Equity Law Cases

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Hameed v Qayyum [2009] EWCA Civ 352

Constructive trust – effect of innocent misrepresentation

A husband and wife bought a property for W to live in. In 1991 H and W executed a deed under which H held his interest on trust for W absolutely. In 2004 H became involved in litigation and mistakenly understood that a freezing injunction to which he was subject required him to be able to demonstrate free assets in excess of the limit fixed by the injunction. W and H agreed that H should be released from trusteeship, taking beneficial interest in half the property. W borrowed money against her share to fund H defence in the litigation. Charging orders were later obtained over the property, and sale was ordered. H and W argued that the 2004 agreement did not amount to a constructive trust that they owned the beneficial interests equally, as the court could not give effect to the 2004 agreement because it was procured by H’s misrepresentation as to the requirement of the freezing injunction.

The Court of Appeal held that a constructive trust did arise notwithstanding H’s innocent misrepresentation. It stated that in a case where the issue was whether an innocent misrepresentation precluded the existence of a common intention constructive trust, the court should consider what would happen if there had been a rescission of the agreement immediately afterwards It would be an unusual case which refused rescission for innocent misrepresentation, but where that same misrepresentation would be held to prevent the creation of a common intention constructive trust.

Elithorn v Poulter [2008] EWCA Civ 1364

Beneficial interests – loan amount providing purchase contribution – whether beneficial interest accrued at purchase or repayment of loan

A property was registered in E’s name. The property had been purchased with money provided by M (with whom E was in a relationship). The couple were registered as joint proprietors, but a restriction on the registered showed that they were not beneficial joint tenants. M died and C were executors. Their case was that M and E had intended that their beneficial interests would reflect their contributions to the purchase price. It was contended that E would make a contribution of up to half the price upon the sale of another property. That second property was not promptly sold and E never made any payment to M towards the purchase price.

E contended that M had leant him half the purchase price at the time of purchase, and that although he never repaid this loan, he was still a beneficial owner through the arrangement. The judge found that M did make the loan to E, but that E was only to acquire a beneficial interest if and when he repaid that debt, and that since he had not repaid it, had no beneficial interest.

E’s appeal to the Court of Appeal was allowed. As the judge had found that M did lend E half the purchase price, E was a purchaser and had acquired a beneficial interest in half the property at the time of purchase.

Moriarty v Various Customers of BA Peters Plc [2008] EWCA Civ 1604

Separate client bank accounts – breach of trust – priority – proprietary rights

C were customers of B. B was a broker for the purchase of yachts. Each C had paid substantial amounts of money to B as payment for yachts and had been told by B that the money would be held in a separate client account. A small proportion of the money was paid into the client account but the majority was paid into B’s current account, which was substantially overdrawn. The C’s did not receive the yachts. B went into administration. The current account remained overdrawn but the customer account was in credit. There was a substantial deficiency as regards unsecured creditors

The Court of Appeal held that the small amount of money belonging to C which had been paid into the client account was held on trust for C. Had the rest of the funds also been paid into the client account, they would also have been held on trust. The fact that this did not occur was attributable to B’s breach of trust. However, as the money had been paid into the overdrawn current account, it had been used to reduce B’s liability with the band and had effectively disappeared. There was therefore no fund upon which a proprietary claim could operate. Although equity treats as done that which ought to have been done, it would be a step too far to conclude that the client account should be treated as having received the money.

Thorner v Major [2009] UKHL 18

Proprietary estoppel; lack of express promise; extent to which assurances capable of being relied on to support proprietary estoppel

P owned a farm and in 1997 made a will leaving the farm to D. The will had been destroyed and P died intestate. D worked on the farm for no remuneration from 1976 onwards. No express representation that D would inherit the farm was made by P. However, D relied on hints and remarks made by P over the years, which he claimed led him to believe that he was to inherit the farm. In 1990 P handed D a bonus notice relating to two life insurance policies, stating ‘that’s for my death duties’. D argued that at this point his hope of inheritance became an expectation.

At first instance the judge found that D had the benefit of proprietary estoppel, as he had understood P’s words and acts as an assurance that he would inherit the farm, and P had intended that to be the understanding.

The Court of Appeal reversed the decision because there was no clear and unequivocal intention on the part of P and no basis to construe P’s statements as a definite assurance.

The House of Lords reversed the decision of the Court of Appeal, allowing the appeal. It held that whether a representation had sufficient clarity to establish a proprietary estoppel depended on the context. In this case the context was of two men who communicated obliquely but understood each other well. It was held that the Court of Appeal had given insufficient weight to the advantage of the judge in hearing the witnesses. It was further held that although the 1990 incident had been a significant point, the evidence showed a continuing pattern of conduct by P for the remaining 15 years of his life. The assurances were intended to be taken seriously, and had been relied upon by the claimant.

Re Harding [2008] 2 WLR 361

Charities – charitable intention – exclusively charitable purpose

The courts have recently been reluctant to invalidate otherwise charitable trusts on the basis of lack of exclusivity of purpose.

In this case Lewison J sought to construe the underlying intention as being charitable and found that the trustees could in practice apply the trust property so as to make it operate as a charitable trust.

The bequest was to the effect that property was to be held ‘in trust for the black community of Hackney, Haringey, Islington and Tower Hamlets’. It was held that this should be interpreted to make it valid as to comply with s.34(1) of the Race Relations Act 1976 the specific ethnic limitation should be treated as having been removed. The judge found that the trustees should set up a scheme for using the property in a way which would satisfy the Charity Commission.

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