CONSTRUCTIVE TRUST OR PROPRIETARY
ESTOPPEL
CHOOSE YOUR WEAPON
Page 2
Copyright Jane Drew. February 2005 - All rights
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Continued
See also Curley v Parkes (2004)
The appellant had failed to establish that he
had made contributions to the purchase price of a
property that he had occupied with the Respondent
and accordingly he failed to establish that a
resulting trust existed.
·
A resulting trust however can be
displaced by:
(a)
a constructive trust relying on the common
intentions of the parties (i.e. an actual
constructive trust) or
(b)
an inferred intention of the parties – an
inferred constructive trust.
·
See Drake-v-Whipp [1996]1 FLR
826.
(b)
An Actual Constructive Trust
·
The difference between the actual
constructive trust and the inferred constructive
trust comes from Lloyds Bank v Rossett
[1990] 2 FLR 155.
·
Under the first category, the actual
constructive trust, the question to ask is was there
any express agreement.
·
See Rowe-v-Prance[1999] 2 FLR
787
·
Was the co-habitee promised that the
property would be theirs if some obligations were
discharged by them e.g. paying for the food and
furnishings or contributing to the mortgage and did
the co-habitee actually put the intention into
practice.
·
By The Law of Property Act 1925 any
enforceable declaration of trust must be in writing
and the Courts will only enforce an unwritten
intention to create beneficial interest if there is
some act by the party receiving the interest alleged
to be relying on the trust and to the detriment of
that party.
·
In other words is there a common
agreement or arrangement or understanding to share
between the parties perhaps informal and often
imperfectly recalled that the property was to be
shared beneficially – see Lloyds Bank v
Rossett. The Court must look carefully
for any act done by the claiming party to their
detriment such as paying any accounts or paying for
food etc.
·
Notice the similarity between the
actual constructive trust and proprietary estoppel
when the issue of detriment is considered-see
Lloyds Bank v Rossett [1991]AC107
per Bridge LJ “Once a finding to this effect is
made (i.e. of an arrangement or agreement to share)
it will only be necessary for the partner asserting
a claim to a beneficial interest against the partner
entitled to the legal estate to show that he or she
has acted to his or her detriment or significantly
altered his or her position in reliance on the
agreement in order to give rise to a constructive
trust or a proprietary estoppel”. See also
Jennings v Rice [2002] EWCA 22 February 2002.
·
The act or acts done do not have to be
referable to the property itself but do have to be
done in reliance upon the understanding or agreement
and it does involve the expenditure of money.
·
See Savill v Goodall [1993]
1 FLR 755.
Claimant moved in with secure tenant, the Defendant,
and seven years later together signed secure tenants
notice claiming to exercise right to buy the house,
purchased house for £20,445 with a discount of 42%,
purchase funded by a 100% mortgage. No expressed
declaration as to the respective beneficial
interest. Parties contributed roughly equally to
domestic outgoings during the period of
cohabitation. HELD: Parties had acquired the
property with the intention that it should be held
on trust for themselves in equal shares.
·
It is often very difficult to
ascertain whether there was such an understanding or
agreement sufficient to create this sort of trust.
Ask to see the conveyancing file of the solicitors
who acted on the property purchase. Take careful
instructions from one’s client as to the terms of
the agreement or discussions, which took place prior
to the purchase. Any third party information such
as from relatives or friends with whom the house
purchase was discussed in the presence of the other
co-habitee and any written information whether
letters or other form of evidence might help to
establish such an agreement. See also
Stokes v Anderson [1991] 1 FLR 391.
(c)
An Inferred Constructive Trust
·
This is the second type of
constructive trust referred to by Lord Bridge in
Lloyds Bank v Rossett.
If there is no such express agreement or
understanding a trust can only exist where the Court
could infer from the conduct of the parties that
they jointly intended they should both have a
beneficial interest in the property.
·
Under Lloyds Bank v Rossett
a common intention can only be inferred from direct
contributions to the initial purchase price or
indirect financial contribution or the payment of
mortgage instalments referable to the acquisition of
the home.
·
Continued
