Constructive Trusts

Question 1

Define the statue

Whenever two or more people concurrently beneficially own land, this ownership will be behind a trust of land….

Answer 1

(s1 Trusts of Land and Appointment of Trustees Act 1996). S1 TLATA 1996

Question 2

What is a resulting trust?

Answer 2

A ‘resulting trust’ arises when “B” has made a direct financial contribution to the purchase of the property registered solely in “A”’s name. It is important to have evidence of this payment and to show that this contribution to the purchase was not intended to be a gift or a loan.

Question 3

What is a constructive trust?

Answer 3

A ‘constructive trust’ is a more complex area of law and happens when there is an agreement or promise between the two parties.

This can happen in one of two ways, when there is an express agreement or an implied agreement.

Question 4

When looking at constructive trusts, two crucial issues need to be established….

Answer 4

1) whether such a trust exists (or “qualification”) and if it does,

2) what “share” each party will have of the beneficial interest (“quantification”).

Question 5

In order for a constructive trust to arise in favour of a party who is not named on the legal title, there must be:

Answer 5

1) common intention that the claimant was to hold an equitable interest in the land,

2) the claimant must have acted to their detriment, with the belief that by acting so, they were acquiring a beneficial interest in the property

3) and reliance on the belief.

Question 6

What is express common intention?

Answer 6

An express common intention requires evidence of express discussions between the parties which demonstrates that the property is to be shared beneficially.

The clearest form of express intention is where the parties are jointly named as legal owners, which automatically qualifies them as having an equitable interest in the property. Therefore in ‘joint names’ the only dispute that may arise relates to quantification.

Question 7

What counts towards qualifaction?

Answer 7

Looking first at qualification, in order to create a constructive trust there must be evidence of a common intention that the parties would have an equitable interest in the land; and evidence of detriment.

Question 8

What is implied common intention?

Answer 8

In situations where a party claiming a beneficial interest is not named as a legal owner and where no express words can be proven, the claimant must demonstrate a common intention, which can be inferred from the behaviour of the parties

Question 9

What case relates to excuse cases?

Answer 9

The “excuse cases” such as Eves v Eves involved the legal owner giving the person claiming a beneficial interest particular reasons as to why he had not placed the other person’s name on the legal title.

A trust of the beneficial interest had arisen because the man had led his partner to believe she held a beneficial interest, and the house had been bought and renovated for their joint benefit.
There was common intention that she would be a legal owner.

Question 10

25 years of contributions to household expenditure did not imply a common intention that a woman had rights in the property…….

What case?

Answer 10

Gissing v Gissing

Question 11

Household contributions were taken into account by the court.

What case?

Answer 11

Head v Cooke

Question 12

In Lloyds Bank v Rosset Lord Bridge was of the opinion that…

Answer 12

only a substantial contribution to the purchase price would suffice.

Such contributions, whether to the initial purchase or to mortgage repayments, have generally been seen as necessary by the courts post-Rosset.

Question 13

However, Lord Bridge did provide the smallest of possible exceptions in only going so far as to say he was…

Answer 13

“extremely doubtful whether anything less will do” than direct contributions.

In the years since Rosset many claims have attempted to show that less will indeed ‘do’, with some encouragement from obiter comments such as those in Stack v Dowden.

Question 14

Why was the decision in Rosset heavily critised?

Answer 14

It can be argued that strict interpretations of Rosset do lead to unfair outcomes and a lack of protection - particularly notable as it only affects those who are not married or in civil partnerships, who are protected from exactly this problem by various elements of family law.

Question 15

What does quantification relate to?

Answer 15

we see the court being asked to decide the “size of the share” for each party.

Question 16

Why is the level of detriment greater for implied common intention?

Answer 16

A direct contribution to the purchase price will count as detriment but so will other factors including substantial home improvements: Eve v Eve

Question 17

Qualification and Stack v Dowden

Answer 17

Stack also made it clear that in ‘joint name’ cases the starting point should be a 50/50 split (on the basis that equity follows the law and the parties hold as joint tenants at law) and that the court should only depart from this in “exceptional circumstances”.

Stack v Dowden (2007) provides that, in quantifying the share of a constructive trust the courts must have regard to what is fair in all the circumstances.

The relevant factors that the courts may consider in deciding this are:
* the financial contributions to the property;
* the nature of the parties’ relationship;
* advice or discussions at the time of the transfer;
* the purpose for which the house was purchased;
* the courts may consider whether there are children of the parties;
* how the couple arranged their finances;
* payment of outgoings and how this was divided;
*the individual characters and personalities of the parties.