In 1995, Edgar inherited a property 'The Shambles' from his brother. Three years later, he sold it for £120, 000 and used his proceeds towards the purchase of 'Hanging Gardens', a large residential house with a florists shop attached. He took out a mortgage secured over 'Hanging Gardens' for £300, 000. The property was registered at the Land Registry in his sole name. Edgar moved in with his long term girlfriend, Angelica. Angelica paid the legal costs, stamp duty, Land tax and Land registration fees, together with the removal firm's costs. She also purchased new carpets and curtains for the property. When they moved in, the couple spent many evenings discussing plans for their home and the florist shop.
Initially, Edgar and Angelica shared all the household expenses. After a few months, Angelica resigned from her full-time job to work in the florists shop. She did not recieve any pay for the first 10 months to enable the business to become established. During this time she was supported by Edgars income and he paid the household expenses.
In 2002, Angelica gave birth to the couples child, kelly. Edgar employed a sales assistant in the shop to enable Angelica to be a full time mother.
Angelica did the housework, decorating and shopping and cared for Kelly. In 2004, Angelica used the proceeds of sale of her car to pay for a new central heating boiler and additional radiators at 'Hanging Gardens'.
Edgar left 'Hanging Gardens' two months ago after an arguement. Last week, Angelica received a letter from Edgar's solicitor advising her that Edgar intended to sell his freehold property, 'Hanging Gardens', and that she should find alternative accommodation. Angelica is very upset. She has always believed 'hanging Gardens' was joinly owned property.
Advise Angelica as to whether she has any legal or equitable interest in the property. Would it make any difference to Angelica’s claim to an interest in the property in Land Law if Angelica and Edgar had married in 1998?
Cohabiting couples' interests are governed by general property law although the courts have tried to achieve an equitable result for cohabitees using the notion of implied, resulting or constructive trusts, possible contractual claims and the doctrine of proprietary estoppel.
Angelica may have a beneficial interest in ‘Hanging Gardens’ under either a resulting or a constructive trust. A resulting trust occurs where property is purchased in whole or in part by money belonging to a person other than the person to whom the legal title is conveyed. The resulting trust arises by operation of law, based on the presumed intention of the party who provided the purchase money. This presumption can be rebutted by evidence that the purchase money was advanced for other purposes, such as a gift or a loan.
A constructive trust is imposed by law on the legal owner, in this case Edgar, so that he holds the beneficial interest, or part of it, on trust for a third party. There is no clear and all-embracing definition of a constructive trust; rather, it is a flexible concept which the courts of equity use to achieve justice in cases where it would be inequitable to allow the legal owner to claim the whole of the beneficial interest for himself.
This is a preview of the whole essay
The concept of the constructive trust has been used in the context of domestic property, to allow one partner a beneficial interest in a property which was conveyed into the sole legal name of the other partner. In Gissing v Gissing, before the court had power to make property adjustment orders in divorce proceedings, a wife sought a beneficial interest in the matrimonial home under a constructive trust, which she argued arose by virtue of her financial contributions over the years. These included items such as furniture and paying for garden improvements. The House of Lords held that she did not have such an interest in the property, but the case laid down the general principles for the creation of what is known as the common-intention trust.
Lord Diplock stated that where there was an express agreement between the parties that the legal owner would hold the property on trust for the other party, and that the other party had acted to their detriment in reliance on that agreement, the courts would uphold the agreement as giving rise to a constructive trust. It was important that the trust was a constructive trust and not an express trust, as an express trust of land is unenforceable unless evidenced in writing whereas a constructive trust is enforceable despite the lack of writing as it arises by operation of law. He added that a constructive trust could arise even in the absence of an express agreement between the parties, where their common intention could be inferred from their conduct. It is sufficient that one party’s words or conduct led the other to believe that this was the intention. Even if no discussion/agreement took place the court may nonetheless still infer such an intention.
But if none of the parties gave any thought to the question of an interest in the house, then the court cannot impute such intention. Yet in Pettitt v Pettitt the minority were of the view that even in such a case, the court could impute such an intention if in the court’s opinion it would have been formed by reasonable partners had they given any thought to it. In extending this argument, in Gissing v Gissing Lord Diplock asserted that the courts could not impute such an agreement, but could infer intention from conduct or words insofar as they could be reasonably understood by the other party.
The principles laid down in Gissing v Gissing were initially interpreted liberally by the Court of Appeal. In Cooke v Head contribution to the mortgage payments and physical work on the property were held to give rise to a common-intention constructive trust and in Eves v Eves a constructive trust was found on the basis of manual work done. However, in Burns v Burnsthe Court of Appeal emphasised the need for some agreement between the parties.
The principles were considered again by the House of Lords in Lloyds Bank v Rosset where the matrimonial home was purchased in the sole name of the husband. The wife had not contributed financially to the purchase of the home, but had been involved in its renovation and she claimed a beneficial interest under a constructive trust. The trial judge found as a fact that there had been no express agreement, but granted the wife a beneficial interest under the second ground in Gissing v Gissing, the common intention of the parties as inferred from their conduct.
The House of Lords rejected this finding, stating that the work done by the wife was insufficient to satisfy the test of detriment in a case of express agreement, and could also not give rise to an inferred common intention trust. Lord Bridge narrowed the scope of the inferred common intention trust by stating:
‘… direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do.
In the present case, Angelica can be said to have made some direct contributions to the purchase price as she paid the legal costs, stamp duty, Land tax and Land registration fees. In addition, although her purchase of the curtains and carpets, half the household expenses etc would not, on the basis of the decisions above, strengthen her case, the fact that she and Edgar discussed plans for the home and florist shop may justify a potential beneficial interest in Hanging Gardens under both a resulting and a constructive trust. The crucial difference is that if her interest arises under a resulting trust (based on the presumed intention of the parties), she will obtain a share in direct proportion to her contribution, whereas if her interest arises under a constructive trust (based on an express agreement, or the inferred intention of the parties) then the court has greater flexibility in quantifying her interest.
In Midland Bank v Cooke the wife made a small contribution to the purchase price but since her interest arose under a constructive trust, the Court of Appeal held that the correct approach to quantifying her interest was to “undertake a survey of the whole course of dealing between the parties relevant to their ownership and occupation of the property”. This approach was applied in Drake v Whipp to an unmarried couple where woman’s financial contributions amounted to 20% of the total cost of purchasing and renovating the property, but as there was undisputed evidence of a common intention that the parties were to share the property beneficially, her interest arose under a constructive trust. She was awarded a one-third share.
Another judicial approach is found in Walker v Hall where the claimant had the defendant’s child and consequently her earnings diminished. The Court of Appeal awarded her a one-quarter share of the home on account of her lower financial input into the family. Dillon LJ rejected the claim that her share should be greater simply because the house was bought “to be their family home and they intended that their relationship should be for life”.Yet, as Eekelaar comments, in considering only financial contributions, the courts exercising a bias against women who bear children:
The very activity which deprives a woman of her independent means of acquiring security and saving capital is excluded when deciding whether an alternative form of security was intended.
Thus, the courts should take into account the fact that a woman may have made less of a financial contribution towards the family home because she was raising the family. In the given scenario Edgar agreed to Angelica raising Kelly as a full-time mother.
Because of the difficulties associated with establishing an implied trust, Angelica may also wish to rely on the doctrine of proprietary estoppel. This doctrine creates a right in the third party (Angelica) where another knowingly encourages her or acquiesces to take some form or action which causes detriment. The aim is to reverse the detriment, by putting her back in the position she would have been in had they not undertaken the actions which led to the detriment.
In order to establish such a claim, Angelica must satisfy three requirements as confirmed in Taylor Fashions Ltd v Liverpool Victoria Trustees Co. Ltd. There must have been a representation by Edgar; she must have relied on this representation; and in relying on such representation, she must have acted to her detriment. The representation by Edgar
may be active or passive. An active representation is when words are used as in Pascoe v Turner while passive representations may arise from conduct as in Inwards v Baker.
Whether or not the detriment is sufficient is a matter for the court to decide in each case as held in Gillett v Holt where it was held that the detriment need not consist of expenditure of money or other tangible financial detriment, provided that it was something substantial.
The court may find that Angelica acted to her detriment by relying on an understanding that she would obtain an interest in the house. The decision in Inwards v Baker is relevant in that it was held that an expectation to be permitted to remain in the house during ones lifetime was sufficient. The court may thus hold there is proprietary estoppel. The size of her interest will depend on the nature of the interest established.
Thus the extent of Angelica’s beneficial interest will depend on whether the court finds that her interest arises under a constructive or a resulting trust or proprietary estoppel. It is likely that the court will infer a common intention, based on the judgment in Lloyds Bank v Rosset, from her direct contributions and her share will then be determined by undertaking a complete survey of her direct and indirect contributions.
It appears that the law creating results is arbitrary as although a common intention is stated to be necessary, in many cases it has been inferred from weak evidence. Much depends on how willing the judge is to find a trust. The emphasis on contribution also creates arbitrary situations. If there is no contribution, after Lloyds Bank v Rosset it appears that the court will not find a trust in the absence of express agreement. On the other hand, if there is a contribution, albeit small, the court can infer an agreement to share the property in whatever proportions it deems appropriate, as illustrated by Midland Bank plc v Cooke, where the purchase price was provided mostly by the husband and partly by a wedding present.
Had Edgar and Angelica married in 1998 then the courts’ powers to make orders for financial provision include wider powers to redistribute the parties’ assets, including their property so as to achieve broad fairness and equality between them and any relevant children. In reaching an equitable decision the courts consider a number of factors, including “the standard of living enjoyed by the parties before the breakdown of the marriage” in determining what may be considered the parties’ reasonable needs. The implicit objective is to achieve a fair outcome in financial arrangements, giving first consideration where relevant to the welfare of children. Fairness requires the court to take into account all the circumstances of the case and not to discriminate between husband and wife and their respective roles. In making an order for division of the assets a judge checks his views against the yardstick of equality of division. As a general guide, equality should be departed from if there is good reason for doing so.
The courts also have to consider whether Angelica’s contribution as a home-maker was a comparable contribution to the husband's financial contribution. In addition previous cohabitation is also important enough be taken into account as a non-financial factor or circumstance when applying section 25 of the Matrimonial Causes Act.
E.H. Burn, ‘Cheshire and Burn’s Modern Law of Real Property’ (16th edition, 2000), Butterworths
J. Eekelaar, ‘A Woman’s Place – A Conflict Between Law and Social Values’  Conv 93
S. Gardner, ‘Fin de Siecle Chez Gissing v Gissing’  112 LQR 378
K. Gray and S.F. Gray, ‘Elements of Land Law’ (3rd edition, 2000) Butterworths
C. Harpum, ‘Megarry and Wade: The Law of Real Property’ (6th edition, 2000), Sweet & Maxwell
D. Hayton, ‘Revolution in Restrictive Covenant Law?’ (1980) 43 MLR 445
J.G. Riddall, ‘Land Law’ (6th edition, 1997) Butterworths
R.J. Smith, ‘Property Law’ (2nd edition, 1998) Longman
P. Sparks, ‘A New Land Law’ (1999) Hart Publishing
Dewar v Dewar  1 WLR 1532; Dyer v Dyer (1788) 2 Cox 92; Kingsnorth Finance Co Ltd v Tizard  1 WLR 783.
Stock v McAvoy (1872) LR 15 Eq 55
Carl-Zeiss Stiftung v Herbert Smith & Co (No. 2)  2 Ch 276
 AC 886
Law of Property Act 1925, section 53(1)(b)
As held in Gissing v Gissing  HL
Midland Bank plc v Cooke  4 ALL ER 768
Pettitt v Pettitt  HL
 AC 777
 AC 886
 1 WLR 518
 1 WLR 1338
 1 Ch 317
 1 AC 107
Ibid., at 132
 4 All ER 562
Ibid., at 574
(1995) 28 HLR 531
 FLR 126
J. Eekelaar, ‘A Woman’s Place – A Conflict Between Law and Social Values’  Conv 93, at 94
 1 ALL ER 897
 2 ALL ER 945
 2 QB 929
as per Lord Bridge in Lloyds Bank plc v Rosset  1 AC 107 AT 132