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 21 March 2026
This article accurately summarises the decision in Re Sharpe (A Bankrupt) [1980] 1 WLR 219. The case remains good law and continues to be cited in property law and equity courses for its treatment of licences, loans, and rights of occupation in the context of bankruptcy.
However, readers should note a few important points. First, the article’s framing focuses primarily on resulting trusts, but the significance of the case lies more squarely in Browne-Wilkinson J’s finding that the aunt had an irrevocable licence (or a right analogous to a constructive trust) arising from the informal arrangement underpinning the loan, which was sufficient to bind the trustee in bankruptcy at least until the loan was repaid. The article understates this constructive trust dimension, which is the aspect most commonly examined and discussed in the academic literature. Second, the broader doctrine of licences binding third parties, which Re Sharpe touched upon, has been significantly clarified and restricted by later case law, most notably Ashburn Anstalt v Arnold [1989] Ch 1, which confirmed that a licence cannot as such bind a third party and that only a constructive trust analysis could achieve that result. Students should read Re Sharpe alongside Ashburn Anstalt to understand the current limits of the doctrine. The underlying principles of resulting and constructive trusts in this context are also informed by Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53, though those cases arose in a different factual context. The article remains a reliable starting point for the facts and basic outcome of the case.
