EQUITY AND TRUSTS

1
EQUITY AND TRUSTS

• CONSTRUCTIVE TRUSTS
• (2)

2
Circumstances giving rise to CTs

• Exhaustive categorisation not possible will
  examine some other of the categories but the main
  focus in this lecture is CTs of the
• family home.

3
Mutual wills

• CTs can arise from mutual wills. If two or more
  agree to make wills and not to revoke without
  mutual consent.
• If first to die performs then it will be
  unconscionable for second to deviate from terms.
• CT imposed on survivors property.

4
Proctor v Dale 1999 4 All ER

• Held not necessary for testators to agree to
  leave property to each other.
• Equity will impose trust on property of survivor
  where each testator agrees to leave property to
  third party.
• Goodchild v Goodchild 1997 3 All Er 63 for
  mutual wills must be clear evidence intent not to
  unilaterally revoke.

5
Wills and formalities

• Formalities s9 Wills Act 1837 a will must be in
  writing signed by testator and two witnesses in
  presence of testator
• If not will is void.

6
Wills secret trusts

• Take effect on testators death do not comply
  with requirements of Wills Act
• Testator normally leaves property to someone
  prima facie an outright gift
• But donee has agreed to take on certain trusts
  fully secret trust

7
Half secret trust

• Property left on trust in will but without
  specifying terms trust

8
Why a secret trust?

• Usually to keep identity of beneficiary secret
• or
• testator undecided about dispositions
• Subject to some conditions secret trusts are
  enforceable despite not conforming with Wills
  Act.

9
Secret Trusts

• STs traditionally justified on basis of doctrine
  of fraud
• But modern doctrine is that STs arise
  independently of will
• Are secret trusts express or CTs? Important in
  case of land and s53(1)(b) LPA 1925 which applies
  to express only.

10
CTs and crime unlawful killing

• A person cannot benefit from their crime
• If one person kills cannot take benefit from
  will or through intestacy rules. If killer
  acquire legal title to victims property he will
  hold it on CT for people next entitled.

11
Fraud

• CT imposed where property gained through fraud.
  See
• Rochefoucauld v Boustead 1897 1 Ch 196
• Bannister v Bannister 1948 2 All ER 133
• Binnions v Evans

12
Land

• Contract to sell land is specifically
  enforceable vendor holds it on CT for
  purchaser. CT arises through maxim
• equity treats as done that which ought to be
  done.
• Contract for sale of personal property not
  generally enforceable unless unique see
• Oughtred v IRC 1960 AC 206

13
Imperfect gifts

• Substantive law relating to this dealt with in
  trustees lectures
• In circumstances where failed transfer or gift
  as declaration of trust no real declaration of
  trust so if settlor is to be treated as trustee
  then must equity must impose a trust. See
• Re Rose
• Mascall v Mascall
• Pennington v Waine
• in lecture on creation of express trusts

14
CTs of the family home
15
CTs of family home

• Trusts can arise where dispute as to ownership
• e.g. where property owned by one cohabitee and
  the other claims interest through contribution to
  the purchase price or improvements or payment of
  domestic expenses
• RT when two people contribute to purchase legal
  owner hoods it on RT in proportion to
  contribution
• CT if one does not make direct contribution to
  purchase price interest under a CT? or
  proprietary estoppel?

16
CTs social context

• Family home CTs arose out of married women where
  property held in husbands sole name
• Wife may claim under CT if direct contribution
  to purchase
• But if mortgage paid by husband then only
  monetary contributions count. CT developed to
  provide share. See Gissing v Gissing 1971 AC 886
  and Pettit v Pettit 1970 AC 777 and also the
  Matrimonial Causes Act 1973

17
Family home

• MCA 1973 does not apply to unmarried cohabitees
  so general law principles apply doctrines of
  CTs and RTs
• Also important to married couples where third
  party is claiming priority interest e.g.
  mortgagee

18
RTs and family home

• Claim under RT requires direct contribution to
  purchase price at outset - share is then
  proportionate
• Contrib can be payment towards mortgage
  instalment if agreed at outset

19
RTs limitations

• Limitations of RT clear no contribution to
  initial purchase price then useless.
  Proportionate basis can also be unfair.
• CT sometimes preferable. Not limited to
  contributions to the purchase price or share of
  entitlement

20
CTs requirements

• Two requirements for CT
• (i) common intention to share the beneficial
  interest in property
• (ii) acted to their detriment on basis of that
  intention

21
Trusts of the family home

• Lloyds Bank v Rosset 1991 1 AC 107
• Lord Bridge two situations
• (i) Agreement to share OR (ii) no such
  agreement.
• If no agreement then conduct is used to infer
  common intention to share.

22
Common intention CTs

• CT gives effect to common intention.
• Can arise from (i) express agreement
• OR (ii) inferred from conduct.

23
(i) express agreement

• Agreement to share beneficial interest required.

24
(i) express agreement

• Agreement must be expressly discussed.

25
(i) express agreement

• Bridge considered Eves v Eves 1975 3 All ER 768
  and Grant v Edwards 1986 Ch 638 as outstanding
  examples of category (i)
• In both cases female partner misled by male
  partner

26
(i) express agreement

• In Grant v Edwards female partner told by male
  no joint names because she was getting a divorce
• Norse LJ facts raised inference of common
  intention of females proprietary interest

27
(i) express agreement

• Hammond v Mitchell 1991 1 WLR 1127 Hammond
  said he would have to put house in his name
  because of tax problems he had lost his
  accounts in fire.
• Hyett v Stanley 2003 All ER (D) 284 statement
  to claimant that no need for her name on deeds
  because it was on mortgage and would give her a
  right to the property was a clear inference of
  understanding to share.

28
Common intention

• Common intention without more does not give a
  CT. Is equal to express declaration of trust but
  ineffective unless formalities of 53(1)(b) LPA
  1925 have been complied with. But does not apply
  to CTs see 53(2).
• Claimant must have acted to their detriment in
  reliance on common intention.

29
Detrimental reliance?

• Difficult to know what detrimental reliance is.
• Conduct is different from that for inference of
  common intention.
• Nothing short of direct contribution to
  purchase price will give rise to such an
  inference
• Detriment not needed where express agreement

30
Detrimental reliance

• Rosset does not analyse the conduct needed to
  give rise to a CT. Reference should be made to
  Grant v Edwards as leading authority
• Grant made substantial contributions to expenses
  of household maintenance that enabled Edwards to
  pay mortgage thus detrimental reliance. Type
  of conduct that is acting on common intention?
  Uncertain.

31
Detrimental reliance

• Norse LJ behaviour that would be unreasonable
  unless expected to have interest in house
• Mustill LJ conduct to be used to determine quid
  pro quo if claimant provides this then
  sufficient
• Browne-Wilkinson VC more liberal, any act of
  detriment done by claimant relating to joint
  lives is sufficient

32
Conduct as detrimental reliance

• Conduct that has been considered sufficient
• Grant v Edwards substantial indirect contribs
  to mortgage and bringing up children
• Eves v Eves labouring work
• Hammond v Mitchell unpaid business assistant as
  well as looking after house and children
• Stokes v Anderson 1991 1 FLR 391 12k to man
  to pay ex-wifes mortgage
• Chan v Lun giving up political career and
  helping with property development projects

33
Contrast Rosset

• But Mrs Rossets activities painting ,
  decorating, supervising builders carrying out
  renovations, ordering, delivering materials so
  trifling as to be de minimis.

34
No agreement to share

• Conduct becomes basis from which to infer (i)
  common intention and (ii) conduct to give rise to
  CT
• Usually nothing less than direct contributions to
  purchase price

35
Trowbridge v Trowbridge 2002 All ER (D) 207

• Court found no discussions that Mr T to have
  interest in house. As no discussions possible
  inference from conduct? Payment to purchase price
  or by mortgage instalments. Common intent arose
  from his mortgage contributions

36
Contrast

• Buggs v Buggs 2003 All ER (D) 379 claimant
  contributed to common pool from which mortgage
  payment were made. Judge decided no trust in her
  favour perverse and criticised.

37
Rosset

• Rosset house bought from family trust. Property
  bought in Mr Rossets name. Mr Rosset obtained
  15 k loan from Lloyds then defaulted. Possession
  claimed by bank and Mrs R claimed overriding
  beneficial interest 70(1)(g) LRA 1925

38
Rosset

• Mrs R claim that express agreement that property
  would be jointly owned rejected at first
  instance. But common intention that Mrs should
  have beneficial interest under CT. HL held
  activities insufficient to justify inference.

39
Express agreement

• Absence of express agreement not necessarily
  fatal court may still infer.
• But only where conduct leads court to infer this
  is what happened I.e. court cannot infer simply
  if one would have been reasonable had the parties
  thought about it.

40
Direct contributions

• Direct contributions to mortgage or purchase
  price will readily lead the court to infer an
  agreement was present.
• See Burns v Burns 2004 EWCA Civ 1258 Gissing v
  Gissing decorating and gardening work justified
  on basis of making the homes more pleasant rather
  than gaining a share of equity.

41
Rosset indirect contributions

• Bridge appears to rule out indirect
  contributions as in Grant v Edwards
• These were accepted in Burns as giving rise to
  CT.

42
Rosset indirect contributions

• Fox LJ absent express agreement then conduct is
  sued to infer common intention especially
  expenditure.
• Court looks for expenditure related to purchase
  of house e.g. making of indirect contributions

43
Grant v Edwards indirect contributions

• Norse LJ expenditure referable to purchase of
  house is necessary duel effect in establishing
  common intention and detrimental reliance

44
Rosset - indirect contributions

• Does Bridge rule out such contributions?
• Analysed Grant v Edwards females indirect
  contributions to mortgage and Eves v Eves where
  labouring done. Conduct was sufficient because of
  express common intention. On its own conduct was
  insufficient to base claim to CT.

45

• Le Foe v Le Foe HC concluded Bridge had not
  intended to exclude wifes indirect contribution
  to mortgage. Court entitled to infer from
  indirect contribs of Mrs Le Foe parties intended
  she should have beneficial interest.

46
Improvements

• Are improvements - contributions of time and
  labour enough to give rise to inference necessary
  to found CT?
• These can detrimental reliance - see Eves
• But unclear whether would fall into Bridge
  second category (see earlier decisions Cooke v
  Head 1974 2 All ER 1124 and Hussey v Palmer
  but now apparently ruled out)

47
Rosset - criticisms

• Confusion of second category with that of RTs.
  Direct contributions traditionally gives rise to
  RT but in Rosset is basis for CT.

48
CT/RT confusion

• CT/RT confusion problematic for quantification.
  Midland Bank v Cooke 1995 4 All ER 562 CA held
  that where direct contrib made not an RT on
  proportionate basis but would assess
  contributions the parties could be assumed to
  have intended by undertaking a survey of whole
  course of conduct relevant to ownership.

49
See also

• Drake v Whipp 1996 1 FLR 826 D made direct
  contributions to the purchase and claimed direct
  share under RT CA found a CT not RT as evidence
  of express common intention to share can employ
  broad brush approach set out in Midland Bank v
  Cooke. Here fair share was one third.

50
Le Foe v Le Foe

• Parties married 40 years. In husbands sole
  name. Wife made indirect contributions to
  mortgage and cash contributions to second
  mortgage and arrears on earlier mortgage.
  Husband argued beneficial interest was 10. J
  applied Midland Bank v Cooke. From whole course
  of dealing share should equal 50.

51
RTs/CTs and Rosset

• Direct contribution can equal RT and a
  proportionate share
• Under Rosset such a contribution can give rise to
  CT or can be used to infer necessary common
  intention
• Court not bound to apply RT formula but can take
  account of whole range of conduct as above

52
Quantification

• Where express common intention to share then
  shares equals what parties agree e.g. Hammond v
  Mitchell

53
Quantification

• Where there is no express agreement then
  principles laid down in Gissing v Gissing apply.
  Can an inference be drawn from parties conduct of
  what share was intended.
• e.g. Grant v Edwards and Hyett v Stanley

54
Quantification

• e.g. half shares awarded in
• Grant v Edwards and Hyett v Stanley

55
Quantification

• Could be inferred that share was to be
  quantified later having regard to total
  contributions of whatever kind.
• Court can then determine what in all the circs
  is a fair share. Stokes v Anderson Oxley v
  Hiscock 2004 EWCA Civ 546

56
Oxley v Hiscock

• Court at first instance determined shares on
  basis of intention to share equally.
• On appeal defendant argued that shares should be
  proportionate on basis of original contributions.
  

57
Oxley v Hiscock

• CA held each entitled to share considered fair
  in regard to whole course of dealings
  including occasional expenses.
• Accounting also for defendants greater
  contribution fair share was 60/40.

58
Oxley v Hiscock

• Where no discussion therefore each is entitled
  to share court considers fair after survey of
  whole course of dealing.
• Chadwick LJ gave leading judgement followed
  Gissing. In absence of any express agreement
  intention must have been to agree this later on
  what was agreed to be fair.

59
Quantification

• Under second limb of Rosset CT as a result of
  direct contribution to the purchase price then
  starting point in quantifying shares is
  proportionate entitlement.
• e.g. Springette v Defoe 1992 2 FLR 388 RT
  ordered after council house discount obtained.
  See also Ashe v Mumford 33 HLR 756 and
• Huntingford v Hobbs 1993 1 FLR 736

60
Quantification

• Where direct contribution court is not bound to
  use proportionate basis.
• Midland Bank v Cooke wife made contrib of 550
  being half of wedding gift to both parties. At
  first instance awarded 6.5.

61
Quantification

• CA held not bound to deal with quantification
  on strict basis of cash contrib. Could attribute
  intention to share beneficial interest by survey
  of whole course of dealing and take account of
  all conduct relevant to issue of hat shares were
  intended.

62
Quantification

• Approach in Midland Bank v Cooke applied
  applied in other cases

63
Oxley v Hiscock

• CA in Oxley criticised approach of Waite LJ in
  Midland Bank v Cooke that whole course of dealing
  should be surveyed
• Chadwick thought this artificial that shares
  should be fixed as from time of the acquisition
  when the evidence suggests they gave no thought
  to the matter.

64
Lloyds Bank v Rosset

• Rosset appeared to provide clear statement but
  problems surrounding quantification of beneficial
  interest especially where direct contribution
  is made

65
Law Commission

• Discussion paper Sharing Homes
• law is complicated, difficult to apply and
  unsuited to informalities of home sharing.
• Much depends on what court identifies as common
  intention unrealistic
• No clear what contribs are sufficient
• Quantifying shares extremely difficult
  decisions inconsistent
• Uncertainty of law can lead to delay

66
Summary

• Considered law of CTs in variety of situations
• Trustees or other fiduciaries becoming trustees
  of unauthorised profit
• Third party when in receipt of trust property
• Common intention and the family home
• Property received as a result of killing
• Mutual wills
• Specifically enforceable contracts
• Imperfect gifts
• Unifying factor unconscionable conduct.