Re Sharpe (A Bankrupt) [1980] 1 W.L.R. 219
Constructive Trusts – Bankruptcy – Property – Contract – Equity
Facts
An aunt loaned Sharpe, her nephew, money for the purpose of buying a leasehold premises. This was a shop with living accommodation situated above it. It was agreed between them that the Aunt could live there with Sharpe and his wife as long as she liked. The aunt paid some of this purchase price, as well as for decorations and various fittings for the property. However, Sharpe became bankrupt and the trustee in bankruptcy wanted to sell the property. This resulted in the Aunt putting forward her claim to an interest in the property.
Issues
The main issue in this case was whether there was a resulting trust created by the Aunt paying some of the purchase price for the property and whether she had an interest in this property.
Decision/Outcome
It was held that the Aunt had no equitable interest in the property and there was no resulting trust. The money that the Aunt had provided to her nephew was intended to be a loan and was not a form of gift. This meant that the money was not to be seen as a contribution to the purchase price of the property, which did not allow for a trust to be created that would have given her an interest in the property. However, the loan agreement regarding staying in the property for as long as she liked, did mean she had a contractual right of occupation in the property until the loan was repaid to her.
Updated 20 March 2026
This article accurately summarises the key facts and outcome of Re Sharpe (A Bankrupt) [1980] 1 WLR 219. The case remains good law and is still regularly cited in the context of equitable interests, constructive trusts, and licences. However, readers should note some important qualifications and subsequent developments.
First, the article’s framing of the issue solely as a resulting trust question slightly understates the reasoning in the judgment. Browne-Wilkinson J held that the aunt had a licence coupled with an equity — arising from the loan made on the understanding she could remain — rather than a proprietary interest derived from a resulting trust. The right of occupation recognised was grounded in the irrevocable nature of the licence in equity, not in any direct proprietary or trust-based claim.
Second, and importantly, the status of licences as capable of binding third parties (including a trustee in bankruptcy) has remained controversial. Subsequent case law, particularly Ashburn Anstalt v Arnold [1989] Ch 1, cast significant doubt on whether a contractual licence can bind a third party. The position established in Re Sharpe — that such a right could be enforceable against the trustee in bankruptcy — should therefore be read cautiously and in light of later authorities. Students should be aware that the broader principle that contractual licences create interests in land binding on third parties is not settled law and has been criticised.
No subsequent statutory changes directly reverse the outcome in this specific case, but the Insolvency Act 1986 (which replaced the Bankruptcy Act 1914 in force at the time) now governs trustee in bankruptcy powers, and students should refer to that Act rather than the older legislation when researching this area. The substantive equitable principles discussed in the case, however, remain relevant to modern equity and land law courses.
