The difference between common intention constructive trusts and propriety estoppels

This essay will explain the relationship between common intention constructive trusts and proprietary estoppels and whether or not it can be stated as “illusory." (Hayton)

Firstly, it is important to provide a definition of both these terms. Constructive trusts “at its simplest describes the circumstances in which property is subjected to a trust by operation of law." (R.Pearce: 298: 2010) The authority for this can be seen in the case of Paragon Finance V DB Thackerer [1999] stating if it can be unreasonable for the owner of a property to declare his beneficial interest, constructive trust will arise by law. Constructive trusts do not need to be in writing as they are exempted from the operation of Law Property Act 1925 s 53(1) (b), by s 53(2). Mere denial of an informal arrangement or understanding is of itself generally insufficient, since equity will not assist a volunteer. Either the owner must be unjustly enriched or the claimant must have acted to their detriment.

Proprietary estoppels can be used as a defence rather than a remedy as it is another method whereby a person may receive the equitable interest that they deserve without the appropriate formalities. Proprietary estoppel comprises three main elements. Firstly, the owner of the land assures the claimant that he will have some rights over the property, secondly, the claimant must have had belief that he would receive interest in the property and lastly the claimant acted to his detriment. This detriment has to be substantial, authority from Gillet v Holt [2000].

There are raised questions concerning the similarities between the doctrines, which will now be considered. Both rely upon a promise which has been relied upon and a detriment due to the reliance of the promise. Authority from Grant v Edwards [1986] which proved that both depend upon shared characteristics, assurance, reliance and detriment. Also in this case, Browne-Wilkinson VC suggested that proprietary estoppels might provide an alternative route for claiming an interest in the home, to that of the constructive trust. The assurance must be made by the person against whom the estoppels are claimed - that will usually be the owner of the freehold or leasehold estate in the land. Per Lloyds Bank Plc v Carrick [1996] attempts to stop the holder of an adverse encumbrance (e.g. a mortgagee) from asserting their rights (e.g. to possession) have been rejected where the claimant has acted to their detriment as a result of a common intention or mistaken belief that was neither encouraged nor consented by the third party. However, this does not rule out the possibility that an interest which has been successfully asserted against the owner on the basis of estoppels may bind a third party according to the rules of priority. Detriment will usually be financial, (i.e. contributions to the acquisition or improvement of the land), but it may also be personal, involving, for instance, working without payment or giving up an independent life style. Reliance, being the link between the assurance and the detriment can be difficult to pin down, particularly where the detriment is personal. The claimant must have acted to their detriment because of the owner's assurances and not for any other reason. For instance, that reason may be personal attachment. In Greasley v Cooke [1980], suggestions were made, although not proved, that Mrs Cooke acted to her detriment because of the personal relationships she had within the family. Alternatively, the reason may arise because of the existence of some other legal right. In Lloyds Bank Plc v Carrick [1996], Mrs Carrick's claim to an interest by estoppels was rejected because as a buyer under an enforceable contract she held under a bare trust and had acted to her detriment in that capacity.

According to George Rowell’s article, “both doctrines require some combination of D’s words, actions and omissions to give ride, on an objective view, to a common intention for D to give C an interest in his property; require C to have relied upon that common intention to his detriment; and result in C being awarded a beneficial interest in D’s property. Thus, superficially at least constructive trusts can usually supplant proprietary estoppels in relation to expectations of future interests in property."

Constructive trust and proprietary estoppels are ways of enforcing a promise made by a landowner to a claimant being informal. If a person wishes to have an interest in land, without having the specific formalities i.e a deed or by writing, the two doctrines can enforce this whilst it being an exception to the formalities required in regards to land transactions.

There are similarities between the two equitable doctrines which have just been examined. On occasions the courts have not made it clear upon which doctrine they have relied in reaching their decision. For instance, in Gissing v Gissing [1971] when considering implied trusts Lord Diplock thought it was "unnecessary for the present purposes to distinguish between these ...classes of trust" although now there are signs that the courts are more aware of the importance of the distinctions between the two doctrines.

To an extent, both doctrines are similar, however the significant differences between them will now be looked at.

Intention, detriment and remedy are the three sections which cause differences to arise between proprietary estoppels and constructive trusts.

A resulting trust is based upon the presumed intention that arises where a person provides funds for the purchase of property. A constructive trust is founded upon a common intention that can either be expressed or inferred but cannot be based upon an intention that the parties never in fact had. Estoppels may be claimed where there has been either a representation or acquiescence that an interest in property is to arise. Certainly a representation could equally be interpreted as leading to an express common intention. In a constructive trust, once a common intention has been found between the parties, they will now be entitled to the intended property. A comparison can be seen with proprietary estoppels whereby it is for the court to resolve and to decide which remedy is the most appropriate for the case, taking into account “the minimum equity to do justice," which was an important statement made in Crabb v Arun DC [1975].

There is no separate requirement for detriment in the case of a resulting trust - the provision of funds by itself gives rise to the presumption. In a similar way there is a close, if not invisible link, between an inferred common intention and the detriment where a constructive trust is based upon financial contribution. The distinction is that a resulting trust is based upon a presumed intention at the time of acquisition but a constructive trust can arise afterwards. In the case of both a constructive trust based upon an express intention and estoppels there may be a more questionable link between intention and detriment. It is thus perhaps not surprising that there is a broader view of what is acceptable detriment in these situations. For the remedy, the clearest distinctions lie in what result will flow from each of the doctrines.

Gillet v Holt [2001] was a case which clearly showed the distinction between the two doctrines and its importance when a defendant has already discarded the property. When there is a claim regarding proprietary estoppels, the court will look back and will take everything into consideration when deciding what interest to give. Only then can an interest in the property be definite. Nevertheless, constructive trust arises by the operation of law, which can be recognised by the court. Proprietary estoppels usually can be seen as more beneficial to a claimant when a testator disposed of his personal assets e.g. home during his lifetime. Contrast this with constructive trust, whereby it is more likely to be gainful where one party still has possession of and is a resident in the property.

Despite the similarities which exist between common intention constructive trusts and proprietary estoppels, in practice the differences are significant. We now need to link it with the case of Lydia Barnet. In this particular situation it is questionable whether she can claim by using proprietary estoppels or constructive trust, however the court will decide which one would be more appropriate for her. Lydia’s sister disposed of her home during her lifetime to Lydia in exchange for her sister to work in the cottage. There was a deliberate common intention between the parties (the understanding that Lydia will be looking after the property and that in return she will be able to stay in the property) and the understanding between the sister and Digby (Lydia will be allowed to stay in the property and that is why the sister sold him the property at a cheap price). No form of written agreement between them was encountered and thus proprietary estoppels could be better here for her to win her case to remain in the cottage regardless of it now belonging to Digby.

However, she could plead under both doctrines and leave it to the court to determine under which one she would be able to succeed. “Do not give up on proprietary estoppels but only that is, if you can succeed on establishing a constructive trust as well. (N.Thomas: Modern law of proprietary estoppels: 2009)

After taking everything into consideration, I agree with Hayton’s statement. A lot of differences do not exist between the two doctrines. Both can be used to gain an interest in equity. The elements of each doctrine have a close relationship, and even though their particular methods of functioning stay dissimilar, they may lead to comparable outcomes.