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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Hudson v Hathway [2022] EWCA Civ 1648 (14 December 2022) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2022/1648.html Cite as: [2022] WLR(D) 513, [2023] 2 WLR 1227, [2022] EWCA Civ 1648, [2023] 1 FLR 1252, [2023] 2 P & CR DG2, [2023] KB 345, [2023] WTLR 207, [2023] 2 P & CR 10, [2023] 3 All ER 718, [2023] HLR 13, [2023] 3 FCR 57, 25 ITELR 787 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE, KING'S BENCH DIVISION
THE HON. MR JUSTICE KERR
Strand, London, WC2A 2LL |
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B e f o r e :
LADY JUSTICE ANDREWS
and
LORD JUSTICE NUGEE
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Lee Hudson |
Appellant |
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- and - |
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Jayne Hathway |
Respondent |
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Michael Horton KC and Guy Holland (instructed by Ashtons Legal) for the Respondent
Hearing dates : 22 & 23/11/2022
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Crown Copyright ©
Lord Justice Lewison:
Introduction and issues
"This is an appeal in a case about equitable ownership of a family home purchased in joint names, initially with equal ownership rights, where the unmarried parties later separate. Must a party claiming a subsequent increase in her equitable share necessarily have acted to her detriment? Or does a common intention alone suffice to alter the beneficial shares? And if the former, was the judge right to decide that the requirement of detriment was met?"
i) A party claiming a subsequent increase in her equitable share as a result of a post-acquisition changed common intention must show detrimental reliance on that changed common intention;
ii) The trial judge was right to decide on the facts that the requirement of detrimental reliance was met.
The facts
"Your shares are the main matter outstanding. You have told me that they are not worth anything. Whether or not that is the case, they form part of what was our collective assets at the time we split. I imagine that you feel that I should have no call on them, you earned them, from all the hours of effort you put in at work – my position is, of course, different – you earned them while we were together, your career advancement was part of our relationship, as was the building of pension funds etc. I hope we are both adult and reasonable enough to reach some sort of compromise?"
"My thoughts on this are that anything accrued while we were together is for us to come to an agreement on, which I think fits with what you are saying."
"We'll sort who deserves what in regards to our joint assets (house, shares, savings etc) when we're in a position to liquidate it all, which obviously depends on when you are ready."
"So here it is. We were never married. You have no claim over what is mine. What I consider ring-fenced is what I get from my years of personal graft. They are not up for discussion. I'm not agreeing to give you any. …. The liquid cash, you can have. Savings in the bank, other plans, take it all. Physical property, the contents of the house … again I don't want it; keep it. Which leaves the house, a bad asset which is preventing all of us [from] .. moving on with our lives…. You know what, I want none of the proceeds of that either. Take it. Buy yourself somewhere you can afford to live….
As for a Will, if I were to die before this financial mess is sorted, Heidi [his wife] will have no rights to Picnic House …
What I want is an end to it. So have everything that's available to have now and when the house is sold."
"Can't see any point in putting "my side" of the argument. Not because I don't feel that I have a valid case to make, but because it is clear that it would be pointless."
"So that we can move forward and get to a point of completely severing our financial connections, your suggestion, as I understand it, is you get sole ownership of your shares and pension, I get the equity from the house, the house contents, savings and income from endowments. Is that right? If so, then I will accept this and will do everything I can to get the house ready for sale as soon as the situation with the oil spill is resolved."
"Yes, that's right. …
Under this arrangement, I've no interest whatsoever in the house, so whilst I will continue to contribute, I won't do so forever."
"If you want to continue to "wait" on the house to maximise your gain (means nothing to me if it sells for a pound or a million) then that needs to be your decision and your responsibility."
"Remember the House is of no value to me: the deal from one year ago which was supposed to be finalised 6 months ago gave you all liquid assets, including the proceeds of the house sale. I don't care what it sells for. "
"However, Lee was certain that the equity from our house and our savings of £100,000 would mean a manageable mortgage and, if things became tight, he always said that his shares in Hiscox, the insurance company in which he worked, would be sold to pay it off…. I did not know the full extent of his shareholding in Hiscox but he said that it would be sufficient to cover the mortgage."
"I knew that as we were not married I had no claim to his shares or pension or to maintenance, but we had been together for 20 years and Lee and I agreed that there needed to be a fair distribution of the assets that we had built up together."
"I was of the view that those assets which both of us secured during our relationship were joint assets however they were held legally and that we needed to reach an agreement as to how they were split… My view was that we had been together for 20 years and that my taking time off for looking after our children and our home, and to support him in his career advancement was one of the primary reasons he was able to earn such significant sums, to build his pension and to secure the shares so that they were our joint assets."
"When I returned to work in the charity sector after having the children, I earned less than I had… I needed to fit my work around the children and around Lee's work in insurance, so I worked fewer hours than Lee. I believed that we were in a happy and stable relationship and that our relationship would endure. My understanding was that we would continue to pool our resources and that when we retired we would live on our combined assets all of which were accumulated whilst we were a couple…"
Is section 53 (1) (c) of the Law of Property Act 1925 satisfied?
"[16] First, an appellate court will be cautious about allowing a new point to be raised on appeal that was not raised before the first instance court.
[17] Second, an appellate court will not, generally, permit a new point to be raised on appeal if that point is such that either (a) it would necessitate new evidence or (b), had it been run below, it would have resulted in the trial being conducted differently with regards to the evidence at the trial…
[18] Third, even where the point might be considered a "pure point of law", the appellate court will only allow it to be raised if three criteria are satisfied: (a) the other party has had adequate time to deal with the point; (b) the other party has not acted to his detriment on the faith of the earlier omission to raise it; and (c) the other party can be adequately protected in costs."
"(1) Where a legal estate (not being settled land) is beneficially limited to or held in trust for any persons as joint tenants, the same shall be held in trust, in like manner as if the persons beneficially entitled were tenants in common, but not so as to sever their joint tenancy in equity.
(2) No severance of a joint tenancy of a legal estate, so as to create a tenancy in common in land, shall be permissible, whether by operation of law or otherwise, but this subsection does not affect the right of a joint tenant to release his interest to the other joint tenants, or the right to sever a joint tenancy in an equitable interest whether or not the legal estate is vested in the joint tenant…"
"(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law;…
(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will."
"A purported assignment of the interest of one joint tenant to the other joint tenant does not constitute an assignment, because each of the joint tenants is already the owner of the whole. The so-called assignor has no separate interest of his own which is capable of being transferred to the other and which the other does not already own. None of this, of course, applies to a tenant in common, because he has a separate and distinct interest of his own which he can assign either to a third party or to his co-owner.
Before 1926, therefore, one joint tenant could not assign his interest to the other. But he could achieve much the same result by releasing his interest. The release operated to extinguish his interest and not to assign it. The difference, though technical, was not a formality. Since a release did not operate by way of assignment or conveyance, it required no words of limitation. Moreover, where there were three or more tenants, a release by one joint tenant did not destroy the unity of title of the others and so sever their interests, for they did not acquire any interest by the release which they did not already own.
No particular form of words was required for a release. Even if it was drafted as any assignment, it still took effect as a release. The difference was one of substance, not form; it was not merely a matter of language. The ability of one joint tenant to release his interest to the other has been preserved by section 36(2) of the Law of Property Act 1925. It is still not possible for one joint tenant to assign his interest to the other."
"Another familiar principle is that an assignment of an equitable estate need not be in any particular form. As Lord Macnaghten said in Brandt's (William) Sons & Co Ltd v Dunlop Rubber Co Ltd: "The language is immaterial if the meaning is plain." That, in my judgment, applies as much to a voluntary assignment as to one for valuable consideration as in that case. (See also Lambe v Orton). An equitable assignment may take many forms. It may in terms purport to operate as an assignment, or it may take the form of a direction to the trustees in whom the legal estate is outstanding to hold the property on trust for the donee or on new trusts."
"If the word "disposition" is given its natural meaning, it cannot, I think, be denied that a direction given by Mr. Hunter, whereby the beneficial interest in the shares theretofore vested in him became vested in another or others, is a disposition. But it is contended by the appellants that the word "disposition" is to be given a narrower meaning and (so far as relates to inter vivos transactions) be read as if it were synonymous with "grants and assignments" and that, given this meaning, it does not cover such a direction as was given in this case. As I am clearly of the opinion, which I understand to be shared by your Lordships, that there is no justification for giving the word "disposition" a narrower meaning than it ordinarily bears, it will be unnecessary to discuss the interesting problem that would otherwise arise."
"'Disposition' is a familiar enough word in the law of property and ordinarily means an act by which someone ceases to be the owner of that property in law or in equity."
"In such a case involving the application of a statute to new technology it is plainly not necessary to ask whether the express statutory language is ambiguous. … But in order to give effect to a plain parliamentary purpose a statute may sometimes be held to cover a scientific development not known when the statute was passed. Given that Parliament legislates on the assumption that statutes may be in place for many years, and that Parliament wishes to pass effective legislation, this is a benign principle designed to achieve the wishes of Parliament."
"In the light of the dicta cited above, it seems to me that a party can sign a document for the purposes of section 4 by using his full name or his last name prefixed by some or all of his initials or using his initials, and possibly by using a pseudonym or a combination of letters and numbers (as can happen for example with a Lloyds slip scratch), providing always that whatever was used was inserted into the document in order to give, and with the intention of giving, authenticity to it. Its inclusion must have been intended as a signature for these purposes."
"I have no doubt that if a party creates and sends an electronically created document then he will be treated as having signed it to the same extent that he would in law be treated as having signed a hard copy of the same document. The fact that the document is created electronically as opposed to as a hard copy can make no difference. However, that is not the issue in this case."
"Mr Zelin doubted whether simply typing "Putsmans" on the e-mail amounted to a signature that complied with the practice direction, citing J Pereira Fernandes SA v Mehta [2006] 1 WLR 1543, but wisely he did not waste much time on the point. In that case the signature was alleged to be constituted by the words "From: Nelmehta@aol.com" appearing in the e-mail header. It was a mere statement of the sender's e-mail address and it would have been generated automatically after the message was transmitted. It was not put there by the sender with the intention of authenticating the document. In contrast, in our case the word "Putsmans" was deliberately typed in (what is more, after the customary salutation "Yours faithfully"). I have no doubt that its purpose would be recognised throughout the profession. Anyone would think: "Putsmans are signing off on this document". It was intended to signify that document was being sent out with the authority of the defendants' legal representative."
"In a modern context, the section will clearly be satisfied if the representation is contained in an email, provided that the email includes a written indication of who is sending the email. It seems that it is not enough that the email comes from a person's email address without his having "signed" it in the sense of either including an electronic signature or concluding words such as "regards" accompanied by the typed name of the sender of the email…"
"[44] … The liquidator accepts, adopting the reasoning of his Honour Judge Pelling QC in J Pereira Fernandes SA v Mehta … in the context of the statutory requirements for a guarantee, that Miss Gillis on behalf of the company and Mrs Ireland, by inserting their names at the end of the e-mails sent by them respectively, had "signed" them for the purposes of s 2.
[45] Section 2(3) requires also that the document incorporating the terms be signed by or on behalf of each party. The liquidator accepts that Miss Gillis's e-mail to Mrs Ireland and Mrs Ireland's reply constitutes a single document for these purposes. In my view, this is right where, as here, the second e-mail is sent as a reply and so creates a string, as opposed to [being] simply a new e-mail referring to an earlier e-mail. It is the electronic equivalent of a hard copy letter signed by the sender being itself signed by the addressee."
"It was common ground both before the judge and before us that an electronic signature is sufficient and that a first name, initials, or perhaps a nickname will suffice. Mr Kendrick's point was that the affixing of Mr Hindley's name was not done in a manner which indicated that it was intended to authenticate the document, that being the touchstone… I do not accept Mr Kendrick's first argument. Chartering brokers may communicate with one another in a familiar manner but that does not detract from the seriousness of the business they are conducting. In my judgment Mr Hindley put his name, Guy, on the e-mail so as to indicate that it came with his authority and that he took responsibility for the contents. It is an assent to its terms. I have no doubt that that is a sufficient authentication."
"Naturally I accept that the e-mail … is not itself the contract of guarantee. I have no doubt however that the signature on that document of Mr Hindley, assuming his authority, is properly regarded as authentication of the contract of guarantee contained in it and the other document or documents in the sequence to which I have already referred."
"Generally speaking, a signature is the writing or otherwise affixing of a person's name, or a mark to represent his name, with the intention of authenticating the document as being that of, or binding on, the person whose name is so written or affixed. The signature may be affixed by the name being typed in an electronic communication such as an email: see Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd at [32]. Section 7 of the Electronic Communications Act 2000 recognises the validity of such an electronic signature by providing that an electronic signature is admissible as evidence of authenticity."
"[54] … It was common ground that the rule that a footer of this type be added to every email involved the conscious action at some stage of a person entering the relevant information and settings in Microsoft Outlook. Furthermore, Mr Tear knew that his name was added to the email. Indeed, the manual typing rather than automatic inclusion of the words "Many Thanks" at the end of the email strongly suggests that the author is relying on the automatic footer to sign off his name.
[55] In such circumstances, it is difficult to distinguish between a name which is added pursuant to a general rule set up on an electronic device that the sender's name and other details be incorporated at the bottom from an alternative practice that each time an email is sent the sender manually adds those details. Further, the recipient of the email has no way of knowing (as far as the court is aware) whether the details at the bottom of an email are added pursuant to an automatic rule as here or by the sender manually entering them. Looked at objectively, the presence of the name indicates a clear intention to associate oneself with the email—to authenticate it or to sign it."
"In my judgment, no such difficult arises if the email footer here is treated as being a sufficient act of signing:
i) it is common ground that such a footer can only be present because of a conscious decision to insert the contents, albeit that that decision may have been made the subject of a general rule that automatically applied the contents in all cases. The recipient of such an email would therefore naturally conclude that the sender's details had been included as a means of identifying the sender with the contents of the email, since such a footer must have been added either as a result of a conscious decision in the particular case or a more general decision to add the footer in all cases;
ii) the sender of the email is aware that their name is being applied as a footer. The recipient has no reason to think that the presence of the name as a signature is unknown to the sender;
iii) the use of the words "Many Thanks" before the footer shows an intention to connect the name with the contents of the email; and
iv) the presence of the name and contact details is in the conventional style of a signature, at the end of the document. That contrasts with the name and contact address of Mr Hale, the person alleged to have signed the letter in [Firstpost Homes Ltd v Johnson [1995] 1 WLR 1567], whose name and address appeared above the text of the letter, in the conventional manner of inserting the addressee's details."
Constructive trust
Is detriment or change of position necessary?
"My Lords, equitable estoppel is a flexible doctrine which the court can use, in appropriate circumstances, to prevent injustice caused by the vagaries and inconstancy of human nature. But it is not a sort of joker or wild card to be used whenever the court disapproves of the conduct of a litigant who seems to have the law on his side. Flexible though it is, the doctrine must be formulated and applied in a disciplined and principled way. Certainty is important in property transactions. As Deane J said in the High Court of Australia in Muschinski v Dodds (1985) 160 CLR 583, 615–616,
"Under the law of [Australia]—as, I venture to think, under the present law of England—proprietary rights fall to be governed by principles of law and not by some mix of judicial discretion, subjective views about which party 'ought to win' and 'the formless void' of individual moral opinion …" (references omitted)."
"… equity is not a sort of moral US fifth cavalry riding to the rescue every time a claimant is left worse off than he anticipated as a result of the defendants behaving badly, and the common law affords him no remedy."
"A resulting, implied or constructive trust - and it is unnecessary for present purposes to distinguish between these three classes of trust - is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired, and he will be held so to have conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land."
"In a case such as the present, where there has been no written declaration or agreement, nor any direct provision by the plaintiff of part of the purchase price so as to give rise to a resulting trust in her favour, she must establish a common intention between her and the defendant, acted upon by her, that she should have a beneficial interest in the property. If she can do that, equity will not allow the defendant to deny that interest and will construct a trust to give effect to it."
"There is another and rarer class of case, of which the present may be one, where, although there has been no writing, the parties have orally declared themselves in such a way as to make their common intention plain. Here the court does not have to look for conduct from which the intention can be inferred, but only for conduct which amounts to an acting upon it by the claimant. And although that conduct can undoubtedly be the incurring of expenditure which is referable to the acquisition of the house, it need not necessarily be so."
"(2) The question whether one party to the relationship acquires rights to property the legal title to which is vested in the other party must be answered in terms of the existing law of trusts. There are no special doctrines of equity, applicable in this field alone.
(3) In a case such as the present the inquiry must proceed in two stages. First, by considering whether something happened between the parties in the nature of bargain, promise or tacit common intention, at the time of the acquisition. Second, if the answer is "Yes," by asking whether the claimant subsequently conducted herself in a manner which was (a) detrimental to herself, and (b) referable to whatever happened on acquisition. (I use the expression "on acquisition" for simplicity. In fact, the event happening between the parties which, if followed by the relevant type of conduct on the part of the claimant, can lead to the creation of an interest in the claimant, may itself occur after acquisition. The beneficial interests may change in the course of the relationship.)."
"If the legal estate in the joint home is vested in only one of the parties ("the legal owner") the other party ("the claimant"), in order to establish a beneficial interest, has to establish a constructive trust by showing that it would be inequitable for the legal owner to claim sole beneficial ownership. This requires two matters to be demonstrated: (a) that there was a common intention that both should have a beneficial interest; (b) that the claimant has acted to his or her detriment on the basis of that common intention."
"Once it has been established that the parties had a common intention that both should have a beneficial interest and that the claimant has acted to his detriment, the question may still remain "what is the extent of the claimant's beneficial interest?" This last section of Lord Diplock's speech shows that here again the direct and indirect contributions made by the parties to the cost of acquisition may be crucially important. If this analysis is correct, contributions made by the claimant may be relevant for four different purposes, viz.: (1) in the absence of direct evidence of intention, as evidence from which the parties' intentions can be inferred; (2) as corroboration of direct evidence of intention; (3) to show that the claimant has acted to his or her detriment in reliance on the common intention: Lord Diplock's speech does not deal directly with the nature of the detriment to be shown; (4) to quantify the extent of the beneficial interest." (Original emphasis)
"But as Lord Diplock's speech in Gissing v Gissing … and the decision in Midland Bank Plc v Dobson … make clear, mere common intention by itself is not enough: the claimant has also to prove that she has acted to her detriment in the reasonable belief by so acting she was acquiring a beneficial interest."
"I suggest that in other cases of this kind, useful guidance may in the future be obtained from the principles underlying the law of proprietary estoppel which in my judgment are closely akin to those laid down in Gissing v Gissing…. In both, the claimant must to the knowledge of the legal owner have acted in the belief that the claimant has or will obtain an interest in the property. In both, the claimant must have acted to his or her detriment in reliance on such belief. In both, equity acts on the conscience of the legal owner to prevent him from acting in an unconscionable manner by defeating the common intention. The two principles have been developed separately without cross-fertilisation between them: but they rest on the same foundation and have on all other matters reached the same conclusions."
"Even if there had been the clearest oral agreement between Mr and Mrs Rosset that Mr Rosset was to hold the property in trust for them both as tenants in common, this would, of course, have been ineffective since a valid declaration of trust by way of gift of a beneficial interest in land is required by section 53(1) of the Law of Property Act 1925 to be in writing. But if Mrs Rosset had, as pleaded, altered her position in reliance on the agreement this could have given rise to an enforceable interest in her favour by way either of a constructive trust or of a proprietary estoppel."
"The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made 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."
"… if the answer to the first question is that there was a common intention, communicated to each other, that each should have a beneficial share in the property, then the party who does not become the legal owner will be held to have acted to his or her detriment in making a financial contribution to the purchase in reliance on the common intention."
"I take the law of this Court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes; and if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an imperfect gift."
"About the rules of the Court there can be no controversy. A voluntary agreement will not be completed or assisted by a Court of Equity, in cases of mere gift. If anything be wanting to complete the title of the donee, a Court of Equity will not assist him in obtaining it; for a mere donee can have no right to claim more than he has received. But the subsequent acts of the donor may give the donee that right or ground of claim which he did not acquire from the original gift."
"In a suit founded on ... part performance, the defendant is really "charged" upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the Statute) upon the contract itself ... The matter has advanced beyond the stage of contract; and the equities which arise out of the stage which it has reached cannot be administered unless the contract is regarded."
"The reconciliation thus draws a distinction between the executory contract, not performed on either side, and the effect of subsequent acts of performance by the plaintiff. The former attracted the full force of the Statute while the latter could create an equitable rather than purely contractual right to performance. The Statute and the doctrine of part performance could co-exist in this way because contracts for the sale of land almost always start by being executory on both sides and usually remain executory until completed by mutual performance."
Stack v Dowden
"I add a brief comment as to proprietary estoppel. In paras 70 and 71 of his judgment in Oxley v Hiscock [2005] Fam 211 Chadwick LJ considered the conceptual basis of the developing law in this area, and briefly discussed proprietary estoppel, a suggestion first put forward by Sir Nicolas Browne-Wilkinson V-C in Grant v Edwards [1986] Ch 638, 656. I have myself given some encouragement to this approach (Yaxley v Gotts [2000] Ch 162, 177) but I have to say that I am now rather less enthusiastic about the notion that proprietary estoppel and "common interest" constructive trusts can or should be completely assimilated. Proprietary estoppel typically consists of asserting an equitable claim against the conscience of the "true" owner. The claim is a "mere equity". It is to be satisfied by the minimum award necessary to do justice (Crabb v Arun District Council [1976] Ch 179, 198), which may sometimes lead to no more than a monetary award. A "common intention" constructive trust, by contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests."
"… the search is still for the result which reflects what the parties must, in the light of their conduct, be taken to have intended."
"There may also be reason to conclude that, whatever the parties' intentions at the outset, these have now changed. An example might be where one party has financed (or constructed himself) an extension or substantial improvement to the property, so that what they have now is significantly different from what they had then."
Jones v Kernott
"There was ample evidence from which the trial judge could properly draw the inference that after 1993 the parties intended that the claimant's beneficial interest should be greater than the defendant's, that the claimant acted to her detriment in continuing to pay all of the endowment and maintenance costs, and that it would be inequitable to permit the defendant one half share of the property."
"By the date of the trial the claimant had contributed more than 85% of the purchase price of the property, and since 1993 all of the indirect contributions. From 1993 the claimant had also paid all the payments due in respect of the life insurance policy. The defendant would not have been able to put down a deposit or buy a property of his own without the claimant's co-operation in encashing the life insurance policy. The claimant acted to her detriment in paying all the endowment and maintenance costs and in agreeing to encash and share the insurance policy equally, having paid all the premiums since 1993."
"At the outset, their intention was to provide a home for themselves and their progeny. But thereafter their intentions did change significantly. He did not go into detail, but the inferences are not difficult to draw. They separated in October 1993. No doubt in many such cases, there is a period of uncertainty about where the parties will live and what they will do about the home which they used to share. This home was put on the market in late 1995 but failed to sell. Around that time a new plan was formed. The life insurance policy was cashed in and Mr Kernott was able to buy a new home for himself. He would not have been able to do this had he still had to contribute towards the mortgage, endowment policy and other outgoings on 39 Badger Hall Avenue. The logical inference is that they intended that his interest in Badger Hall Avenue should crystallise then. Just as he would have the sole benefit of any capital gain in his own home, Ms Jones would have the sole benefit of any capital gain in Badger Hall Avenue. In so far as the judge did not in so many words infer that this was their intention, it is clearly the intention which reasonable people would have had had they thought about it at the time. But in our view it is an intention which he both could and should have inferred from their conduct."
"(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity. (2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change. (3) Their common intention is to be deduced objectively from their conduct. … (4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, "the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property"…. In our judgment, "the whole course of dealing … in relation to the property" should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties' actual intentions. (5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4))."
"… detrimental reliance was not in issue in either Stack nor Jones, not least because its existence was blindingly obvious on the facts. It was not pleaded as an issue, and was not argued as an issue. To infer therefore that the silence about detrimental reliance in those cases means that it is not required is imaginative. I may not specifically mention that you may not steal my laptop, but I am not authorising you to take it."
Subsequent cases
"Secondly, even if (contrary to my view above) there was a promise by the Company given after it was formed in April 2002, I consider that the analysis proposed by Mr Crossley fails because the detrimental reliance on the part of Ms Smith on which he seeks to rely cannot be clearly and distinctly related to that promise in such a way as to justify the creation of a good claim in equity against the Company."
"… it was common ground that there was an oral agreement or understanding between the parties as to the terms on which the property was to be bought, held and used. In these circumstances, if Sunil was able to establish, on the balance of probabilities, that the agreement was that he should be the sole beneficial owner, then provided he could also show that he had acted to his detriment in reliance on that agreement, he would be able to discharge the onus of showing that the beneficial ownership differed from the legal ownership."
"While an explicit reference to detriment in para [7] would have been desirable, having set out in para [3](e) the detriment claimed by Sunil, which included the work he put into buying, converting and running the business, the judge was not required to repeat it word-for-word in para [7]. The judge's reference to Sunil managing the letting business must be a reference back to the detriment claimed by Sunil and an implicit acceptance of at least that part of Sunil's case on detriment. It is not without significance that, having referred to the applicable legal principles in para [3](e), which of course include the need for there to be detriment in reliance upon a common understanding, the judge referred again to those principles in his concluding words in para [7]."
"[77] Overarching all these points is the lack of detrimental reliance. The need for detrimental reliance on the part of the claimant is an essential feature of this kind of case….
[78] Although Ms Crowther's skeleton argument suggested that the need for detrimental reliance had been abolished by Stack v Dowden and Jones v Kernott, she rightly abandoned that argument in the course of her oral address. The judge's finding on that point at [101] was that Ms Curran did not in any way act to her detriment in reliance on the specious excuse "or at all". That in itself is fatal to Ms Curran's case."
"Once a relevant common intention is divined by the Court, then that common intention will be given effect to by constructive trust provided that the person relying on establishment of the same has acted to his or her detriment in reliance upon the common intention."
"In my judgment it follows that, from the time they met in Poole Park, Ms Robson and Mr Ely had a common understanding as to the extent of their respective interests in 6 Torbay Road and thereafter Mr Ely acted to his detriment in reliance upon that understanding. Accordingly, whatever Ms Robson's interest in 6 Torbay Road may have been prior to that meeting, I am satisfied that thereafter Mr Ely held the property on constructive trust for them both and that Ms Robson's interest was limited to the interest defined in the declaration that the judge made."
"The existence of a continuing common intention, that Ms Cowlam hold an 80% beneficial interest in the Property, is not, however, in my view, the end of the matter, in the determination of her beneficial interest. Such a beneficial interest, if it arises, does not arise as an express trust, since it is not supported by a signed writing in compliance with section 53(1)(b) of the Law of Property Act 1925, but can only arise by virtue of the application of constructive trust principles. Those principles, as is well understood, require, in circumstances where the beneficial interest is not to follow the legal interest, that the party asserting a constructive trust interest different to the legal interest, in reliance upon a common intention, must show that he, or she, has acted in reliance upon that common intention in such a way as to render it inequitable that he, or she, not obtain the intended interest. Although the focus of attention in both Stack and Jones v Kernott was on the proof of the common intention, whether by agreement, or imputation, there is nothing in either authority to abrogate the requirement of reliance, or the requirement that such reliance render it inequitable that the party asserting the trust be deprived of his or her intended interest."
"For a common intention constructive trust to arise, the parties must have had a common intention to share the property beneficially, upon the faith of which the claimant then acts in reliance to her detriment. The common intention by itself is not enough for the constructive trust to arise. Otherwise s 53(1)(b) of the 1925 Act would be meaningless. It is the detrimental reliance that makes it unconscionable for the defendant landowner to resile from their otherwise unenforceable agreement."
"Judge Pelling was in my view right to hold that detrimental reliance remains an essential ingredient of a successful claim to a beneficial interest in a residential property under a common intention constructive trust, in the class of case where the legal estate is in the sole name of the other party."
"Nor, for my part, would I wish to question the correctness of the proposition, which seems to me to be firmly based on authority and underlying principles of equity."
"The issue at the heart of this appeal can be identified as follows: if A gives B money for the express purpose of using it only to purchase an identified property as an investment, A and B agree that A will have an interest in the property pro rata to his financial contribution, and the money is then used to buy the property, does A have a beneficial interest in the property? The answer is yes. It would be surprising if it were otherwise. A has acted to his detriment in consenting to the use of his money to fund the purchase, in reliance on the express promise of an interest in the property. It makes no difference to that answer that the property was subsequently purchased in the name of C, who was B's nominee or agent."
"… detriment is relevant to both the arising of the equity and to the remedy. Without reliant detriment there is simply no equity at all. This reflects the notion that it is the reliant detriment which makes it unconscionable for the promisor to go back on his promise."
"The appellant had received almost 25 per cent of the equity in the property for his own use very shortly before the parties split up in 2005. This entirely warranted an adjustment of the beneficial shares in the property which reflected that change of position. Furthermore the judge was clearly correct in his conclusion that subsequent events required a further adjustment in the intention to be imputed to the parties. Here, the judge properly took account of the respective positions of the parties and, in particular, the payments made in respect of the mortgage and in respect of repairs. … I also consider that he acted correctly in taking account of payments made (or not made) in respect of the children. In this regard the contributions to the mortgage after June 2005 are particularly important. In the period from June 2005 to January 2008 the appellant paid approximately two-thirds of the mortgage contributions and the respondent one-third. However thereafter the appellant failed to contribute towards the mortgage repayments for a period of six years up to trial. In these circumstances it was clearly necessary to vary the intention to be imputed to the parties as to their respective interests in the property. The further adjustment of 10 per cent in the respondent's favour was entirely justified by these changed circumstances."
The text books
"The third factor requiring emphasis here is that the court's decision as to whether or not there is a common intention constructive trust, and if so what are its terms, is still governed by equitable principles. It remains true following Jones v Kernott …that in all types of constructive trust, before the court will impose a constructive trust in favour of a non-legal title holder or allow the Stack v Dowden … presumptions as to beneficial ownership to be rebutted on the basis of a common intention constructive trust, the claimant must satisfy the court that the intervention of equity is justifiable to remedy the failure to use an express trust or valid contract to confer an interest on the claimant. More specifically, the courts have repeatedly emphasised that a common intention not accompanied by detrimental reliance on shared intentions as to ownership or some equivalent will not give rise to a constructive trust. (although see Hudson v Hathway … noted below for a rare dissent).
The insistence that detrimental reliance (or equivalent factor making it unconscionable for a claimant to be denied a beneficial interest) is an essential feature of a common intention constructive trust long pre-dates Stack v Dowden … and Jones v Kernott…."
"In order that a constructive trust should arise in English law, it is not sufficient that a common intention should have been expressed or a bargain made that B should have some equitable entitlement in A's land. If an assurance of beneficial entitlement is purely oral, further elements are required. One of these is that there must be a "change of position" by the party who relies on the bargain or agreement. This requirement is deeply consonant with the ancient idea that an "equity" attaches to a promised entitlement when it has been acted upon."
"Where the purchaser of the property shares a common intention with the claimant that the claimant is to have a beneficial interest in the property even though he is not a legal owner, either at the time of acquisition or at a later date, and the claimant acts to his detriment upon the basis of the common intention, a trust is imposed so as to give effect to the common intention."
"A variation in the shares initially declared in a declaration of trust may be effected through a subsequent written declaration. For an express trust to be varied by a subsequent express declaration of trust, the variation must comply with the formal requirement of section 53(1)(c) of the Law of Property Act 1925, which requires dispositions of equitable interests to be in writing. A constructive trust may also be imposed in order to give effect to a common intention to effect such a variation, coupled with the requisite detrimental reliance."
"A constructive trust arises in connection with the acquisition by one party of a legal title to property whenever that party has so conducted himself that it would be inequitable to allow him to deny to another party a beneficial interest in the property acquired. This will be so where (i) there was a common intention that both parties should have a beneficial interest either at the date of acquisition or at a later date and (ii) the claimant has acted to his detriment in the belief that by so acting he was acquiring a beneficial interest."
"If the parties reach a fresh agreement, arrangement or understanding after the time of purchase, varying the original beneficial shares, and the claimant acts upon the agreement to his detriment, effect may be given to that agreement as a common intention constructive trust."
"A constructive trust "does not come into being merely from a gratuitous intention to transfer or create a beneficial interest", because such an intention would amount to an unenforceable declaration of trust. B must have acted to B's detriment in reliance upon the parties' common intention and in the reasonable expectation that she would thereby acquire an interest in the property. It is this detriment that takes the trust outside the formal requirements normally applicable to declarations of trusts of land and the claim fails without it."
"Recent cases, including Jones v Kernott, have tended not to comment on the role of detriment in crystallising the constructive trust, but instead focus on factors which establish the common intention, possibly because such factors might also constitute the necessary detriment."
"Simple proof of the oral or inferred agreement between the parties or an unwritten declaration of trust would not be enough to entitle the claimant to an enforceable interest in the property under a trust. Such an arrangement could only take effect as an express trust. It would be unenforceable since it would not be evidenced by writing signed by the party declaring the trust. Accordingly, proof that the claimant has acted to his detriment in reliance upon the agreement that he would take an interest in the property is essential to explaining the constructive trust. In these circumstances it would be fraudulent for the proprietor of the legal estate to rely on the formality requirements to deny the enforceability of the beneficial interest and claim the entire beneficial rights to the property for himself. The constructive trust arises to prevent this result. Where the [agreement] is inferred, then the parties' conduct is both the evidence from which the agreement is inferred and the detriment which gives rise to the constructive trust."
"where it is the proprietor and the claimant's common intention, express or inferred (but not imputed), that the claimant is to have some beneficial interest in the property and the claimant acts to his detriment in reliance thereon."
"A constructive trust may be imposed on property, such as a house in A's name that is occupied by A and B as a shared home, to give effect to A and B's express or inferred (but not imputed) common intention (whether at the time of the purchase or subsequently) that B should have a beneficial interest therein, so leading B to act to her detriment in reliance on that intention, thus making it unconscionable to allow A to deny B any interest by pleading the lack of the necessary written formalities for a valid declaration of trust or contract."
"It is not sufficient for a claimant to establish only that there has been some express or tacit common intention. Thus a constructive trust does not come into existence simply because D makes some promise or forms some intention to transfer an interest to C or create an interest for C. It is necessary for C also to demonstrate that he/she has placed reliance on that agreement to his/her detriment, or at least has significantly altered his/her position in reliance upon the agreement. The importance of this second requirement can easily be overlooked in the quest to demonstrate a common intention; yet so important is the necessity of demonstrating reliance upon the common intention that even an express common intention that the claimant should have a beneficial interest will not give rise to any such interest if, as Scott J said in Layton v Martin, the express agreement is "unsupported by any quid pro quo moving from the claimant"."
Sole name/joint names
"Just as the starting point where there is sole legal ownership is sole beneficial ownership, the starting point where there is joint legal ownership is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. So in sole ownership cases it is upon the non-owner to show that he has any interest at all. In joint ownership cases, it is upon the joint owner who claims to have other than a joint beneficial interest."
"The approach to quantification in cases where the home is conveyed into joint names should certainly be no stricter than the approach to quantification in cases where it has been conveyed into the name of one only."
"[16] In an interesting article by Simon Gardner and Katharine Davidson, "The Future of Stack v Dowden" (2011) 127 LQR 13, 15, the authors express the hope that the Supreme Court will "make clear that constructive trusts of family homes are governed by a single regime, dispelling any impression that different rules apply to 'joint names' and 'single name' cases". At a high level of generality, there is of course a single regime: the law of trusts (this is the second of Mustill LJ's propositions in Grant v Edwards [1986] Ch 638, 651). To the extent that we recognise that a "common intention" trust is of central importance to "joint names" as well as "single names" cases, we are going some way to meet that hope. Nevertheless it is important to point out that the starting point for analysis is different in the two situations. That is so even though it may be necessary to enquire into the varied circumstances and reasons why a house or flat has been acquired in a single name or in joint names (they range, for instance, from Lowson v Coombes [1999] Ch 373, where the property was in the woman's sole name because the man was apprehensive of claims by his separated wife, to Adekunle v Ritchie [2007] WTLR 1505, where an enfranchised freehold was in joint names because the elderly tenant could not obtain a mortgage on her own).
[17] The starting point is different because the claimant whose name is not on the proprietorship register has the burden of establishing some sort of implied trust, normally what is now termed a "common intention" constructive trust. The claimant whose name is on the register starts (in the absence of an express declaration of trust in different terms, and subject to what is said below about resulting trusts) with the presumption (or assumption) of a beneficial joint tenancy."
"This case is not concerned with a family home which is put into the name of one party only. The starting point is different. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If he does, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct. If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, the court will have to proceed as at para 51(4) and (5) above."
"… it is true that Jones v Kernott was a joint names case and the analysis in [51] is expressly said to be applicable to such a case. But at [52] Lord Walker and Lady Hale dealt with sole name cases and, as set out above, said that the parties' common intention had once again to be deduced objectively from their conduct. That is a reference back to [51(3)]. In a joint names case the starting point is the presumption that equity follows the law and hence that the parties are beneficial joint tenants, and the common intention referred to in [51(3)] is the intention, either at the date of acquisition or subsequently, that the parties' beneficial interests should be something other than joint: see [51(2)]. In a sole name case the starting point, as the Judge expressly recognised, … is that the presumption is that the sole legal owner is also the sole beneficial owner, and the common intention referred to in [52] is a common intention that the beneficial interests should be something other than the legal owner being also the sole beneficial owner. But that apart, it seems to me that the exercise that Lord Walker and Lady Hale envisaged is similar in a sole name case to that in a joint names case. In each case what needs to be found to displace the presumption that equity follows the law is a common intention that the beneficial ownership should be something different from the legal ownership; and (save for the case where there is evidence of express discussions as referred to by Lord Bridge in Lloyds Bank v Rosset) that is to be deduced objectively from their conduct."
Conclusion on the issue whether detrimental reliance is necessary
"By not dealing with the issue of detriment in Jones v Kernott, the Supreme Court either omitted mentioning for completeness that it did not need to be proved in the case before them, or omitted to mention a crucial element of the relevant principles to be applied. In my judgment, the latter is less likely than the former."
Was detrimental reliance established?
"The overwhelming weight of authority shows that detriment is required. But the authorities also show that it is not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances."
"… the detriment need not be financially quantifiable, let alone quantified, provided that it is substantial and such as to make it unjust for the representor to resile. A common form of detriment, possibly the commonest of all, is that as a result of his reliance on the representation, the representee has lost an opportunity to protect his interests by taking some alternative course of action. It is well established that the loss of such an opportunity may be a sufficient detriment if there were alternative courses available which offered a real prospect of benefit, notwithstanding that the prospect was contingent and uncertain."
"'Detriment' in this context is a description, or characterisation, of an objective state of affairs which leaves the claimant in a substantially worse position than she would have been in but for the transfer into the sole name of the defendant. Although the facts which constitute the detriment need to be pleaded, their characterisation is ultimately a matter for the court, in the light of all the evidence adduced at trial."
"[98] I agree with Mr Horton that the judge's decisions on detriment were not just primary findings of fact but were evaluative, i.e. they extended to the judge's considered assessment of the quality and character of the primary facts and whether they sufficiently amounted to a detriment. He decided that some of them did while others did not. He gave sound reasons for that assessment. I respectfully defer to it and find no reason to do otherwise.
[99] That applies as much to the findings of "no detriment" criticised by Mr Horton as to those of detriment which he seeks to defend. The judge's thinking was, in essence, that it was the agreement between the parties that was all-important. It was, as Mr Horton rightly submitted, open to the judge to decide that foregoing a weak claim to an interest in personal assets of Mr Hudson was sufficient because Mr Hudson might well have been willing to part with some of his personal assets whether the legal claim to them was good or bad.
[100] The other supposed detriments relied on were not, on the judge's findings, what made it inequitable for Mr Hudson to resile from the main agreement, the lynchpin of the parties' understanding. It was the main agreement which made that inequitable. Although the notion of detriment is broad and unconfined in this domestic context, it was not wrong for the judge to tie the detriment to the central basis of the parties' understanding and to reject other peripheral features as sufficient in themselves.
[101] Thus, while the judge might have viewed with more favour Ms Hathway's mortgage payments after January 2015, her payments of other outgoings of the property, her taking responsibility for the oil spill and its consequences, her conduct of her financial affairs and her lifestyle generally, he was not (contrary to Mr Horton's contention in his respondent's notice) bound to treat those matters as detriments separate from the effect of the agreement. His rejection of those matters as sufficient detriments in themselves was an evaluative decision which was open to him."
"What she [Ms Hathway] is doing is showing that she did rely on a promise. She gave up the claims she perceived she had and which Mr Hudson also perceived may be live against shares and pension."
What would Ms Hathway's claim have been?
"[Ms Hathway] desisted from making any claim against [Mr Hudson] in respect of assets held in his sole name but acquired during the course of the parties' relationship."
"The result of these authorities appears to me to be that the court has to consider all the circumstances in which the concurrence of the cestui que trust was given with a view to seeing whether it is fair and equitable that, having given his concurrence, he should afterwards turn round and sue the trustees: that, subject to this, it is not necessary that he should know that what he is concurring in is a breach of trust, provided that he fully understands what he is concurring in, and that it is not necessary that he should himself have directly benefited by the breach of trust."
Result
Lady Justice Andrews:
Lord Justice Nugee: