Proportion of Couples and Family Members

One of the most recurring issues that the courts are facing nowadays is the increasing proportion of couples and family members that are co-habitating outside of the traditional framework of a family. Should these relationships fail, the court has no statutory power to adjust their property interests unlike civil partnerships or marriage. How then do you ensure that the ownership of the home is fairly shared? This paper will examine the establishment of proprietary interest in the family home through the different forms of trusts available such as express agreement or declaration, resulting trusts and constructive trusts. Finally, this essay will examine whether financial contributions remain the main element in determining the beneficial interest in a home or have indirect contributions gained proportionate importance in determining property interests when relationships break down.

Express Agreement Or Declaration

For the courts the most straightforward way in deciding which of the co-owners is to acquire the equitable rights in a home, is to see if there has been an express declaration of trust dealing with all the equitable interest in the land. A resulting trust may arise under the terms of a conveyance of property to the co-owners, or as a result of an express declaration of trust between the parties or in a situation in which the property is provided for the co-owners under a pre-existing settlement. Beneficial ownership will then be enjoyed in proportion in which the purchase money has been provided. Payments of, or substantial contributions to the mortgage amount will usually be enough evidence. One of the leading authorities on this subject is the case of Goodman v Gallant, where the conveyance of property included the express trust which clearly laid out the complete equitable interests between parties. The trust provided that the property was to be held on trust for the parties as joint tenants. The issue arose as to the interest in the property given their different financial contributions towards the property. It was held by the Court of Appeal that the express trust in the deed of conveyance was decisive of all of the interests of all the parties to the land, therefore the wife took half of the interest in the property as the deed provided. It was held by Slade LJ in Goodman v Gallant “If, however, the relevant conveyance contains an express declaration of trust which comprehensively declares the beneficial interest in the property or its proceeds of sale, there is no room for the application of the doctrine of resulting implied or constructive trusts unless and until the conveyance is set aside or rectified; until that event the declaration contained in the document speaks for itself” An important note is that in order for there to be a valid declaration of trust over land, the declaration must comply with section 53 (1) (b) of the Law of Property Act 1925: ‘...declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.” Failing to comply with S. 53 (1) (b) will lead to a failure to create a valid express trust over land.

Resulting Trusts

Purchase money resulting trust, according to Megarry J in Re Vandervell's Trusts (no.2)[1974] Ch 269 represents the intention of both parties as to how the home will be shared. This is flawed as the trust operates to act in accordance with the intention of the party who contributes towards the purchase price without retaining legal title. The trust operates on two presumptions; the first is that the party did not intend a gift and that the party intended to gain a beneficial interest. In cases prior to Pettit v Pettit and Gissing v Gissing where there was no legal agreement between spouses about who is entitled to beneficial interest with regards to the property, the wife held no interest in the property unless it was shown that there were financial payment(s) that were made towards the purchasing the property. The law would then infer, from the payment(s), the common intention of the parties involved from there they would determine the legal owner holding. This is what is known as presumed resulting trust and the presumption of a common intention may be disproved by law; not on the facts. However, let us not forget the implications that this may have on the co-habiting partner who did not directly contribute to purchase payment of the property. When discussing married couples, most couples have one spouse that make no direct financial contribution, but are more likely to contribute indirectly by other means. The other party would therefore have no beneficial interest even though they are providing for the house in other ways. In the case of Gissing v Gissing, Lord Reid speaks about ‘common case' where the husband is the one who acquires the home in his name. They both agree that the wife should contribute financially, the wife may either contribute directly to the price of the property, or she may choose to help by helping pay for bills and housekeeping. The latter, is often the simplest way. Therefore, when there are direct contributions, beneficial interest in the house is given, but, when contributions indirect by paying sums which one spouse would otherwise have had to pay, the other party would receive nothing unless there was some agreement that they should receive a share.

Constructive Trust

A constructive trust is generally imposed by the court in particular circumstances where it would be unconscionable for the owner to be the absolute owner outright. Lord Diplock's judgment in Gissing shaped what we now know as a common intention constructive trust. It was held that when legal title to property was owned by an individual person, the other person would hold a beneficial interest in the property even though their contribution was not directly used in the purchase price, as long as they could provide that there was a common intention and that the beneficial interest would be shared as well as prove though inducement that the beneficiary was induced to act in his or her own detriment in reliance of this agreement. There was no need to further explain the boundaries of this principle, or distinguish common intention constructive trusts from implied or presumed resulting trusts. According to Lord Bridge in Lloyds Bank v Rossett[1991] when deciding whether to impose a constructive trust, the court should first consider if there was an express oral declaration or agreement to share the beneficial ownership. This constituted a common intention evidenced by “prior discussions however imperfectly remembered or imprecise the terms”. For example, in Eves v Eves [1975], an excuse that the woman was under 21 was enough and similarly in Grant v Edwards [1986] where the excuse was that joint names might prejudice her divorce proceedings. However, words such as “our home” will not suffice according to Otway v Gibbs (Grenada) [2000] UKPC 39. Even if a person convinces the court that there was a common intention based on discussion or any other, they must also show they relied on this agreement to their detriment. The agreement alone is not enough. To prove detrimental reliance, both direct and indirect contribution by way of money or money's worth will be looked at by the court. In Grant v Edwards [1986], it was held that a wife's indirect contribution to mortgage repayments by using her income to pay joint household expenses in addition to keeping house and raising the children entitled her to half share in the house. However, in Midland Bank Plc v Dobson [1986], it was shown that although a common intention was established to share the beneficial interests, no detrimental reliance was found. The court concluded that the wife was not induced into doing the things she did based on the agreement but rather did this as any wife would ordinarily do in the interest of her family. The court took a similar view in Lloyds Bank v Rossett [1991], saying that where the acts can be considered as what any wife would do, this will not amount to detrimental reliance. In Eves v Eves, Lord Denning imposed a constructive trust simply because the interests of justice required it. Here, the court recognised the claimant's conduct in terms of her extensive decorating and heavy gardening. However, since Lloyds Bank v Rossett [1991], it was unlikely such conduct by itself will amount to detrimental reliance. The law surrounding this area was so cloudy since Midland Bank v Cooke, that it became unclear which test was to be applied. The court stated "the duty of the judge is to undertake a survey of the whole course of dealing between the parties relevant to their ownership and occupation of the property and their sharing of its burdens and advantages." Stack v Dowden became the leading case on the beneficial interests of co-habitees pursuant to a constructive or resulting trust, where there is no express declaration of trust. It has provided some guidance as to the method of the court in such cases. The main point is that equity follows the law. Therefore, the sole legal owner is the sole beneficial owner. The claimant to a beneficial interest must prove his or her claim to a beneficial interest. In the absence of any express agreement, the question is whether the claimant can point to conduct from which it is possible to infer an agreement that the claimant should have some beneficial interest. Lord Bridge in Lloyds Bank v Rosset states how “direct contributions to the purchase price by the partner who is not the legal owner, whether when they initially purchase or by mortgage payments, will justify the necessary inference to create a constructive trust.”

Stack V Dowden And Beyond...

In Stack v Dowden [2007], Lord Walker, in his opinion, thought the law had moved on. Baroness Hale thought that there was an argument for saying that Lord Bridge's doubts have set the hurdle rather too high in certain respects.. In July 2007 the case of Abbot v Abbot, it was reiterated that the law had indeed moved on since Rosset, In this judgment, Baroness Hale reviewed the Appeal Court judge's approach and their reliance on Lord Bridge Lloyd's Bank v Rosset. Baroness Hale then concluded stated that: a) the assumption that a gift to a married couple was usually inferred as for both parties; b) the acceptance of the husband in the court that the wife had a beneficial interest (though only valued at 8% and; c) the course of dealings of the parties involved which included (but was not limited to) the insurance policies and the use of joint bank accounts, led her Ladyship to conclude that the wife was entitled to a 50% interest in the home. It probably remains the case, therefore, that the contribution of domestic endeavour in itself will not give rise to a presumption of a common intention to share beneficial ownership (see Burns v Burns [1984] Ch 317). In Oxley v Hiscock [2005] Chadwick L.J. had expressed the view that an indirect contribution to the purchase price may suffice, such as a contribution which has added to the resources out of which the property has been acquired, e.g. work done or services rendered, or expenditure relieving the other spouse of some, at any rate, of his financial obligations. Following Stack v Dowden it seemed to have been suggested that if there is joint legal ownership, there will be joint beneficial ownership unless there is proof through evidence that the parties did not intend to pool resources, or set aside their finances separate, and did not contribute equally. If the presumption is rebutted, then the shares of the parties will be assessed in the same way as they are assessed in a case of sole legal ownership. Under sole beneficial ownership, the presumption will be that the sole legal owner is the sole beneficial owner. However, only if, there is an express agreement, or direct or indirect contributions to the purchase price, will that presumption be rebutted. Once it has been established that the claimant has some beneficial interest, the court can consider matters other than financial contributions in assessing the quantum of the claimant's share. Parties involved in these sorts of situations must learn that flexibility is one of the most crucial elements of equity, and constructive trusts are a clear example of that. However with it being flexible the principals must still be clearly distinguished and established within a framework. We have seen a lack of framework and as a result blurring principals and confusion in this area of law. Thus upon reviewing the court decisions we can see that the courts have chosen to exercise the financial contribution avenue more often than not when determining the parties beneficial interest in the home. Until the framework for non-financial contributions becomes more concrete or the recognition of co-habiting couples is recognised through statutory means, there will continue to be heavy reliance on financial contributions when determining beneficial interest in the family home.

Bibliography

Acts Of Parliament

1. Family Law (Scotland) Act 2006. 2. 3. Law and Property Act 1925 s 53(1b). 4. Law and Property Act 1925 s 53(2).

Parliamentary Bills

1. Cohabitation Bill [HL] 2008-09;

Books

1. Abbott v Abbott [2008] 1 FLR 1451.
2. Bannister v Bannister [1948] 2 All ER 133.
3. Drake v Whipp (1996) 28 H.L.R. 531.
4. Dyer v Dyer (1788) 2 Cox Eq Cas 9.
5. Eves v Eves (1975) 1 WLR 1338.
6. Fowler v Barron [2008] EWCA Civ 377.
7. Gissing v Gissing [1970] 2 All ER 780.
8. Goodman v Gallant [1986] 2 WLR 236.
9. Grant v Edwards (1986) Ch 638.
10. Jennings v Rice [2003] 1 P & CR 8.
11. Lloyd's Bank Plc v Rosset and Another Respondent [1990] 2 WLR 867.
12. Midland Bank Plc v Cooke (1995) 27 HLR 733.
13. Milroy v Lord (1862) 4 De GF & J 264.
14. Oxley v Hiscock [2004] EWCA Civ 546.
15. Pettit v Pettit [1970] AC 777.
16. Savill v Goodhall [1993] 1 FLR 755.
17. Stack v Dowden [2007] UKHL 17.
18. Stokes v Anderson [1991] 1 FLR 391.

Journals

1. Luke Barnes, ‘Stack v Dowden - the principles in practice' Family Law Week (May 14, 2007).
2. Gillian Douglas and others, ‘Cohabitation and conveyancing practice: problems and solutions' CPL 365 2008.
3. Terence Etherton, ‘Constructive trusts: a new model for equity and unjust enrichment' CLJ 265 2008.
4. John Fotheringham, ‘Cohabitation Reform: The Scottish Experience' FLW 15, February 2008.
5. Robert George, ‘Stack v Dowden - Do as we say, not as we do?' J. Soc. Welf. & Fam. Law Vol. 31 No. 1 pp 49 - 61, 2008.
6. Matthew Harding, ‘Defending Stack v Dowden' CPL 309 2009.
7. David Hughes and others, ‘”Come live with me and be my love” - a consideration of the 2007 Law Commission proposals on cohabitation breakdown' CPL 197 2008.
8. Nick Piska, ‘Two recent reflections on the resulting trust' CPL 441 2008.
9. Rebecca Probert, ‘Equality in the Family Home?' FLS 341 2007.

Reports

1. Law Commission, ‘Sharing Homes - A Discussion Paper'(2002).
2. Law Commission, ‘Cohabitation: The Financial Consequences of Relationship Breakdown' (Law Com No 307 Cm 7182, July 2007).