Significant and increasing proportion of couples

The issues that are facing the courts today are the significant and increasing proportion of couples and family members that are co-habitating outside of the traditional framework of a society long ago. As such the courts are struggling to keep up with society in determining beneficial interests and it's subsequent quantification. This presents a clear problem, as it is quite difficult to effectively quantify indirect contributions. Thus, the courts have been very cautious when approaching this, and despite attempting to look at the ‘whole course of dealings' have, it appears, chosen to focus on direct financial contributions. This paper will examine the establishment of proprietary interest through express agreement or declaration, resulting trust with a direct contribution and constructive trust with indirect contributions.

The courts take the stance that, prima facie, when there is no express declaration of trusts, it is presumed that equity follows the law and the legal interest is reflected in the beneficial interest. This was summarized by Gray and Gray in Elements of Land Law, at 11.57:

"Equity's starting assumption is … that joint tenants of the legal estate likewise hold the equitable estate as joint tenants. But this assumption … is readily displaced by any of a number of contra-indications that … equitable ownership was intended to take the form of a tenancy in common. Indeed, these contra-indications have become so prevalent that it is relatively rare that the nature of equitable co-ownership falls to be ascertained by a despairing resort to the residual proposition that 'equity follows the law."

Prior to the decision in Stack v Dowden [2007], in sole-legal ownership cases, the onus was on the claimant to prove that they had a beneficial interest. In contrast, in joint-name cases, it was generally assumed that both parties shared the beneficial interest. In both cases, the quantity of the beneficial interest(s) would be decided on the evidence. Thus in cases involving joint owners, the starting point is that both parties are joint beneficial owners, thus the courts presumes that the equitable interests of both owners are equal, that is 50:50.

However, the Law and Property Act 1925 s 53(1b) requires that this express declaration of trust that the legal owner desires the claimant to have a beneficial interest in the property, that is a separation of the legal and beneficial title (interest). Failing this, the Law and Property Act 1925 s 53(2) declares, that failing this oral declarations can be used by the courts to prevent unconscionable behaviour, so called “informal oral agreements” (Bannister v Bannister [1948]). In order to rebut the presumption, the claimant must prove to the court that there existed a common intention of the part of the appellant for them to share a beneficial interest. When there is an express declaration of trust the courts are reluctant to depart from this and will give effect to the express declaration. Such was the issue in this sole legal ownership case of Savill v Goodhall [1993]. This is also the stance in cases involving joint legal ownership in which the courts will also give force to the effect of express declarations of trust (Goodman v Gallant [1986]). The Law Commission Report in 2002 commented on this by indicating that; persons who make provisions for the distribution of assets should be ‘rewarded' by the courts, that is, should be given the full force. In fact, it is a requirement of Land Registration Rules 2003 for the persons having a legal and beneficial interest to make an express declaration.

Previously, the courts have employed a constructive trust in which they awarded the non-legal owner a percentage of the beneficial interest. The courts also have the power to invoke the principle of proprietary estoppel (referred in Jennings v Rice [2003] as ‘mere equity') in which the claimant, in seeking the minimal justice required, are able to make a claim on the legal owner, that they were labouring on an assurance from said person, to their detriment, that they would receive some beneficial interest. The courts, while being restrictive on the use have given some guidance through ensuring that it is proportional and not excessive (Jennigs v Rice [2003]). Unconscionability and common intention are the twin tenants that are required for a constructive trust to function. This was noted by Browne-Wilkinson (Grant v Edwards (1986)) and Chadwick LJ (Oxley v Hiscock [2004]). It must be noted however, that either a constructive trust or proprietary estoppel may be granted on cases with similar facts (see Lord Bridge in Lloyd's Bank Plc v Rosset [1990]), with the primary difference being proportion of the beneficial interest awarded to the claimant.

In Stack v Dowden [2007], Lord Walker (at 37) rejected the principle that applying a constructive trusts and allowing a claimant to invoke proprietary estoppel would provide a flexible power to fashion a remedy in both cases (paragraph 66 of Oxley v Hiscock [2004]). In the former, Lord Walker noted that it is the court's intention to identify the true beneficial owner(s) and attempt to quantify any interests. In the later, it is quite simply satisfying an equitable remedy in favour of the claimant, but at a level just enough to do justice. Thus, it may be beneficial for an individual to make a claim on both a constructive trust and proprietary estoppel.

While the water is fairly clear with issues involving express declarations of trust, things appear murky when this is not the case. Dyer v Dyer (1788) appears to indicate that where there is no express declaration of trust, what one puts in is what one gets out; equity assumes bargains and not gifts. That is, in order for a claimant to prove that he or she had a beneficial interest they had to provide evidence of purchase money and needs to be quantification of what they had put in. Subsequently in the case of Pettit v Pettit [1970], the courts once again addressed the issue of how to decide cases in which there is no express declaration of trust with a sole legal owner. However, the courts struggled when determining what behaviour is satisfactory to give rise to a beneficial interest and how to quantify these beneficial interests, whether they are orthodox or unorthodox legal principles.

In order to further understand the development of the law in this area we can look to Diplock LJ (obiter minority opinion in Pettit v Pettit [1970]) indicated that courts, in cases in which there is no express declaration of trust, should impute a common intention in favour of the claimant. His Lordship outlined that where previous instances involved persons of the ‘properteed class”, this view is out of touch with the current demographic of modern society and it would be unfair, in light of issues such as shared mortgages, etc… to deny them an interest where it may be difficult to ascertain contributions. It is to be noted that while in the minority in Pettit v Pettit [1970], Lord Diplock in Gissing v Gissing [1970] had a chance to review his comments and changed the language from impute to infer. In addition it has shown to be Lord Diplock's minority dicta from the two aforementioned cases, which has taken root, bore fruit, and appears to now be the standard on which cases of this ilk are decided. In Eves v Eves [1975] Lord Denning stated (at 1341):

“Lord Diplock brought it into the world and we have nourished it.”

Once again, this issue was raised in which there was a sole-legal owner and no express declaration of trust. Such was the case in Lloyd's Bank Plc v Rosset [1990], in which Lord Bridge stated that nothing except for direct financial contributions would gain the claimant a beneficial interest. He determined that not only are direct financial contributions necessary to establish a beneficial interest, but also should be used in quantifying the size/proportion of the award. This Lord Bridge clothed in the veil of a constructive trust but appears quite narrow and in actuality focusing solely on direct financial contributions resembles a resulting trust (presumption of advancement based on money).

Following the decision in Lloyd's Bank v Rosset, Waite LJ and Chadwick LJ agreed with Lord Bridge on the first hurdle (financial contributions gains a claimant a beneficial interest), however the disagreed on the second hurdle, that is that financial contributions should not be the sole factor in the quantification of the beneficial interest, that is the courts should look at the whole course of dealings when making this determination.

The court in Stack v Dowden [2005] considered Lord Chadwick's formula in Oxley v Hiscock [2005] (at page 69) when addressing the approach to quantification in the absence of oral evidence:

"…where there is no evidence of any discussion between them of the share which each was to have … 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."

However, the court preferred the Law Commission's approach (at 4.27), by which they would:

"Undertake a survey of the whole course of dealing between the parties and take account of all conduct which throws light on the question of what shares were intended."

Baroness Hale ruled (at page 61):

"That may be the preferable way of expressing what is essentially the same thought, for two reasons. First, it emphasises that the search is still for the result, which reflects what the parties must, in the light of their conduct, be taken to have intended. Second, therefore, it does not enable the court to abandon that search in favour of the result which the court itself considers fair."

This may create a bit of a conundrum with, on one hand, the judicial fairness of the Law Commission and Lord Chadwick focusing on the intention of the parties involved being almost identical. In contrast, the court must pursue the latter and not the former. The relationship between fairness and intention is demonstrated in Stokes v Anderson [1991] and Drake v Whipp (1996). However, when presumption is rebutted, it is still unclear if and if so to what extent the courts' approach will alter by reason of Baroness Hale's criterion of fairness.

Joint names cases where a property (joint home) is jointly conveyed in the names of a cohabiting couple, however, with no express declaration of their beneficial interests, the courts have decided that until it is proved otherwise, there will be an assumption of joint beneficial tenancy. This ‘formula' was outlined at p 40 as:

"The issue before us is the effect of a conveyance into the joint names of a cohabiting couple, but without an explicit declaration of their respective beneficial interests, of a dwelling house which was to become their home"

The court continueed at p 58:

“The issue as it has been framed before us is whether a conveyance into joint names indicates only that each party is intended to have some beneficial interest but says nothing about the nature and extent of that beneficial interest, or whether a conveyance into joint names establishes a prima facie case of joint and equal beneficial interests until the contrary is shown. For the reasons already stated, at least in the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved"

Following the decision in Stack v Dowden [2005] was Abbott v Abbott [2008], in which the courts revisited the issue (Privy Council). In this judgment, Baroness Hale reviewed the Appeal Court judge's approach and their reliance on Lord Bridge's dicta in Lloyd's Bank v Rosset: that it is “extremely doubtful whether anything less” than direct payments would result in a constructive trust. Her Ladyship concluded that: a) the assumption that a gift to a married couple was usually inferred as for both parties; b) the acceptance of the husband in the court that the wife had a beneficial interest (though only valued at 8% and; c) the course of dealings of the parties involved which included (but was not limited to) the insurance policies and the use of joint bank accounts, led her Ladyship to conclude that the wife was entitled to a 50% interest in the home. This decision was subsequently followed in Fowler v Barron [2008].

Such has been the confusion surrounding the issues that the government commissioned the Law Commission (headed by Sir Stewart Bridge) to propose solutions to the problem. This culminated in the Law Commission Report 2007. Following on the heels of the Law Commission's Report of 2007 was the proposition of a new Bill in Parliament. The Cohabitation Bill (proposed by Lord Lester of Herne which, though struck down after the second reading) was proposed by a Member of Parliament as a result of one of her constituents being thrown out her partners' home and despite her contributing to the upkeep of the home, found that she had no rights to establish a beneficial interest. In March of 2009, The House of Commons announced that plans to place on statutory footing rights of cohabitants (of which there are some 2.2 million in the United Kingdom) indicating that those individuals will have to continue to rely on an uncertain and increasingly complicated scheme outline in Stack v Dowden [2005].

However, it must be noted that placing this on a statutory footing should not be a shock to the system as a similar Act has been passed in the Scottish Parliament, in the form of the Family Law (Scotland) Act 2006 (here after called the Scottish Act). The Scottish Act, while in no way binding on English and Welsh courts, does provide a blueprint on which English lawyers may advise their clients and may provide some persuasive precedent on English courts. However, it is not without its detractors with Baroness Deech being of the opinion that the proposed changes as put forward by the Bill will retard the progress of women, do very little in the way of what it was intended, and pervert the sanctity of marriage.

In the absence of an express declarations of trust, the courts struggle for fairness, clarity, and consistency in their rulings. Though it appears that courts are favouring an approach designed at ‘looking at the whole course of dealings in the vein of a true constructive trust, it seems as if they are still focusing on financial contributions. The courts it seems are taking a somewhat safe and cautious approach. As has been pointed out; how does one put a value on a stay-at-home spouse or an individual who though not contributing directly to the shared home has done so indirectly? Are we to apply the cold and cruel arm of the law to claimants, who through either ignorance or have not otherwise had the foresight to place in writing or have expressly declared their beneficial interest? Parliament has noticed this to be an issue, but rather than jump blindly into it, they have chosen, possibly wisely, to take a pragmatic wait-and-see approach, and it does appear, that at least for now, beneficial interests will continue to be driven by direct financial contributions to the home. What is without question is that with the increase in cohabitees in the United Kingdom, action is needed sooner rather than later.

Bibliography

Acts Of Parliament

1. Family Law (Scotland) Act 2006.

2. Hansard HL Column 1418 (13 Mar 2009).

3. Law and Property Act 1925 s 53(1b).

4. Law and Property Act 1925 s 53(2).

Parliamentary Bills

1. Cohabitation Bill [HL] 2008-09;

Books

K Gray and SF Gray, Elements of Land Law (OUP, Oxford 2005).

Cases

Abbott v Abbott [2008] 1 FLR 1451.

Bannister v Bannister [1948] 2 All ER 133.

Drake v Whipp (1996) 28 H.L.R. 531.

Dyer v Dyer (1788) 2 Cox Eq Cas 9.

Eves v Eves (1975) 1 WLR 1338.

Fowler v Barron [2008] EWCA Civ 377.

Gissing v Gissing [1970] 2 All ER 780.

Goodman v Gallant [1986] 2 WLR 236.

Grant v Edwards (1986) Ch 638.

Jennings v Rice [2003] 1 P & CR 8.

Lloyd's Bank Plc v Rosset and Another Respondent [1990] 2 WLR 867.

Midland Bank Plc v Cooke (1995) 27 HLR 733.

Milroy v Lord (1862) 4 De GF & J 264.

Oxley v Hiscock [2004] EWCA Civ 546.

Pettit v Pettit [1970] AC 777.

Savill v Goodhall [1993] 1 FLR 755.

Stack v Dowden [2007] UKHL 17.

Stokes v Anderson [1991] 1 FLR 391.

Journals

Luke Barnes, ‘Stack v Dowden - the principles in practice' Family Law Week (May 14, 2007).

Gillian Douglas and others, ‘Cohabitation and conveyancing practice: problems and solutions' CPL 365 2008.

Terence Etherton, ‘Constructive trusts: a new model for equity and unjust enrichment' CLJ 265 2008.

John Fotheringham, ‘Cohabitation Reform: The Scottish Experience' FLW 15, February 2008.

Simon Gardner, ‘Family property today' LQR 422 2008.

Robert George, ‘Stack v Dowden - Do as we say, not as we do?' J. Soc. Welf. & Fam. Law Vol. 31 No. 1 pp 49 - 61, 2008.

Matthew Harding, ‘Defending Stack v Dowden' CPL 309 2009.

Nicholas Hopkins, ‘Regulating trusts of the home: private law and social policy' LQR 310 2009.

David Hughes and others, ‘”Come live with me and be my love” - a consideration of the 2007 Law Commission proposals on cohabitation breakdown' CPL 197 2008.

Nick Piska, ‘Two recent reflections on the resulting trust' CPL 441 2008.

Rebecca Probert, ‘Equality in the Family Home?' FLS 341 2007.

Reports

Law Commission, ‘Sharing Homes - A Discussion Paper'(2002).

Law Commission, ‘Cohabitation: The Financial Consequences of Relationship Breakdown' (Law Com No 307 Cm 7182, July 2007).

Land Registration Rules (Statutory Instrument No. 3037, 1997).

National Statistics, ‘Social Trends' 39 (Hampshire: Palgrave Macmillan, 2003).