the court only needs to be satisfied by minimum award to do justice.

  1. In contrast to Stack v Dowden, in Burns v Burns (1984 ) Ch 317, concerned beneficial ownership of the property in one name. It was held that the claimant did not have a beneficial interest as she acquired no interest in the family home. Additionally, there was no express agreement to qualify her. There was no substantial contribution made by the claimant.
  2. Le Foe v Le Foe [2001] 2 FLR 970.
  3. There is an overlap between constructive trust and proprietary estoppel however the treatment of proprietary estoppel differs in some areas The doctrine of proprietary estoppel can be used to create a lease, licence, freehold ownership and easement.
  4. Pascove v Turner [1979] 1 WLR 431
  5. Holman v. Howes [2008] 1 FLR 1217
  6. [2009] UKHL 18.
  7. Jennings v Rice [2002] EWCA Civ 159
  8. Emma Warner-Reed, Optimize land law (Oxon: Taylor and Francis 2014) 151.

Above all, it is not advised that client H should seek a legal claim under a proprietary estoppel due to the minimum award given by the courts in this area.

Summary

All things considered, it seems reasonable to assume that client H will have a beneficial interest over the property held under a constructive trust. This will enable her to gain a large percentage of the beneficial interest. The most compelling argument for client H is that she relied on the premise of an express common intention as the defendant expressly stated that he will put her name as the legal owner to the property. This can be inferred from her conduct of paying portions of the mortgage payments alongside with the household bills.

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From the above discussion it is evident that there is an inferred common intention. As client H aims to gain the maximum advantage in regards to the beneficial interest, she should seeks a claim under constructive trust. This is due to the fact that the courts are flexible under constructive trust and she stands a chance to gain more.

Bibliography

Books

  • Bray J, Unlocking land law (Routledge 2016)
  • Chambers R, Resulting trusts (Clarendon Press 1997)
  • Dixon MJ, Modern land law (5th edn, Routledge Cavendish 2005)
  • Hudson A, Equity and trusts (Routledge 2016)
  • Warner-Reed E, Optimize land law (Taylor and Francis 2014)
  • Watt G, Trusts & equity (Oxford University Press 2016)
  • Birks PBH and Pretto A (eds), Breach of trust (Hart Publishing 2002)

Case Law

  • Boyce v Boyce (1849) 60 ER 959
  • Burns v Burns (1984) Ch 317
  • Carl Zeiss Stiftung v Herbert Smith & Co [1969] 2 Ch. 276
  • Curly v Parks (2004) EWCA Civ 151
  • Eves v Eves [1975] 1 W.L.R 1338
  • Grant v Edwards [1986] Ch. 638
  • Holman v. Howes [2008] 1 FLR 1217
  • Jennings v Rice [2002] EWCA Civ 159
  • Stack v Dowden [2007] UKHL 17
  • Wright v Atkyns (1823) Turn & R 143
  • Pascove v Turner [1979] 1 WLR 431
  • Jennings v Rice [2002] EWCA Civ 159
  • Hammad v Mitchell (1992) 1 WLR 1127.
  • Le Foe v Le Foe [2001] 2 FLR 970
  • Lloyds Banks v Rosset [1990] UKHL 14
  • Oxley v Hiscock [2004] EWCA Civ 546
  • Plamer v Simmonds 1854 2 Drew 221
  • Tinsley Milligan (1993) 3 WLR 125 HL
  • Thorner v Major, [2009] UKHL 18
  • Westdeutsche Landesbank Girozentrale v Islington LBC [1996] UKHL 12

Legislations

  • Land Property Act 1925
  • Mental Capacity Act 2005

Journals

David Hayton, Paul Mathews and Charles Mitchell, Underhill and Hayton - Law Relating to Trusts and Trustees (London: Butterworths LexisNexis 2003)


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