Five years ago Hogwart’s Lodge (Title to which is registered) was transferred to Harry, Ron and Hermione who contributed equally towards the purchase price. They converted the downstairs of the building into a restaurant and employed Neville to help take the orders and wash up. Neville worked hard and was popular with the customers. Harry, Ron and Hermione told him he should consider himself as much an owner of Hogwart’s Lodge as any of them were. Neville worked even harder in the restaurant. He also spent much of his free time painting and decorating the upstairs rooms so that all four of them could live there. They all moved in three years ago.
Unfortunately Harry was killed by an unhappy customer last year. Ron, who could not bear to live at Hogwart’s Lodge without Harry, sold his interest in the property to Hermione and moved out.
Neville has spent the last six months abroad, trying to recover from Harry’s death and from overwork. He has returned to find that during his absence Hermione has sold Hogwart’s Lodge to Draco and was last seen catching a flight to Bulgaria.
Draco says that he asked Hermione why two of the upstairs rooms seemed to be occupied. She replied that the one containing Neville’s possession was used by somebody who helped out in the restaurant from time to time and had too far to travel to be in on time in the mornings.
NB You are not required to discuss any issues relating to Proprietary estoppel when answering this question.
1. The student is expected to understand the wide number of differing legal interests and issues in this area. (Except Proprietary estoppel)
2. The student should understand and explain the varying decisions of case law
3. The student must critically analyse the case law and determine whether the cases are appropriate to the problem set.
In order to advise Neville it is necessary to look at the relationship that existed between the four of them and their entitlement to a share of the property. When looking at ownership of property it is important to note that there are two kinds of co-ownership which include joint tenancy and tenancy in common. A joint tenancy is a collective ownership which means that there is unity of ownership amongst one or more persons. With unity of ownership the sale or disposal of the property has to be done collectively. The initial purchase of the property involved Harry, Ron and Hermione who contributed equally to the purchase price of the property. If they were regarded in law as joint tenants this would mean that Harry, Ron and Hermione could not sell their share of the property to anyone else or leave it in a will to anyone else. Joint tenancy agreements create the right of survivorship. Under this doctrine when one of the joint tenants dies their share in the property is divided between the surviving tenants. In this situation this would mean that when Harry died his share would have been split between Ron and Hermione. However, in business dealings the rights of survivorship are not appropriate. As joint tenants the legal title can only be dealt with as a whole. Joint tenancies are classed as unseverable. Although the joint tenancy is not severable Ron can sell his interest to Hermione as she is a joint tenant with him. None of the parties can force the others to sell the property. It must be a unilateral decision as joint tenancy insists on unity of title. When Ron sold his share of the property to Hermione if he did not expressly surrender his legal ownership in the property Hermione would not be able to sell the restaurant without Ron’s agreement.
In general terms co-ownership assumes that the relationship is a joint tenancy unless there have been words of severance or when it is one of the three special cases where the ownership is covered by equity. Under equity one of the special cases that are listed is where the co-owners are business partners. The notion behind treating business partners as tenants in common is because it is not appropriate to have rights of survivorship in business dealings. A tenancy in common creates individual ownership in the shares of the property but can only be recognised in equity or through severance. If words are included in the purchase of the property stating that the parties will have separate shares then severance is established. Where it is stated that the property is to be held in equal shares then severance can be presumed. A tenancy in common would allow the parties to sell their shares in the property individually.
Looking at the above scenario Ron, Hermione and Harry are more likely to be treated as tenants in common as the arrangement is a business one even though they are planning to live in the property above the restaurant once the work has been done. The main purpose of the purchase was primarily as a business. As they are tenants in common Ron would be entitled to deal separately with his shares in the business and would therefore be allowed to sell them to Hermione without having to expressly surrender his ownership. The difficulty that would arise would be in respect of the shares that had been held by Harry. As mentioned above the rights of survivorship do not apply with tenancies in common therefore Harry’s shares do not have to be divided between Hermione and Ron. In the above there is no mention of what happened to Harry’s shares in the business although the fact that Hermione has been entitled to sell this to Draco the assumption must be that the shares were divided between Hermione and Ron.
When looking at Neville’s entitlement to a share of the property the starting point is to consider whether he has contributed anything toward the purchase price. If he had but had not had his name entered on the register he would be entitled to a share of the property under the doctrine of resulting trusts. A resulting trust can be inferred where one of the party has provided money towards the purchase price, which is then only registered in the name of one of the parties. The courts are free to make the presumption that the legal owner is holding the property on trust for the other party in shares according to their contribution. As Neville did not contribute to the purchase price it is unlikely that a court will find that a resulting trust could be inferred. If Neville had paid towards the purchase price of the property he would be able to rely on the authority established in Tinsley v Milligan. In this case the plaintiff had bought a house with her lesbian partner but in order to be able to claim benefits had chosen not to have her name included on the registration despite having contributed towards the purchase price. The respondent attempted to use the fact that the property was only registered in one name to deprive the plaintiff of their share when the relationship came to an end. In this case the courts were faced with the difficulty that the plaintiff had chosen to not have her name on the register so that she would be entitled to claim benefits. This caused problems as equity insists that he who seeks equity must do equity. Using common law remedies a plaintiff could assert their common law right to ownership provided that they did not need to rely on their illegal conduct to establish title. In this case the plaintiff did not need to rely on their illegal conduct to establish title her claim and the courts allowed the claim under common law remedies.
In this case Neville might be able to rely on the principle established by constructive trusts. A constructive trust could be inferred where the actions of the party not entered on the register suggest that they expected to have an interest in the property. This can be evidenced by them having contributed towards the bills or by having assisted in the repairs of the property. Constructive trusts can be inferred if a common intention that Neville should have a beneficial interest in the property can be proved and that he has acted in his own detriment in reliance on that promise. Lloyd’s Bank Plc v Rosset is an example of where the courts initially found that a constructive trust could be construed. The court held that a constructive trust existed as the evidence suggested a common intention had been inferred that Rosset should acquire a beneficial interest. The work carried out by Rosset was accepted as proof that she only assisted because she expected to acquire a beneficial interest. The judge also pointed out that her contribution would have reduced the cost of the renovations. On appeal the decision was reversed by Lord Bridge of Harwich who stated that only direct contribution to the purchase price by the party who is not the legal owner whether from the offset or by payment of the mortgage instalments will justify the inference necessary for the creation of a constructive trust.
Despite no legislation to assist, Neville can still rely on previous case law to assert his rights. In Rowe v Prance the plaintiff won her claim for a half share in the yacht that Prance had bought and for which she had made no financial contribution. The court accepted the evidence of Rowe that Prance had made representations to her referring to ‘our boat’ and ‘sharing the boat together’ and such declarations could amount to a declaration of trust. In this case the comments made by Hermione, Ron and Harry that Neville should consider himself just as much an owner as the rest of them could be adduced as evidence to show an intention that he was to have an interest in the business. Further cases that might assist Neville in his claim for a share of the property would be Eves v Eves and Grant v Edwards. In both cases inference was drawn from comments made by the respondents to the plaintiffs and by their conduct in respect of work carried out that there was an intention to give the plaintiffs a beneficial interest.
Although it would seem unfair for him not to receive a share as he has been decorating the upstairs rooms, the courts may decide he is not entitled as they cannot find any evidence within the relationship of a common intention of joint ownership. In Burn v Burn the court held that because Mrs Burn had made no financial contribution to the purchase price or mortgage payments they were not entitled to construe a trust in her favour. It could be argued that Neville has acquired an equitable interest in the property because of the repairs he has paid towards on the principle of a constructive trust.
A further argument that could be raised by Neville is that as he is in occupation of the property he could claim an overriding interest on the basis of actual occupation of the land or squatter’s rights as the property is a registered property. With registered property incumbrances are entered onto the register. An intending purchaser then inspects the register and if the right is on the register if the purchaser continues with the purchase of the property they become subject to the right. If no rights are entered on the register the new purchaser takes the property free of any incumbrances. Some rights on a register may be overreachable. By paying his money to at least 2 trustees or a trust corporation the purchaser may take free of those rights despite the fact they are on the register. By contrast some rights which are not on the register may bind the purchaser. There are a limited class of overriding interests which bind the purchaser despite not being entered on the register. Overriding interests such as legal easements, squatter’s rights and the rights of any person in actual occupation of the land do not necessarily appear on the title and can override the registered title. Occupation may protect a persons rights and it is for the purchaser to inquire of any occupier whether they have any interest in the property.
The conclusion that can be drawn from the above is that Neville might well be able to establish a claim for a share in the property under the doctrine of constructive trusts, or he might be able to establish an overriding interest in the property on the basis of actual occupation or the principle of squatter’s rights.
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Table of Cases
A G Securities v Vaughan  1 AC 417
Burn v Burn  1 All ER 244,  FLR 216, CA
City Permanent Building Society v Miller  Ch. 840  2 All E.R. 621  2 T.L.R. 547
Drake v Whipp  1 FLR 826
Eves v Eves  3 All ER 768
Gissing v Gissing  AC 1886
Grant v Edwards  2 All ER 426
Hammersmith and Fulham LBC v Monk [1992} 1 AC 478
Harris v Goddard  1 WLR 1203
Lloyd’s Bank Plc v Rosset  1 All ER 1111 (HL)
Malayan Credit Ltd v Jack Chia-MPH Ltd  AC 549
Midland Bank plc v Cooke  1 FCR 442
National Westminster Bank Plc v Malhan  EWHC 847  2 P. & C.R. DG9
Payne v Adnams  C.L.Y. 6486
Pettitt v Pettitt  2 All ER 385
Re Lord Hylton’s Settlement  1 W.L.R. 1055  2 All E.R. 647 47 R. &
I.T. 681 (1954) 98 S.J. 509
Re Jackson (1887) 34 Ch D 732
Rowe v Prance (1999) 2 FLR 787
Tinsley v Milligan  3 WLR 126 (HL)
Wallcite Ltd v Ferrishurst Ltd  Ch. 355  2 W.L.R. 667  1 All E.R. 977  1 E.G.L.R. 85  05 E.G. 161  E.G.C.S. 175 (1998) 95(47) L.S.G. 30 (1999) 96(4) L.S.G. 39 (1999) 143 S.J.L.B. 54  N.P.C. 157 (1999) 77 P. & C.R. D20 Times, December 8, 1998
Williams & Glyn’s Bank Ltd v Boland  A.C. 487  3 W.L.R. 138  2 All E.R. 408 (1980) 40 P. & C.R. 451 (1980) 124 S.J. 443
Williams v Hensman (1861) 1 J & H 546
Table of Statutes
Administration of Estates Act 1925
Law of Property (Joint Tenants) Act 1964
Law of Property Act 1925
 Wallcite Ltd v Ferrishurst Ltd  Ch. 355  2 W.L.R. 667  1 All E.R. 977  1 E.G.L.R. 85  05 E.G. 161  E.G.C.S. 175 (1998) 95(47) L.S.G. 30 (1999) 96(4) L.S.G. 39 (1999) 143 S.J.L.B. 54  N.P.C. 157 (1999) 77 P. & C.R. D20 Times, December 8, 1998
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