Trusts in the Family Home

The law on constructive trusts in the family home context is permeated by a tension between the desire of the courts to achieve a result they consider reasonable, using the constructive trust as a flexible remedy to protect the claimant’s financial reliance interest, and the dubious basis for this intervention in the parties’ common intentions. As Gardner (1993) points out, the central difficulty is that the common intention analysis focuses on the parties’ own thinking as the basis for the imposition of a constructive trust, when in fact they will often have given little or no thought to the question of ownership. Lord Diplock appreciated in Pettitt v Pettitt ([1970] A.C. 777) that proprietary interests are often not thought about by parties in a relationship when the property is acquired and paid for, but rather only when their relationship deteriorates. It was on this basis that he was willing to impute a common intention as to proprietary ownership, considering the agreement that would have been reached by the parties had they put their minds to it when the property was acquired. In stating that, “The court does not decide how the parties might have ordered their affairs: it only finds how they did. The Court cannot devise arrangements which the parties never made. The Court cannot ascribe intentions which the parties never had”, the majority in the House of Lords in Gissing v Gissing ([1971] AC 886) rejected this approach. Following Gissing, the House of Lords in Llyods Bank Plc v Rosset ([1991] 1 AC 107) elaborated upon the restrictive approach to finding a common intention. Lord Bridge found that the common intention constructive trust was only to arise in two circumstances: an express agreement between the parties that the beneficial interest in the home is to be shared, or conduct of the parties, in the form of financial contributions from which the court can infer such a common intention, which on the facts were held to exclude a wife’s purchasing furniture and clothes for the family but to include direct and indirect contributions to the deposit, the mortgage instalments, or the general housekeeping expenses. However, although clarity in the law was achieved by the outlawing of the imputation of intention and restricted circumstances in which a court may infer an intention, the underlying issue that led to the willingness to adopt this approach in Pettit persisted and, it will be shown, has led to the undermining of Gissing in some subsequent cases where the courts have been willing to intervene and supply the agreement that the parties would have made, or the intention they would have had, if they had thought about it when they acquired the property. The current state of the law, however, represents reaffirmation of Gissing, a shift towards emphasis on certainty of property rights and away from judicial discretion; it will be argued that this comes at the expense of fairness for cohabitants in many cases.

Following Rosset, the judiciary did seem to change its mind in relation to family home cases, adopting a less strict test in relation to the question of quantum of beneficial interest once a common intention to share ownership has been established. Thus in Oxley v Hiscock ([2004] EWCA Civ 546) the Court of Appeal held that in the absence of an expressed common intention as the proportions in which the beneficial interest should be shared, the quantum of the share is not limited in proportion to the reliance contributions, but will be assessed in accordance with, as Chadwick LJ put it, “a fair share for each party having regard to the whole course of dealing between them in relation to the property” (at [73]). A broad discretion as to quantum allowed a ‘fair share’ to be assessed with reference to financial outgoings and the ‘sharing ethic’ of the parties’ relationship. Thompson (2004) argues that this constructive trust differs from that of Gissing in that it does not accord with well-established principle, and is based on a novel concept of overall fairness, linked to resulting trust principles. This broad approach as to quantum was affirmed in the important case of Stack v Dowden, which concerned a house registered to a cohabiting couple as joint tenants, with the wife financing 65% of the purchase and the remaining 35% being a joint loan secured on the title, the repayment of which they both contributed to. Mr Stack sought an order for sale and an equal division of the proceeds on the basis that there was now a tenancy in common in equal shares. As the existence of a trust was uncontested, and there was no declaration, the issue was whether a Gissing v Gissing common intention constructive trust arose so as to enable Mr Stack to claim a 50% share. The House of Lords held that Ms Dowden was entitled to a 65% share. A conveyance into joint names gave rise to a joint tenancy in equity, a presumption which could be rebutted by evidence of a common intention that she was to have an interest different from that at law, and some detrimental reliance on her part. Baroness Hale, quoting from the Law Commission (Law Com. No. 278, 2002), stated that a court should adopt a “holistic approach” to the issue of quantification which involves conducting a survey of the “whole course of dealing between the parties and taking account of all conduct which throws light on the question what shares were intended.” By focussing on the conduct in the whole course of dealing between the parties, the courts could claim to be inferring the parties intentions via this approach. The list of factors relevant to determining a common intention included “any advice or discussions at the time of transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties’ relationship” (at [69]). In identifying the extent of the parties’ beneficial interest in a property, the court was seeking to ascertain the parties’ shared intentions, “actual, inferred or imputed”, with respect to the property, in the light of their whole course of conduct in relation to it. On the issue of quantum the court should take a wide view of what contributions were to be taken into account, yet it is appreciated in Stack that the circumstances in which joint legal titleholders intended their beneficial interests to be different from their legal interests would be “very rare”. Stack has been argued to be an exceptional case owing to the large disparity in contributions to the purchase price and the fact that the parties kept their finances unusually separate, yet it will be shown that later cases have not treated it this way. Swadling (2007) has criticised Stack in accordance with Lord Neuberger’s dissenting judgment, arguing that the purchase money resulting trust was not given due consideration and unfairly dismissed by the majority, and that imputation of intent in relation to quantification is not supported by authority, being contrary to the approaches of Gissing and Rosset.

The Privy Council in Abbott v Abbott ([2007] UKPC 53) went even further and found, in accordance with the obiter dicta in Stack on this point, that the narrow Rosset formulation for the existence of a common intention to share beneficial ownership, to be widened: the court had to ascertain the parties’ shared intentions “actual, inferred or imputed with respect to the property in the light of their whole course of conduct in relation to it.” ([at 4]) If this were the law, it would represent a complete change in judicial approach from that of Gissing. However, this is not what Stack says as, while Baroness Hale does refer to “actual, inferred or imputed intention” [at 60], she also made repeated reference to the fact that the goal is to find the parties’ real intentions, and also rejects imposing upon the parties the court’s own assessment of a fair resolution ([at 61]). Subsequent cases have affirmed this, holding that the exceptions to the presumption that the equitable title follows the legal title are limited.

Warren J in Thomson v Humphrey ([2010] 2 FLR 107) held that a woman who gave up her job and left her home did not suffer sufficient detriment to make a claim as it was not done in reliance on the prospect of ownership of the property, but rather on the prospect that she would be looked after. He stressed that the court’s task following Stack was not one of deciding ‘fairness’, but of ascertaining intentions. This case affirms the traditional approach of Gissing and Rosset in relation to the existence of a common intention, as Warren J refused to impute an intention in the name of fairness. The traditional approach finds further ground in the recent Court of Appeal case of Kernott v Jones. On the facts, a joint policy was surrendered in respect of the beneficial home, which the woman continued to occupy and maintain, and the man used his half of the proceeds as a deposit on a new property. The man did not contribute to the mortgage of the former home or any of the outgoings and provided little maintenance for their children. Twelve years after their separation, the man severed the beneficial joint tenancy and claimed his half share of the property. At first instance, the judge held, that he was entitled to look at the whole course of dealings following separation (see Stack above) and, owing to his lack of contribution, the man’s share was reduced by 10%. On appeal to the High Court, Strauss QC upheld this decision on the basis of Stack permitting the imputation of common intention. As explained previously, this is a misreading of Stack, which rejects the court imposing a resolution merely because it considers it to be fair, and stresses the need to find actual intention. The Court of Appeal reversed the High Court’s decision, finding that the mere passage of time does not displace the presumption of a joint beneficial interest, and that there was nothing in the parties’ conduct post separation from which they could infer an intention to vary the 50-50 beneficial interest. Rilmer LJ explicitly addresses (at [77]) Baroness’ Hales use of the term ‘impute’ and concludes it was not intended, and acknowledges that the woman in this case may have a justified complaint on the grounds of fairness, but the principles that govern the case apply notwithstanding. He also regards Stack as an unexceptional case. The result of the majority in Kernott is such that the traditional approach of Gissing and Rosset remains firm, with the courts’ view of fairness not being allowed to dictate the result. Whilst this does much for conceptual clarity in terms of common intention, it is clear that unfairness should lead to the law being changed, and Kernott seems to indicate that such change must come from the legislature (Fraser and Colenso 2010).

Although it appeared following Stack and Abbott that the judicial approach to family home cases had shifted since Gissing and Rosset, the only liberalisation in the law was in respect of quantification and not the existence of a common intention constructive trust. Even in respect of this, the Court of Appeal in Kernott v Jones makes clear there will be a narrow interpretation given to Stack and imputation of intent in the name of fairness is firmly rejected. Mee (1999) presents a robust attack on the ‘common intention constructive trust’ as theoretically indefensible:

‘.. despite the liberties it takes with legal principle, the common intention trust analysis can boast very few advantages at a practical level: it is difficult and expensive to apply and provides a remedy for claimants in only a narrow range of cases. Clearly, this ill-conceived doctrine should find no place in the law of England.’

English law does not recognise cohabitation as a legal status, and as such cohabitants are forced to rely on property rights that are determined at the outset of the relationship and which fail to account for such factors as the family nature of the relationship, the length of the relationship, and the parties’ relative circumstances at the end of the relationship. This is in stark contrast to the position of the law in relation to married couples and civil partners, with the Matrimonial Causes Act 1973 giving the courts broad discretion to achieve ‘fairness’ in relation to an economically disadvantaged spouse. Whilst one appreciates that certainty should be achieved in relation to property rights and the conceptual uncertainties created by ‘imputed’ intentions are best avoided, and the present law can be praised in this regard, it is another issue as to whether the present law is just. It is argued that it is not so long as a cohabitant can give up her career and make enormous sacrifices for her family to look after her children and receive no redress in terms of a share in the family home solely because there is no marital status. The New South Wales Property (Relationships) Act 1984 grants the court the discretion to adjust the property rights of those who are party to a domestic relationship. A similar approach here would redress the unfairness of the present law while avoiding the fiction of imputed intention. Barlow and Lind (1999) suggest a legislative presumption of sharing of the beneficial ownership for an unmarried cohabitant who, with her partner has a child, or by an unmarried cohabitant without children but who has been living with her partner for a specified period. They put forward the idea of a sliding scale, where the length of the relationship, acting as carer for a minor child, and domestic work would all lead to an enhanced share of beneficial, with a residual discretion being available to reallocate beneficial ownership when the presumptions would result in ‘manifest injustice’.