INFORMALLY CREATED PROPERTY RIGHTS

1.

Constructive Trusts

Express Trusts Parties often record the beneficial interests in land in signed writing pursuant to Law Property Act 1925 s.53(1)(b). It is well settled that such written declarations of trust are conclusive as between the parties for all time, and the court will not consider parol evidence to contradict it. Implied Trusts In the absence of an express trust, a common intention constructive trust will need to be established. The modern holistic approach of the Court is now governed by the opinion of Baroness Hale in Stack v Dowden: The task for the Court isto ascertain the parties shared intentions, actual, inferred or imputed, with respect to the property in light of their whole course of conduct in relation to it.

In divining that common intention, the majority of the House of Lords were of the view that, at least in the domestic context, the resulting trust analysis does not operate as a starting legal presumption; instead, the starting point is the presumption that equity follows the law : The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership.

There are thus two hurdles to overcome first, was it intended that the parties should share the beneficial interest in a property ; and second, if it was so intended, in what proportions was it intended that they share the beneficial interest? - Baroness Hale in Abbott v Abbott

It is to be noted at the outset that: The inquiry is to the common intention at the date of acquisition; and A constructive trust is not ambulatory in the sense that the division of beneficial ownership between the parties will not change simply because of surrounding circumstances, but only when the parties agree (or are taken to have agreed) that it should change. The Court may, at times, infer an agreement to vary their shares of beneficial ownership from the surrounding circumstances, but when it does so the trust is changing because of the parties' agreement and not of its own accord: Jones v Kernott

Informally Created Property Rights

i.)

The First Hurdle was there a common intention that each should have a beneficial interest in the property?

The case of joint legal tenancies is straightforward since equity follows the law, as Baroness Hale observed in Stack v Dowden: A conveyance into joint names is sufficient, at least in the vast majority of cases, to surmount the first hurdle.

The case of a sole proprietor is more complex Lord Bridges test in Lloyds Bank v Rosset tells us that a common intention that A and B should both have a beneficial interest in property may arise: by express agreement, arrangement or understanding however imperfectly remembered and however imprecise their terms may have been, coupled with detrimental reliance; or where there was no evidence of actual agreement, where B contributes directly to the purchase price, whether by cash contribution or its equivalent, or by paying mortgage instalments

However, Lord Bridges doubt that anything less than a contribution to the purchase price will do to infer a common intention was in itself doubted in Stack v Dowden, where Baroness Hale suggested: The observations, which were strictly obita dicta, have set [the first] hurdle rather too high in certain respects.

This position was more firmly adopted by Baroness Hale in Abbott v Abbott, where she considered that: The Court of Appeal appears to have attached undue significance to the dictum of Lord Bridge , in particular as to what conduct is to be taken into account in quantifying an acknowledged beneficial interest. The law has indeed moved on since then. The parties' whole course of conduct in relation to the property must be taken into account in determining their shared intentions as to its ownership.

This has not met universal support however, and a number of recent decisions have cautioned against inferring a common intention from conduct alone, particularly of domestic duties, such as staying home to look after the children, contribution to rates and certain utility bills and purchase of some fittings and fixtures and domestic chattels. It does seem clear now, however, that when Baroness Hale talked of imputing a common intention, she meant no more than inferring/implying an intention, rather than enabling the Court to invent one: Jones v Kernott

Informally Created Property Rights

ii.)

The Second Hurdle if it was so intended, in what proportions was it intended that they share the beneficial interest?

If the parties expressly agree their shares, that will normally be conclusive, and a court will depart from it only if there is good cause to do so: Hapeshi v Allnatt In the absence of such agreement, the Court must undertake a search for the result which reflects what the parties must, in the light of their conduct, be taken to have intended In joint ownership cases Baroness Hale explained in Stack v Dowden: The question is did the parties intend their beneficial interests to be different from their legal interests in joint names cases [a full examination of the facts] is unlikely to lead to a different result [from a finding of joint beneficial ownership].

In relation to the case of a sole proprietor, the extent of the parties beneficial interest is to be answered: By inferences from their subsequent conduct.

In so doing, the Court will declare such interest as it: Considers fair having regard to the whole course of dealing between them in relation to the property including the arrangements which they make in order to meet the outgoings which have to be met if they are to live in the property as their home such as mortgage contributions, council tax and utilities, repairs, insurance and housekeeping

This approach, however, does not enable the court to produce the result which the court itself considers fair. As Lloyd LJ put it recently in Holman v Howes: The court's enquiry is, therefore, for what was intended between the parties, or if that cannot be identified directly, what they must be taken from their conduct to have intended; it is not for that which the court considers fair

In Stack v Dowden at Para [69], Baroness Hale gave examples of relevant conduct that the court might consider: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it were the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances (whether separately or together, or a bit of both); how they discharged the outgoings on the property and their other household expenses; the parties individual characters and personalities; and the construction (or financing of the construction) of an extension or substantial improvements to the property (including significant contributions of manual labour).

Informally Created Property Rights