Introduction to Co-Ownership

5 – Co-Ownership Introduction to Co-Ownership - All co-ownership of land takes place through the medium of the trust device, the ‘trust of land’. Co-ownership can arise under several forms of trust:i) - - - Express trusts; An express trust of land must be evidenced in writing signed by the parties declaring the trust s.53(1)(b)LPA. Typically when 2 or more people co-purchase or otherwise co-acquire land, a Deed of Transfer, Form TR1 if the land is already a registered title or if an unregistered title triggering first registration (Form FR1), is executed. Thus, e.g. TR1/FRI is the Deed which assigns the title to be sold (e.g. freehold) from the Seller to the Purchasers. On the form (Box 10) the Declaration of Trust will be executed, declaring that the co-purchasers hold the land, as trustees, on trust for either themselves (as Joint Tenants/Tenants in Common) or in some other fashion or for some other people (e.g. for X for life remainder to Y). The Declaration of Trust will , in the absence of undue influence, fraud or duress, be conclusive as to equitable ownership, see Goodman v Gallant (1986). Pankhania v Chandegra (2012), Pink v Lawrence (1977)**** ii) Implied trusts (i.e. resulting and constructive trusts) Reasulting Trusts - Arise by operation of law/equity and are exempt from any formality requirement of writing, s.53(2) LPA 1925. - Circumstances when a Resulting Trust of Land can arise: i) Where a Trust does not exhaust/establish an equitable interest. - E.g. Where land (say a freehold) is conveyed by A to B ‘on trust’….but does not say for who! Here a resulting trust by operation of law kicks in, to establish that B holds on a resulting trust for ‘A’ (the Settlor), Merchant Taylor’s Co. v A.G. (1871). A therefore has the equitable title to the land. ii) Purchase of land in another’s name - Where land is conveyed/transferred to one person only (say B) but the purchase price is ab initio provided by another as purchaser (say A), there arises a Presumed Resulting Trust in favour of the person providing the purchase money (i.e. A) to the extent of his or her contribution, in equity Dyer v Dyer (1788). - Evidence of a loan or gift of the money can rebut this Presumed Resulting Trust – Fowkes v Pascoe (1875). - Evidence of the Presumption of Advancement can also rebut the Presumption of the Resulting Trust – Moate v Moate (1948) (presumed gift in equity from husband to wife, parent to child). Tinsley v Milligan (1994)**** Constructive Trusts - Constructive trusts, like resulting trusts, arise by operation of law and are exempt from any formality of writing to be enforceable, s.53(2) LPA. - In broad terms, Constructive Trusts can be imposed by the court so as to award co-ownership shares to the land in equity behind a trust in favour of a claimant ‘wherever justice and good conscience require it’. - In reality, English law uses the Constructive Trust device ‘to award an equitable share of the land in favour of a party (A) who has to his or her detriment relied upon a common intention with the landowner (B) that he or she (A) will acquire an interest in the land of B’. - To succeed A will have to demonstrate: i) a common intention that both parties should have a beneficial interest in the property: and ii) that A acted to his or her detriment on the basis of that common intention so that it would be inequitable for A to deny B an interest. - The Constructive Trust looks similar to the Resulting Trust in some ways. However, Resulting Trusts tend to operate where ab initio land is purchased in one person’s name and another, at that time, contributes to the acquisition costs. - Constructive Trusts tend to arise in ‘subsequent acquisition situations’, where e.g. B owns land, A moves in with B sometime thereafter and A then contributes towards the costs of the property (e.g. mortgage payments or capital improvement works), and then A claims a ‘share’ of the land in equity. - Where the parties are married and divorcing, the court has a unique statutory jurisdiction under s.24 Matrimonial Causes Act 1973 to make property adjustment orders after divorce, to rearrange and award property rights to former spouses. - In cases where former cohabitants/partners have parted and a dispute arises over the ownership of the land, where the land is solely registered in the name of B, claimant A can claim a share of the land under a Constructive Trust if A can show that there was an express or implied common intention (between A and B) to share the land beneficially and that A has acted to his or her detriment in relying on that agreement. ‘Common intention to share beneficially’ a) Can be inferred from A regularly contributing to/paying the mortgage or making a cash contribution to acquisition costs Lloyds Bank v Rosset (1991), Stack v Dowden (2007), Abbott v Abbott (2005)**** - Loans and gifts of money from A to B will not suffice her as evidence of a ‘common intention to share’ Spence v Brown (1988), Risch v McFee (1991), Stokes v Anderson (1991)**** b) May be inferred from the parties’ ‘whole course of conduct in relation to the property’, e.g. substantial improvement works Stack v Dowden (2007), Jones v Kernott (2011), Abbott v Abbott (2007), Midland Bank v Cooke (1995), Hussey v Palmer (1972)**** c) ) Where there is an ‘express agreement to share the land beneficially/equitable ownership of the land’, Lloyd’s Bank v Rosset (1991) per Lord Bridge. - Hammond v Mitchell (1991) - ‘the tenderest exchanges of a common law courtship may assume an unforeseen significance many years later when they are brought under equity’s microscope’. ‘Excuse’ cases: Eves v Eves (1975), Grant v Edwards (1986), Rowe v Prance (1992)**** ‘Detrimental Reliance’ - - As well as a common intention to share the land beneficially, A must then show that he or she relied on that intention/agreement to his or her detriment. Detriment here means an ‘irrevocable change of position’ and the change must be of a kind which A could not reasonably have been expected to make unless he or she was to have an interest in the land. A, carrying out normal domestic duties like washing, cleaning, housework, shopping, paying domestic bills will not amount to ‘detrimental reliance’, so as to generate an equitable interest: Burns v Burns (1984)**** - However, paying direct mortgage contributions to the purchase price, or carrying out substantial capital improvement works will suffice Ungurian v Lesnoff (1990), Maharaj v Chand (1986), Chun v Ho (2002)**** - The equitable interest under any such constructive trust crystallises at the time of A’s ‘detrimental reliance’ on the agreement, whenever that time is. The court then, on hearing the evidence laterally, declares the equitable interest in favour of A under/imposes the constructive trust. Bernard v Josephs (1982)**** ‘Quatifying the Beneficial Interest’ - - - Where the parties have, by their common intention, expressly agreed the shares under the constructive trust, after the necessary acts of detrimental reliance the court will award the ‘agreed’ share. In this regard ‘any acts of detrimental reliance’ would suffice/ E.g. B says to A “don’t worry darling, the house is as much yours as mine”. If, to his or her detriment, A relies on this agreement and pays off B’s mortgage, A can claim a 50% share in the house under a Constructive Trust. Where the parties have not expressly agreed the size of A’s share but there is general common intention to share the land, coupled with acts on A’s part of detrimental reliance, the court will award a ‘fair share’ in favour of A under the Constructive Trust which is deduced from all relevant circumstances and acts on the part of A Stack v Dowden (2007)**** - Previously the court would ascertain the size of A’s share in such instance by an equitable accounting exercise, looking at that behaviour on the part of A which amounted to ‘substantial contributions to the purchase price’. Lloyd’s Bank v Rosset (2007)**** - Nowadays a more flexible and holistic approach is employed by the courts and the court will ‘survey and examine the entire course of conduct between the parties so as to determine the appropriate size of A’s share’ under the Constructive Trustee. Oxley v Hiscock (2007), Midland Bank v Cooke (1995), Drake v Whipp (1996)**** - Where the legal title is held jointly between A and B but no express declaration of trust has declared the beneficial equitable ownership, the normal presumption is ‘equity follows the law and the equitable title is deemed held jointly also. Thus when sold, the proceeds would be in equal shares, Stack v Dowden (2007)**** - i) ii) iii) iv) v) In Stack v Dowden however, in the same instance Ms Dowden sought to depart from this normal presumption as to the equitable title. Baroness Hale found for Ms Dowden and awarded her a larger share of the property on the basis that Ms Dowden, on the evidence, could demonstrate a ‘contrary intention’ to rebut the normal equitable rule. Baroness Hale stated that the parties true intentions which might rebut the normal presumption of equality would include: Examining financial contributions; Advice and discussions had; Reasons as to why the home was acquired in joint names; How the parties arranged their finances; The parties’ personalities and characters. Fowler v Barron (2008) - - - Mr A and Mrs B started relationship. Purchased house transferred into joint names. Mr A paid for property in cash terms. Had children. The couple then split. Mrs B claimed 50% share of the house under constructive trust. Mr A claimed 100% under resulting trust. High Court awarded Mr A 100% under resulting trust. CA held: Ms B awarded 50% under constructive trust – her looking after children was basis from which one could infer common intention to share. ‘Not every direct contribution to purchase price will generate interest under a constructive trust. Direct contribution to purchase price must be made pursuant to common intention that claimant would acquire beneficial interest. Driver v Yorke (2003) Held: Occasional payments to mortgage by a son as mortgage guarantor were not capable of giving rise to a common intention constructive trust. Lightfoot v Lightfoot-Brown (2005) - A common intention constructive trust will not be implied were a direct contribution is made without the knowledge of the legal owner. - Here H discharged the mortgage without knowledge of W. - CA held: No common intention constructive trust arose on facts because of lack of communication of the common intention to W. James v Thomas (2007) - C came to live with D after they started relationship. Both were business partners, trading at a profit. Some of the profits were used by D to discharge the mortgage on the disputed property. C made claim to a beneficial interest under a constructive trust. CA held: There was no common intention between C and D as to shared ownership. C’s assertion that profits from business were her contributions dismissed, being for all outgoings, not just mortgage Adekunie v Ritchie (2007) - House conveyed into joint names of mother and son. Mother needed son on property so she could use him to raise mortgage to buy property. Mother had 9 other children. Mother and son had separated finances. Mother died. Son claim entire house under ius accrescendi. Like Stack, exceptional case. Held: No common intention to make son equal owner, no joint finances. No intention by the mother to deprive other children of the property. Abbott v Abbott (2008) - H had sole title to matrimonial home. H and W had, however, a joint liability on the mortgage, partly discharged by W’s wages. H and W always agree wide should have some interest in land. Issue was therefore as to the size of the beneficial interest to be awarded to W. Held: Applying Stack, W entitled to equal share of property. Court surveyed whole course of dealings between parties, looked at their joint financial arrangements, joint mortgage liability. Land which house was built on what also a joint gift to them both. Jones v Kernott (2010) - J and K bought property in 1985 with deposit provided by J. Mortgage repayments were shared. Property in joint names. In 1993 K moved out and J remained in house with 2 children, making all mortgage repayments. 12 years after separation K sough payment of his half share and severed joint tenancy by notice. J claimed 90% share. J awarded 90% share in High Court. CA held: property held 50:50. Nothing existed to displace presumption of equality. Stack distinguished on facts. Supreme Court held: Stack distinguished. Mrs Jones won 90%, under Constructive Trust. High Court decision restored. See Lady Hale’s judgment. Hapeshi v Allnatt (2010), Thompson v Humphrey (2009), Walsh v Singh (2009)**** - - - The Constructive Trust and the Doctrine of Proprietary Estoppel (see later) are closely related and often in practice a claimant A will plead both doctrines in support of any claim for award of an equitable share of the land. See also 2007 Law Commission Report No.307, Hughes, Davis, Jacklin [2008] Conv.197, ‘Statutory Property Order’ Reform proposal to replace implied trusts, contract and estoppel arguments’. Remember, the trust is a device which separates legal and equitable/beneficial title.