The area of implied trusts is a problematic one, not least because of the way in which the Court of Appeal (CA) and the House of Lords (HL) have dealt with this area of law. This has lead to a degree of uncertainty. Many argue that instead of this area being based on fairness, as maybe it should be, judges have instead followed principles, which although they guarantee certainty, do not guarantee fairness, which this area should promote.
The courts in England and Wales have recognised three main types of implied trust i. e. a trust where the courts will be willing to create a trust even where no specific words/evidence are used. These are the Resulting Trust (RT)1, the Express Constructive Trust (CT) and the Implied CT. The RT will only arise in one situation i. e. where both parties have contributed towards the purchase price the courts will give them their money back in the proportions they contributed2 to the property, and will not be discussed.
On the other hand, a CT is far more difficult to establish, especially where there is not express agreement to share. The idea that there should be an express agreement to share, at the time of acquisition, has also been criticised3. A more likely situation in which a CT will arise is one where 'it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interests in the property and deny the beneficial interests of another'4.
The Implied CT, arises where there has been no express discussion as to whether the couple will share the property in question but one party has done something which they believe guarantees a share in the home as evidenced by various cases5. In this situation the courts must apply the 'common intention' approach i. e. conduct by one of the parties from which it can be inferred that there was an 'intention' to share the property. When considering if there is a 'common intention' to share the courts will consider a number of things.
They will look at what contribution the party has made and whether this is enough to constitute a share in the family home. This was the starting point in the leading case of Gissing v Gissing6. In this case, the HL stated that the wife's contribution was not sufficient enough to constitute a share in the family home. Furthermore, Lord Diplock7 discussed the different types of trust in this context, and went on to state on several occasions8 that he did not believe a 'common intention' to share could be inferred from the conduct of either party.
The earlier case of Pettitt v Pettitt9 also dealt with this issue. Whilst the above approach seems to favour certainty over fairness the next case to come before the courts had a very different outcome. In Eves v Eves10 Lord Denning granted the claimant a 25% share in the house despite the parties not being married, as he believed that on the facts a 'common intention' to share could be inferred and that this had been relied upon by the claimant to her detriment and as such she was entitled to a share in the home.
The later case of Grant v Edwards11 also followed this approach. This approach, however, has been criticised by judges12 and lawyers due to its lack of certainty, and Denning has been criticised for his liberal approach to this area of the law. Later cases13 have gone on to develop further the strict common intention approach favoured in Gissing . A return to the strict application of Gissing can be seen in Lloyds Bank v Rosset14.
In this case it was held that a wife's contribution to the home (supervising building works) was not sufficient enough to guarantee her a share in the family home. In Rosset, the HL laid down a 3-stage test, which needs to be satisfied in order for the claimant to gain a beneficial interest. Firstly, there must be a 'common intention', a change of position (detrimental reliance) based on this common intention and that due to this it would be unconscionable to deny the claimant a beneficial interest in the house.
This case also established that in order to gain a beneficial interest in the house there was need for a significant financial contribution be it direct or indirect. In this way, the courts are blurring the distinction between a RT15, where the couple is entitled to a share in the house equal to what they put in, with a CT, which should not be based on financial contribution but should be designed to prevent the home owner acting unconscionably. Lord Bridge16 summed up both situations in his judgment. Rosset has had an important influence on later cases.
One of the most recent of these has been Oxley v Hiscock17. In this case it was stated that whilst a financial contribution is important in guaranteeing a beneficial interest in a property the courts must take into account 'the whole course of dealings'18, when deciding whether to grant a beneficial interest. In other words, whilst a financial contribution is important in showing a common intention, it is not the only thing that courts should take into account, when deciding if a party has a beneficial interest, and in what proportions.
Similarly, in Stacks v Dowden19 Chadwick LJ reaffirmed the position he had taken in Oxley. So, in conclusion, the courts in England and Wales, often take conflicting views as to how property should be divided. In addition there is not always a clear distinction between the types of trusts, which the courts seek to grant, and the line between the RT and the CT is becoming increasingly blurred and attempts to clarify the distinction have not been successful20. Suggestions for reform in this area have also not been particularly successful21.
As stated on numerous occasions the courts approach does not always guarantee fairness but instead certainty, as judges are unwilling to interfere with existing property law rules, unlike other countries e. g. the USA, and whilst this may guarantee that lawyers are able to advise their clients on the likelihood of success often there is a great deal of unfairness and it was such behaviour, that the CT was originally designed to avoid. b) The scenario raises many important questions and potential problems, which will be discussed below.
Firstly, the starting point is that it does not expressly say whether Philip and Mary are married. This would be something which is needed because we cannot assume that they are married – if they were this would mean that they may have different options open to them and may not have to resort to using trust legislation to gain an interest in the home (see below also), as both will be entitled to a share in the family home. Instead, they could rely on other acts, which are designed specifically to deal with the matrimonial home rights of couples22.
Also, the fact that they are not married could cause other problems (see below). There are several options open to Mary as holder of the legal title to the property. One option available to Mary is she could seek to rely on a RT and may get back some of what she contributed towards the purchase price. This would mean that she was entitled to a share in the home equal to that which she put in. However, it does not say, in so many words, who contributed towards the 5% deposit, and this makes it even more difficult to ascertain in what proportion each person has contributed.
If Philip has contributed towards this then he would be entitled to his share under a RT, however, it is unlikely that this would amount to much and he may seek to rely on a CT being imposed (see below). Similarly, Mary could seek to rebut the imposition of a RT by relying on something known as the 'presumption of advancement'. This relates to property being transferred from one person to another. She could argue, based on this presumption that the house was an 'outright gift' to her. However, there are several problems with this. Firstly, this presumption is very old and has been harshly criticised23.
Secondly, as it is a presumption it is rebuttable by any evidence to the contrary that a gift was not intended. Furthermore, this presumption is likely to fail because it is unclear who has contributed towards the 5% deposit, so it would be even more Also, as mentioned it does not say whether Philip and Mary are married as the presumption only works when property is transferred from husband to wife and not 'common law' spouses24 or from father to child(ren)25 (i. e. eldest son). Finally, though, the presumption will fail if the reason for transferring the property is based on illegality26.
If Mary and Philip were married then Mary may be able to claim this and so deny Philip a beneficial interest/share in the home, as was the case in Tinker. This is because it could be argued that by Philip putting the house in Mary's name to avoid creditors if the business went bankrupt he was performing an 'illegal act' and as such would cause this presumption to fail. All the issues discussed above are peripheral issues in relation to the home, as often they rely on the parties being married or financial contribution at the time of acquisition.
However, the main issue which needs to be discussed and can apply in all circumstances is the CT, the test for which is discussed in question 1. As mentioned above Mary is in a much stronger position in relation to the property. In order for a CT to be granted the Rosset test needs to be satisfied. In relation to Mary and Philip it is unlikely that Philip will be granted a beneficial interest, as it could be argued that he has not made a substantial contribution in accordance with the principles laid out in the cases.
As was the case in Pettitt and the later case of Rosset paying the household bills, redecorating the property and buying a car it could be argued based on the cases discussed above that these actions are not substantial enough to warrant a beneficial interest in the property, as it could be argued that they were just things a normal husband would do and as such do not constitute a significant financial contribution which allow Mary to pay the mortgage. If they were married then Philip many rely on s.
37 Matrimonial Proceedings and Property Act 1970 to argue that his contribution was substantial and this may cause problems for Mary, however, as discussed it is unlikely that Philip's contribution to the property will be deemed to be substantial. Mary may also be able to rely on proprietary estoppel to assert her claim to the house. However, this would not be her best option and as remedies are discretionary. The test for proprietary estoppel is very similar to that of establishing a trust. However, there are some differences. Firstly, proprietary estoppel is based on a representation as opposed to an agreement.
Secondly, the reliance need not be in relation to the property. Finally, the detriment suffered does not have to be financial. In this case, Mary could argue that she has suffered detriment in having to pay the mortgage, but she may not be successful. So, in conclusion it is unlikely that Philip will be granted a beneficial interest in the property as his contribution to the home is not sufficient enough to gain an interest, and he may gain very little under a RT, as the initial deposit was only 5%. In contrast, Mary will be able to sell to Sam because it is unlikely that Philip will have any substantial share in the property.