Following the Law of Property Act

Following the Law of Property Act [1] , specifically sections 1(6), 34(2) and 36(2), it stipulates that property bought by more than one person will be held on trust for the other parties and they will have at least an equitable interest in the property. There is no problem here regarding that as all 3 parties have both legal and equitable ownership of the property.

There are 2 types of trust created under the Law of Property Act [2] , these being trusts created expressively and implied trusts, however these types of trust were replaced by trust in land introduced by TOLATA [3] which has been enforced at the beginning of 1997. Under TOLATA [4] now there is only co-ownership of land and this happens in 2 ways; either a joint tenancy or a tenancy in common.

Analysing joint tenancy, the first aspect would be the fact that it is the preferred way of dealing with property as this method implies that the parties don’t own parts of the property but rather own it as a whole. There are however 4 separate aspects of a joint tenancy that need to be satisfied in order for it to be a valid way of owning the land, also known as the 4 unities; time, title, interest and possession. These actually refer to the idea that all the parties must have acquired the interests at the same time, not being specified in the scenario otherwise, we can assume that it has; What is meant by title is the idea that all parties must have their titles in the same document; The 3rd unity, refers to the fact that all parties must have the same identical interest in the property and this element has been satisfied as well, and the last one being possession as all parties have legal and equitable ownership of the property.

The most important aspect of a joint tenancy is the fact that it has a right of survivorship this meaning that the property is to been seen as a whole and it is impossible to dispose of one’s share by means of a will after the party has died therefore it is not a viable option for Debra.

This type of co-ownership is more applicable to cases where the parties are co-habiting in the same property.

The other form of co-ownership, a tenancy in common, seems a more viable route that Debra could follow. This route does not require 3 out of the 4 unities. The one that is needed is possession which is satisfied.

Under a tenancy in common, each beneficiary has a right to a portion in the land that is equivalent to the percentage of the money that he/she contributed with to the purchase of the property. Also under a tenancy in common there is no right of survivorship and that is why it is a better option for Debra; however the shares are undividable so therefore she can only receive her husband’s percentage once the property is sold as it was seen in Lake v Gibson [5] and Bull v Bull [6] .

There is a list of factors that would point to this type of co-ownership to be a tenancy in common, one of which being the unequal contribution of money to the purchase of the property which in equity would be considered unfair that the party contributing the least would get to be the sole owner if the other parties die which is exactly the case in this scenario, and “…in such cases equity had always presumed that unequal contributors held the property as tenants in common" [7] . Another factor might be the fact that, if the nature of the co-ownership is commercial “the right of survivorship appear to equity to be inappropriate even in the case of equal contributions to the purchase price" [8] .

Now that it has been concluded that the type of co-ownership is a tenancy in common due to the arguments above it is time to decide on the amount of money Debra is to receive. Due to the fact that her late husband has bought Alan’s share before his tragic death, that would make him the owner of 75% of the shares in the property and therefore Debra is to receive that amount and the fact that the remaining party, Barry, has already found a buyer, Andrew, who is willing to pay £60,000 for the property she will be entitled to £45,000, however she cannot have a say whether Barry can sell the property to Andrew or not because she has no legal right to the property, only a beneficial interest.

The second issue that is raised in the memo refers to the legal problems Oliver has been encountering with his ex-partner Roxanne. The 1st factor that needs to be taken into account is the fact that a trust was created impliedly by conduct; more explicitly by the things he has said; “…the house was as much Roxanne’s as his".

Now there are 2 types of trust that need to be looked at; resulting and constructive trusts. In the case of Gissing v Gissing [9] Lord Diplock mentioned that, and I quote “It is unnecessary for present purposes to distinguish between these three classes of trust" [10] and this created problems for the legal system as it is unclear which type of trust is to be applied therefore the circumstances in which they operate, however this was cleared by LJ Peter Gibson in Drake v Whipp [11] and now there are 2 elements to be considered in deciding on the type of trust; the monetary contribution and the size of the share in the property. After looking at the elements that create a resulting trust that can clearly be eliminated because of the case of Stack v Dowden [12] that specifically mentions that resulting trusts have no application to trusts of the family home which this is the issue that we are dealing with and therefore what we are left with is a constructive trust.

As Davis LJ has said in the case of Carl-Zeiss Stiftung v Herbert Smith & Co. [13] “English law provides no clear and all-embracing definition of a constructive trust". The second important aspect of a constructive trust is represented in the words of Chadwick LJ in Banner Homes Group v Luff Developments Ltd [14] :

“A constructive trust arises by operation of law wherever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interests of another"

There are certain specifications that come with constructive trusts however; they arise by operation of law irrespective of the party’s intention, it is applied where a party holds property in circumstances which in equity, and good conscience demand it should be held or enjoyed by another and is excluded from the formal requirements of s53(1)(b) LPA 1925 [15] . The trust comes into effect when the unconscionable act has occurred however the remuneration is completely at the discretion of the court.

For a constructive trust to be valid, 3 elements have to be considered. The first one is an expressed oral declaration or agreement which was seen in the case of Goodman v Gallant [16] where there was an oral declaration on behalf of husband that Mrs P was entitled to half of the beneficial interest of the property. This element is satisfied by Oliver’s declaration. The second element is any direct contributions to the purchase. This may include anything from contributions to the deposit or contribution to the mortgage or installments to parents paying the deposit all of which occurred in this scenario. The third element is any indirect contribution like where a wife relieves her husband from any household expenses so he can pay the mortgage as it was seen in Gissing v Gissing [17] or you could look at Abbott v Abbott [18] . No indirect contributions have been specified in the scenario, only the fact that both of them pooled their salaries together to pay for the instalments and the household expenses.

Having satisfied all the necessary requirements for a constructive trust Roxanne would be entitled to a size of the beneficial share and because the courts have full discretion on the size, there are 3 approaches the court could take; the first one would be the one established in Stack v Dowden [19] and this looks at the initial intentions of the parties, the second one being the ‘broad brush’ established in Drake v Whipp [20] and the third one being looked at in the case of Oxley v Hiscock [21] which looks at what is fair and just when you look at the whole course of dealings between the 2 parties.

There is another alternative however, and it refers to the idea of property estoppel. In order for this to be effective 3 elements that were established in the case of Willmot v Barber [22] need to be satisfied here as well; a promise in the property, detrimental reliance on the promise which results in loss and the idea of unconscionability. The first element is satisfied by Oliver’s statement. The second element is that there must be detrimental reliance on that promise which is also seen in the case of Lloyds Bank plc v Rossett [23] and was proved by Roxanne’s conduct and the loss is seen by her giving up her job to take care of their child. The 3rd element can easily be recognized as she would loose everything that she contributed with to the purchase of the property.

If property estoppel is successful, and due to the evidence provided it is, she will be entitled to the minimum that would satisfy the equity, not only that but also this being more flexible than a constructive trust, she might earn different rights like a right to occupy, share of beneficial interest, transfer of the legal estate however all of these are impossible as the property has been sold.

Having satisfied all the criteria for both constructive trusts and property estoppel, Roxanne can go down either route however it would be more likely she went for a constructive trust due to the fact that she would probably get more money this way.

With regards to Roxanne recovering her money, she could use tracing in equity however because the property was bought by a bona fide purchaser this is not applicable. Oliver could use the £50 000 he is supposed to inherit from his aunt, however the courts cannot impose this on him, so therefore the only course of action for Roxanne, if Oliver refuses to pay her share with the money he inherited, is first charge over his share in the newly purchase property which means that Roxanne will get her share of the money owed before Oliver can get his beneficial interest.

Word Count (including footnotes): 1997