Constructive Trusts 2
Constructive Trusts 2.
In the first lecture on constructive trusts, the discussion began with the case of
Carl Zeiss Stiftung and the words of Lord Justice Edmund Davis that English
law provides no clear and all-embracing definition of a constructive trust and
whilst the unconscionable conduct of the owner appears to be the connecting
factor in the circumstances where a constructive trust has been imposed,
constructive trusts in fact arise over a wide variety of circumstances. An
exhaustive categorisation is not possible and, as such, constructive trusts are
best considered by looking at the most usual situations in which they have
been found to exist. We went on to consider the first two situations and will
deal with the remaining examples here, the main focus of which will be on
constructive trusts of the family home.
Constructive trusts can arise from the creation of mutual wills. Mutual wills will
arise where two or more people make wills in agreed terms and agree that
neither will revoke without the consent of the other. If the first to die carries out
his part of the agreement, equity will regard it as unconscionable for the
survivor to deviate from the agreed terms. Therefore, equity will impose a trust
on the survivors property. The survivor remains free to revoke his will but
because of the existence of the trust, the new dispositions of the property will
In the case of re Dale the court held that it was not necessary for the testators
to agree to leave property to each other. Equity will intervene to impose a trust
on the property of the survivor where the agreement is that each testator shall
leave property to a third party, for example, their children. In the case of
Goodchild v Goodchild, the Court of Appeal confirmed that in order for wills to
be mutual there must be clear evidence of mutual intention not to revoke
In the lecture on the creation of express trusts, it was seen that whilst no
formalities are required for the creation of an inter vivos trust of personality,
certain formalities must be met when creating an express trust of land, and all
testamentary trusts must comply with the formality requirements of section 9
of the Wills Act 1837. This provides inter alia that for a will to be valid, it must
be in writing, signed by the testator in the presence of two witnesses who
each sign in the presence of the testator. If the provisions of section 9 are not
met, the will and accordingly any trust it creates are void.
Secret trusts, however, are trusts which take effect on the testator’s death and
which do not comply with the terms of the Wills Act. Generally, the testator will
leave property by will to a person, someone trusted by the testator, a friend or
the testator’s solicitor. And from the face of the will, it looks like an outright gift
to that person. However, the understanding is that the donee will in fact take it
upon certain trusts. This is called a fully secret trust.
Alternatively, the testator can leave property in his will to the person, declaring
that it is to be held on trust but without specifying the terms of the trust. This is
called a half-secret trust, as it is clear that the person is a trustee but the
details of the trust are secret.
The usual reasons as to why a testator wishes to create a secret trust are to
keep the identity of the beneficiary secret, for example, the beneficiary is his
illegitimate child or mistress, or the testator may simply have not made up his
mind about all the details of his dispositions. Subject to certain conditions,
mainly the timing of the communication of the terms of the trust to the trustee,
secret trusts are valid and enforceable by the courts. Accordingly, by the use
of a secret trust, the testator can effect such dispositions and avoid the
statutory formalities of the Wells Act.
The existence and enforcement by equity of such trusts, contrary to the
provisions of the Wells Act, is justified historically on the basis of the doctrine
of fraud. However, the modern view is that secret trusts are enforced because
they are not created by the will but arise outside of and operate independently
of the will. Closely connected with this is the question of whether secret trusts
are considered as express or constructive trusts, a particularly important issue
in the case of land, as the formality requirements of section 53 1b of the LPA
1925 apply to express trusts of land but not constructive trusts. The question
As a rule of public policy, a person may not benefit from his crime. Thus, if
one person kills another, he cannot take any benefit under the victim’s will or
the intestacy rules if the victim dies intestate. If the killer acquires legal title to
the victim’s property, he will hold it on constructive trust for the people next
entitled to it under the victim’s will or his next of kin. The most famous
example of this principle in operation is the case of re Crippen, where Dr.
Crippen, having inherited his wife’s estate as a result of murdering her, was
not beneficially entitled to. As the property had actually come to him, a
constructive trust was imposed for the benefit of those next entitled.
Similarly, where a person obtains property by fraud, he will hold it as
constructive trustee. This principle can be seen to be operating in cases such
as Rochefoucauld v Boustead, Bannister v Bannister and Binnions v Evans.
Contracts for the sale of land are specifically enforceable and, as such, as
soon as a vendor enters into a contract to sell land, he immediately holds it in
constructive trust for the purchaser. The constructive trust arises as a result of
the application of the equitable maxim that equity treats as done that which
ought to be done. Generally, contracts for the sale of personal property are
not specifically enforceable. In instances where specific performance is
available, however, as for example in Oughtred v Inland Revenue
Commission, which involved a contract for the sale of shares in a private
company, a constructive trust will arise.
Constructive trusts can be imposed to complete imperfect gifts. The
substantive law relating to this area has been dealt with elsewhere. It is of
note to remember that in those limited circumstances where equity will treat a
failed attempt at making a transfer to trustees or a failed attempt at an outright
gift as a declaration of trust, there has in fact been no real declaration of trust.
Consequently, if equity wishes to treat the intended settler as having declared
himself as trustee for the intended beneficiary, it must impose its own trust.
This can be seen in the cases of Re Rose, Mascall v Mascall and more
recently and somewhat controversially in Pennington v Waine, which were
considered in greater detail in the lectures on the creation of express trusts.
The remainder of this lecture will concentrate on constructive trusts of the
Trusts often arise in the context of the family home and disputes over its
ownership, typically where the property is owned by one of the parties to the
relationship but the other claims an interest in the property by virtue of
contributions to the purchase price or improvements to the property or the
payment of domestic expenses. We saw in resulting trusts that when two
people contribute towards the purchase of property, whoever is the legal
owner of the property will hold it on resulting trust for both parties in proportion
to their contributions. However, if one of the parties does not make any direct
financial contribution to the purchase price, the question then arises as to
whether the non-legal owner may claim a proprietary interest in the home
under the doctrine of constructive trusts. Note that the doctrines of resulting
and constructive trusts also apply where the property is in the joint names of
the parties but the title documents do not deal with their respective beneficial
interests. However, the typical situation and indeed the majority of the cases
involve the legal title being in one name only, and the question then of how
the claimant can obtain an equitable interest in the home under a resulting or
constructive trust or a proprietary estoppel calim, which we shall consider
towards the end of the lecture.
Consideration should be given to the social context in which constructive
trusts have developed. Initially, in response to the situation of married women
and the question on divorce of ownership of the matrimonial home typically
purchased in the sole name of the husband. The wife may claim in an interest
under a resulting trust if a direct contribution was made to the purchase price.
However, in the majority of cases the house would be purchased by means of
a mortgage repaid from the husband’s income. Such a trust would not
recognise anything other than financial contributions and certainly would not
reflect the value of other contributions made by the wife. Accordingly, the
constructive trust was developed particularly so by the House of Lords in Pettit
v Pettit and Gissing v Gissing to provide the non-owning spouse with a share
in the matrimonial home. The advent of the Matrimonial Causes Act 1973 has
lessened the significance of the role of the constructive trust and indeed the
resulting trust as the Act gives the court jurisdiction over the distribution of the
The Act however has no application to unmarried couples and in modern
society cohabitation outside marriage is increasingly common. As such, the
rights of the unmarried cohabitees in the property will fall to be determined on
general law principles under the doctrines of resulting and constructive trusts,
the question of ownership arising when the relationship breaks down. The
issue of whether a resulting or constructive trust has arisen will also be of
importance to married couples, one of whom is claiming an interest in priority
to a third party, most commonly the mortgagee of the property.
The claiming of an interest under a resulting trust requires that at the outset
the claimant has made a direct contribution to the purchase price. The
claimant’s interest under such a trust will be in proportion to the contribution to
the purchase price so provided. We saw in the lecture on resulting trusts that
this contribution can be by of payment to the mortgage in instalments,
provided that at the outset the claimant had undertaken to make such
payments. Thus the claimant will be entitled to the share which he or she has
paid for or has undertaken to pay for.
The limitations of the resulting trust can be clearly seen. It is particularly of no
use to a claimant who has not provided for any part of the initial purchase
price and indeed even if such a payment is established, the proportionate
resulting trust analysis may not provide a just result. It may be preferable
therefore for a claimant to establish an interest under a constructive trust. As
we shall see, the claimant’s conduct is not limited to payments to the
purchase price and the court has considerable leeway in determining the size
of the share to which the claimant is entitled.
There are two matters which must be demonstrated in order to establish a
constructive trust. The claimant must show that there was a common intention
to share the beneficial interest in the property and that he or she has acted to
his or her detriment on the basis of that common intention.
The most recent and authoritative statement of the law in this area was set out
in the judgement of Lord Bridge in the House of Lords case of LLoyds Bank v
Rosset in which his lordship drew a distinction between two very different
situations. Those cases in which there has been some agreement,
arrangement or understanding reached between the parties that each is to
have a beneficial share in the property and those cases in which there has
been no such agreement. In such a case the court has to rely on the conduct
of the parties from which to infer a common intention to share the property.
The constructive trust gives effect to the common intention of the parties and
accordingly is often referred to as a common intention constructive trust.
Further, as can be seen from Lord Bridge’s speech, this common intention
can arise as a result of the parties’ express agreement to share the beneficial
interests in the property or such an intention can be inferred from their
conduct. It is proposed to deal with each of the categories in turn.
An agreement to share the beneficial interest is required. In Rosset, Lord
Bridge emphasised the distinction between shared use of assets and shared
The agreement to share must be based on evidence of express discussions,
As observed in Springett v Defoe, trust law does not work on telepathy.
Lord Bridge considered the case of Eves v Eves and Grant v Edwards to be
outstanding examples of cases within the first category. In both cases, the
female partner had been clearly led by the male partner to believe that the
property would belong to them jointly. In Eves v Eves, the male partner had
told the female partner that the only reason why the property was to be
acquired in his name alone was because she was under 21 and that, but for
her age, he would have had the house put into their joint names. He admitted
in evidence that this was simply an excuse.
Similarly, in Grant v Edwards, the female partner was told by the male partner
that the only reason for not acquiring the property in joint names was because
she was involved in divorce proceedings and that, if the property were
acquired jointly, this might operate to her prejudice in those proceedings. Lord
Justice Norse considered that the facts raised a clear inference that there was
an understanding between the claimant and the defendant or a common
intention that the claimant was to have some sort of proprietary interest in the
house. Otherwise no excuse for not putting her name onto the title would have
The courts are thus able to infer from such statements a common intention to
share the property in question. In Hammond v Mitchell, Hammond made the
excuse that he would have to put the house in his name because he had tax
problems due to the fact that his wife burnt all his accounts and his caravan
was burnt down with all the records of his car sales in it. The taxman would be
interested and if he could prove his money had gone back into a property, he
would be safeguarded. More recently in Hyett v Stanley the deceased’s
statement to the claimant that she did not need to have her name on the
deeds of the property because, with her name on the mortgage she would
have a right to the property, raised a clear inference that there was an
understanding between the deceased and the claimant or a common intention
that she was to have a beneficial interest.
Common intention alone will not give rise to a constructive trust. It in effect
amounts to an express declaration of trust which would be ineffective unless
the formality requirements of section 53 1b of the Law of Property Act 1925
have been complied with. These requirements do not apply to constructive
trusts however by virtue of section 53 ss 2 of the Act. In order to establish a
constructive trust and thereby avoid the formality rules, the claimant must
have acted to his or her detriment or significantly altered his or her position in
reliance on the common intention. The constructive trust arises as then it
would be inequitable to allow the legal owner to deny the trust.
It is difficult to state with certainty what sort of conduct will suffice to establish
detrimental reliance. The level of conduct required is clearly different from that
which is required to establish the inference of a common intention. As will be
seen, it would appear that nothing short of a direct contribution to the
purchase price will give rise to such an inference. There is no such
requirement where the constructive trust arises from the parties’ express
agreement. As Lord Bridge states, 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.
Rosset does not provide an analysis of such conduct sufficient to give rise to a
constructive trust. Reference must therefore be made to Grant v Edwards,
which remains the leading authority. As outlined earlier, the Court of Appeal
found a common intention to share the ownership of the house on the basis of
the statement made by the defendant Edwards. Meanwhile, Grant had made
substantial contributions to the general household expenses, which had
enabled the defendant to make the mortgage payments. Accordingly, in
making those indirect payments towards the purchase of the house, she had
acted to her detriment. However, as to the precise type of conduct which
amounts to an acting upon the common intention, the matter is one of
uncertainty, judicial statements in Grant v Edwards being at variance with
Lord Justice Norse requires conduct on which the claimant could not
reasonably have been expected to embark unless she was to have an interest
in the house.
Lord Justice Mustil looks at the conduct as one determining the quid pro quo.
Whatever the court decided the quid pro quo to have been, it will suffice if the
claimant provides it.
Vice Chancellor Brown Wilkinson takes a more liberal view still, propounding
that any act done by the claimant to her detriment relating to the joint lies of
the parties being sufficient detriment to qualify.
Looking at the authorities, conduct considered sufficient has included in the
Case of Grant v Edwards already considered, the claimant making substantial
indirect contributions to the mortgage, providing housekeeping and bringing
up the children. In Eves v Eves, heavy labouring work, Hammond v Mitchell,
the claimant acting as an unpaid business assistant as well as looking after
the house and children. The payment of £12,000 to the man to pay his ex-
wife’s mortgage in Stokes v Anderson and in Chan v Lun, the court found that
the claimant in giving up a promising political career and progressing the
defendant’s property development projects, had acted to her detriment.
Conversely, in Rosset, Mrs. Rosset’s activities of painting and decorating,
supervising the builders who were carrying out renovation work on the
property and ordering and delivering materials were considered by Lord
Bridge as to have been so trifling as to be de minimis. Even if the intention to
share the property had been established, he doubted whether Mrs. Rosset’s
contribution to the work of renovation was sufficient to support a claim to a
In the second of Lord Bridge’s categories, his Lordship outlines the very
different situation of where there is no evidence of an agreement to share and,
as such, the court must rely on the conduct of the parties, both as the basis
from which to infer a common intention to share the property beneficially and
as the conduct relied on to give rise to a constructive trust. In this situation it is
doubtful whether anything less than direct contributions to the purchase price
will justify the inference.
Accordingly in Trowbridge v Trowbridge the court found that there were no
discussions between the parties that Mr. Trowbridge should have an interest
in the house he shared with his wife registered in her sole name. As there
were no discussions that he should have an interest, a finding of a common
intention would, as in most cases of shared property, be inferred from
conduct. Payments towards the purchase price, whether directly or by way of
mortgage instalments, would themselves readily justify that inference. Mr.
Trowbridge’s joint liability for the mortgage was evidence from which a
common intention was to be inferred.
This can be compared with the case of Buggs v Buggs, in which the claimant
was contributing to a common pool of money and out of that pool the
mortgage payments were made. The judge simply said “I do not see that this
history gives rise to a trust in Mrs. Buggs’ favour, which requires the drawing
of an inference that Mrs. Buggs was to have a beneficial interest in the
property”, a somewhat perverse and justifiably criticised outcome.
Nor did Mrs. Rosset fair any better. Mr. and Mrs. Rosset purchased a semi-
derelict farmhouse for £57,000 using money from Mr. Rosset’s family trust,
the trustees of whom insisted that the property be bought in Mr. Rosset’s
name alone. Renovation work began, Mrs. Rosset supervising the builders,
going to builders’ merchants to obtain materials and undertaking skilful
painting and decorating. Meantime her husband, without her knowledge,
obtained a £15,000 loan from Lloyd’s Bank, which was secured on the house.
Mr. and Mrs. Rosset move into the house then later separate following
matrimonial difficulties. Mr. Rosset fails to make the loan payments and
Lloyd’s Bank claimed possession of the house. Mrs. Rosset claimed that she
had a beneficial interest under a constructive trust and hence an overriding
interest under section 70 ss 1g of the Land Registration Act 1925 which
prevailed against the bank’s legal charge.
At first instance the judge rejected Mrs. Rosset’s claim that it had been
expressly agreed between her husband and herself that the property was to
be jointly owned because of the stipulations of the trustee. He found however
that there had been a common intention between the parties that Mrs. Rosset
should have a beneficial interest in the property under a constructive trust,
The House of Lords held that Mrs. Rosset’s activities in relation to the
renovation of the property on which the judge had essentially based his
inference of a common intention that she should have a beneficial interest in it
had been insufficient to justify that inference. And accordingly the judge’s
finding that Mr. Rosset held the property as constructive trustee for himself
and his wife could not be supported.
Absence of express agreement need not be fatal to the claim, but only if the
court can be persuaded to infer one. Lord Bridge indicated that this will only
happen where the conduct leads the court to infer that an agreement must
have underpinned what happened. By this is meant that the court cannot
imply an agreement simply because one would have been reasonable had the
parties thought about it. It is necessary to show that there is no real alternative
explanation as to what happened other than the fact that there must have
been agreement to take a share of the property.
Lord Bridge indicates that direct contributions to the purchase price or to the
mortgage will readily lead the court to infer that an agreement was present.
Presumably this is on the basis that no rational person would contribute to the
purchase of property in the name of another without either showing a gift to
that person, which is generally excluded by the facts, or intending to obtain a
benefit for him or herself. This is consistent with Burns v Burns and Gissing v
Gissing where the court was able to rationalise the decorating and gardening
work done on the basis of an intention to make the house a nicer place to live
in rather than necessarily representing an intention to obtain a share of the
However, in his statement Lord Bridge appears to rule out indirect
contributions such as those in Grant v Edwards involving payments to the
household expenses which correspondingly enabled the mortgage to be paid.
Such contributions specifically accepted in Burns v Burns as giving rise to a
It is clear from the judgement of Lord Justice Fox that in the absence of
express agreement the necessary common intention is inferred from the
conduct of the parties, in particular the expenditure incurred by them. The
court looks for expenditure which is referrable to the acquisition of the house.
Examples of such expenditure include the making of indirect contributions by
Lord Justice Norse makes a similar statement in Grant v Edwards.
Expenditure referable to the acquisition of the house is necessary, and if
found, will have a dual effect of establishing the common intention and the
necessary detrimental reliance.
It can be questioned whether Lord Bridge rules out such contributions, it being
extremely doubtful whether anything less than direct contributions to the
purchase price will justify the necessary inference. It can be argued that from
this Lord Bridge does not in fact rule out these contributions. However, His
Lordship analysed Grant v Edwards, which involved, it will be recalled, Linda
Grant making substantial indirect contributions to the mortgage, and the case
of Eves v Eves which entailed heavy labouring work by Janet Eves. His
Lordship considered that the conduct of the female partner in each of these
cases was sufficient to give rise to a constructive trust because the cases
involved an express common intention. On its own however, the conduct fell
far short of such conduct necessary to support a claim to a constructive trust.
It would appear therefore that Rosset has worked an injustice in apparently
ruling out these contributions.
Contrary to this conclusion however is the case of Le Foe v Le Foe where the
High Court concluded that Lord Bridge did not mean to exclude the situation
involving the wife’s indirect contribution to the mortgage. Referring to Gissing
v Gissing and Burns v Burns, the court was entitled to infer that by virtue of
Mrs. Le Foe’s indirect contributions to the mortgage, the parties commonly
intended that she should have a beneficial interest in the former matrimonial
Likewise, another area of uncertainty is that of improvements to the property
and whether a contribution in time and labour or money to the improvement of
the property is capable of giving rise to the inference necessary to create a
constructive trust. Clearly improvements to the house can amount to
detrimental reliance, as in Eves v Eves. However, it is certainly far from clear
whether such a contribution would fall within Lord Bridge’s second category.
There are decisions prior to Rosset which have found an inference of a trust
from improvements, such as Cooke v Head where an interest was acquired by
Ms. Cooke’s physical labour to the property, and Hussey v Palmer where the
claimant paid for an extension to the house, but it would appear that this type
of contribution has now been ruled out by the dicta of Lord Bridge.
A further criticism of the case is the confusion of the second category with that
of the doctrine of resulting trusts. A direct contribution to the purchase price
traditionally gives rise to a presumed resulting trust in the payer’s favour.
From the dicta of Lord Bridge, a direct contribution is now regarded as
justifying the creation of a constructive trust.
This confusion is particularly manifested in the context of quantification of the
beneficial interest, which can be seen from subsequent cases arguably
mitigating the harshness of Rosset but nonetheless providing for more
uncertainty in the law. In Midland Bank v Cooke the Court of Appeal held
where a direct contribution is found, rather than the court finding a resulting
trust in proportion to that contribution, the court would assess the proportions
the parties were to be assumed to have intended for their beneficial ownership
by undertaking a survey of the whole course of dealing between the parties
relevant to their ownership and occupation of the property.
Similarly in Drake v Whipp, Drake made a direct contribution to the purchase
price and claimed a 40% share in the property under a resulting trust. The
Court of Appeal found that the case was one of constructive trust rather than
resulting trust as there was evidence of an express common intention to share
and in constructive trust cases the court can adopt a broad brush approach in
determining the parties’ shares. Looking at the parties’ entire course of
conduct together the claimant’s fair share would be a third.
In Le Foe v Le Foe, the parties had been married for 40 years. The house,
worth £1,500,000, was in Mr. Le Foe’s sole name. Mrs. Le Foe made indirect
contributions to the mortgage and in 1995 used her mother’s inheritance to
make contributions of £100,000 to paying off a second mortgage and arrears
on an earlier mortgage. At the time the property was worth £1,000,000.
Counsel for Mr. Le Foe contended that the wife’s beneficial interest should be
fixed at no more than 10%. However, the judge, in dealing with the issue of
quantification, referred to Midland Bank v Cooke and the Court of Appeal’s
choice in deciding between 2 different approaches, namely the straightjacket
of the mathematical resulting trust approach and the more holistic approach of
looking at the parties’ global dealings over the span of their ownership of the
property, the Court of Appeal preferring the latter approach and in doing so
deriving authority from Gissing v Gissing and Grant v Edwards. Accordingly, in
surveying the whole course of dealings between Mr. and Mrs. Le Foe, their
common intention was that she should have a 50% share in the property.
Thus a direct contribution can give rise to a resulting trust in the contributor’s
favour and accordingly a corresponding proportionate share. Under Rosset
however such a contribution can give rise to a constructive trust as where it
amounts to detrimental reliance under the first of the situations outlined by
Lord Bridge or it can be used to infer the necessary common intention. As
such, the court is not bound to apply a resulting trust formula but can give a
share which differs from the proportionate resulting trust and takes into
account the whole range of the parties’ conduct.
Looking at the issue of quantification more closely, it is necessary to deal with
each of Lord Bridge’s categories in turn. Where there is express common
intention to share, then the claimant’s share will be whatever the parties have
agreed that it would be. For example, in Hammond v Mitchell, Vicky Mitchell
was awarded a half share because of Hammond’s declaration that the
property would be half hers. Quantification is determined by the common
intention and not the value of the contributions.
Where there is no express agreement as to how the share is to be quantified,
then the basic principles stem from Lord Diplock’s speech in Gissing v
Gissing. The court will try and determine whether any inference can
reasonably be drawn as to the amount of share intended by looking at the
conduct of the parties.
So for example in Grant v Edwards, in looking at the parties’ conduct the court
found that the claimant was entitled to a half-interest in the property. Similarly
in Hyett v Stanley where the claimant with the deceased had rendered herself
jointly and severally liable to Barclay’s Bank by entering into the legal charge,
the judge concluded that the parties could only reasonably have intended that
they should each take a half share.
It might be inferred that the share is to be quantified later on the basis of what
would be fair, having regard to the total contributions, direct or indirect, which
each party had made, and as such the court will give effect to that common
intention by determining what in all the circumstances is a fair share. Such an
outcome was reached by Lord Justice Norse in Stokes v Anderson and more
recently by the Court of Appeal in Oxley v Hiscock.
In Oxley v Hiscock the claimant and defendant who were unmarried
purchased a house in the sole name of the defendant at a price of £120,000.
The claimant’s direct contribution to the purchase price was £36,300 and the
defendant’s were £60,700. The parties were taken to have jointly contributed
to the balance by way of mortgage of £30,000. On the sale of the house 10
years later the proceeds of sale were divided between the claimant and the
defendant with the claimant receiving less than 20%. The claimant brought
proceedings for a declaration that the sales proceeds were held by the
defendant on trust for himself and the claimant in equal shares or in such
shares as the court should determine. The judge found that both had intended
and had expressed the intention to each other that each should have a
beneficial share in the property and that, at the time the property had been
purchased, each had believed it was their joint home and that, in keeping with
that belief, each had contributed towards the total outgoings with a classic
pooling of resources.
The judge concluded that their intention had been to share the property jointly
and equally and made a declaration that the claimant was entitled to a half-
share of the proceeds of sale. The defendant appealed, contending that the
property had been held in beneficial shares proportionate to the contribution of
each party to the acquisition cost, being approximately 22% for the claimant
and 78% for the defendant. The Court of Appeal considered the question of
how the proceeds of property in which an unmarried couple had been living as
man and wife should be shared between them when the relationship came to
The Court of Appeal held that each was entitled to that share which the court
considered fair, having regard to the whole course of dealing between them in
relation to that property. That included the arrangements which they made
from time to time in order to meet the outgoings. For example, mortgage
contributions, council tax and utilities, repairs, insurance and housekeeping,
which had to be met if they were to live in the property as their home. In the
instant case, on the basis of the judge’s findings that there had been a pooling
of resources, it was fair to treat them as having made approximately equal
contributions to the balance of the purchase price. Taking that into account
with their direct contributions to the purchase price, where the defendant’s
contribution had been substantially greater than the claimant’s, a fair division
of the proceeds of sale was 60% to the defendant and 40% to the claimant.
According to Oxley v Hiscock therefore, where there is no evidence of any
discussion between the parties as to the amount of the share which each was
to have, then 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. The leading judgement is that of Lord Justice Chadwick, with whom
their Lordships agreed, and who based his reasoning on that of Lord Diplock
in Gissing v Gissing and, as outlined earlier, subsequently adopted by Lord
Justice Norse in Stokes v Anderson. The parties are taken to have agreed at
the time of the acquisition of the property that their respective shares are not
to be quantified then but are left to be determined when their relationship
comes to an end or the property is sold on the basis of what is then fair,
having regard to the whole course of dealing between them. The court steps
in to determine what is fair because when the time came for that
determination, the parties were unable to agree. Accordingly, in the absence
of evidence that the parties gave any thought to the amount of their respective
shares, the necessary inference is that they must have intended that question
would be answered later on the basis of what was then seen to be fair.
Where the constructive trust has arisen in the second of the two ways
identified by Lord Bridge as a result of a direct contribution to the purchase
price, then the starting point in quantifying the shares is that of the resulting
trust analysis of proportionate entitlement. So for example in Springette v
Defoe a council house discount under the right to buy scheme was considered
a direct contribution to the purchase price and a resulting trust in proportion
was ordered. Similarly in Ashe v Mumford the court said that a council house
discount could be treated as a contribution towards the purchase of the
discounted property but was not an invariable presumption of direct
contribution. In Huntingford v Hobbs the man did not contribute directly to the
purchase price but the arrangement as between the parties was that he
should make all the payments due under the mortgage. It was held that the
woman should be treated as having contributed her cash contribution and that
the man should be treated as having contributed the whole of the sum
borrowed on the mortgage and that the property should be owned by them in
shares proportionate to such contributions.
However, where there is a direct contribution, the courts are not bound to deal
with the issue of quantification on the basis of the proportionate resulting trust
analysis. In Midland Bank v Cooke, the wife was considered to have made a
direct contribution of £550, being half of a wedding gift of £1,100 from the
husband’s parents. The house was purchased for £8,500. At first instance, the
court held that the wife was entitled to a beneficial interest of 6.74% in the
property, being the proportion represented by her half-share of the wedding
gift from the husband’s parents to the total purchase price of the property. The
wife appealed, contending that the judge had adopted the wrong approach to
the quantification of her beneficial interest.
The Court of Appeal held that it was not bound to deal with the matter on the
strict basis of the trust resulting from the cash contribution to the purchase
price and was free to attribute to the parties an intention to share the
beneficial interest in some different proportions. The court would assess the
proportions the parties were to be assumed to have intended for their
beneficial ownership by undertaking 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 and would take into
consideration all conduct which threw light on the question what shares were
A similar decision had been made in the earlier case of McHardy v Warren,
and as we have already considered, the judge in Le Foe followed the
approach of the Court of Appeal in Midland Band v Cooke and, surveying the
whole of the couple’s dealings, found a common intention that the wife should
have a 50% share in the property rather than the 10% share which would
have been awarded by reference to the mathematical resulting trust approach.
The Court of Appeal in Oxley v Hiscock however has criticised the approach
suggested by Lord Justice Waite in Midland Bank v Cooke that the court
undertakes a survey of the whole course of dealing between the parties in
order to determine what proportions the parties must be assumed to have
intended for their beneficial ownership. On that basis the court treats what has
taken place while the parties have been living together in the property as
evidence of what they intended at the time of the acquisition. It seems to Lord
Justice Chadwick artificial and an unnecessary fiction to attribute to the parties
a common intention that the extent of their respective beneficial interests in
the property should be fixed as from the time of the acquisition in
circumstances in which all the evidence points to the conclusion that at the
time of the acquisition they had given no thought to the matter.
In Lloyd’s Bank v Rosset, Lord Bridge appears to have provided a rather clear
statement of the law. Difficulties have however been identified with each of the
categories and can particularly be seen in the uncertainty surrounding
quantification of the beneficial interests, especially where a claimant
establishes an interest by way of a direct contribution.