TYPES OF TRUSTS

Goodman v Gallant [1986]

FACTS

C and her husband were joint beneficial tenants in their home. C and D together purchased C’s husband’s interest, with the conveyance declaring C and D held the property “upon trust to sell [...] until sale upon trust for themselves as joint tenants”. C then issued a notice to sever her share and sought a declaration she held a ¾ interest in the house (because she initially held 50% of the equitable interest and contributed towards the purchase of the remainder). 

• C argued that upon severance of a joint tenancy, the parties’ shares are not necessarily equal, but that the share depends on their intentions. 

• D argued that they owned the house as joint tenants (i.e. that there was no severance) and thus held the sale proceeds in equal shares.

OUTCOME

Although severance occurred, the split would still be 50/50 in a tenancy in common and not a proportionate contribution (severance does not consider the parties’ contributions). This is because the conveyance into joint names contained an express declaration of trust that the parties were to hold the proceeds of sale of the property on trust for themselves as joint tenants.

• On express written declarations: An express declaration of trust is conclusive and excludes the operation of resulting or constructive trusts unless the document ought to be rectified or rescinded on the grounds of fraud or mistake.
  
  

• Where there is no express declaration of trust (s53(2) LPA 1925): The person claiming a beneficial interest can rely on “resulting, implied or constructive trusts”.

  • Purchase money resulting trusts: There is a presumption of equity that a person who has contributed a share of the purchase price is entitled to a corresponding proportionate equitable interest through resulting trust (Pettitt v Pettitt). 

However, “there is no room” for ARTs or constructive trusts when there has been an express declaration of trust.

OBITER

Effect of the LPA 1925:

• A trust is imposed by s34, s35 and s36(1), even if there is no express trust for sale and no declaration as to the beneficial interests. 

  • The reference to “in like manner as if the persons beneficially entitled were tenants in common” refers to s34(2) and s25, which provides that the conveyance operates as if the legal estate had been conveyed to them as joint tenants. 

  • This has no effect on the nature and extent of the respective beneficial interests in the proceeds of sale.

Carlton v Goodman

Facts

C and D were both liable under the mortgage of a house, C did not live there until D’s death. C claimed the house. There was no formal document regulating the arrangement

Outcome

The property was held on resulting trust for D’s estate’s sole benefit alone. No CICT was imposed because there was no evidence of any agreement, understanding or common intention between C and G to share beneficial ownership.

Resulting trust analysis:

1. When there is no express declaration of trust, an informally-created trust can be recognised as it is exempted from the s53(1)(b) formality requirements by s53(2), of which a resulting trust is one. 

2. The starting point: “The beneficial interests under a resulting trust are ascertained by the process of identifying the person who provided the purchase money to acquire the property and, if more than one person is identified as having done so, by ascertaining the respective amounts provided.”

   • Applied: C made no direct payment to the purchase price of the house but merely undertook liability under the mortgage – she merely gave her name on the mortgage and did not make any financial contributions; her involvement was “so circumscribed and temporary” that it cannot be a “contribution”.

     • Therefore, the presumption was that the ART was solely for D.

     • In principle, accepting liability under the mortgage could be a contribution towards the purchase price.

3. Rebutting the starting point: There were no circumstances in this case rebutting the presumption of resulting trust for D.

   • D did not intend C to benefit or get a share in the property. Although they were in a relationship, they did not live together and she was not responsible for any mortgage repayments.

Stack v Dowden

Facts

C and D (an unmarried but cohabiting couple with children) had a home in their joint name, but made no declaration as to the entitlement of the beneficial interest. Most of the purchase price was provided by D, which came from her savings and the sale of her previous property; the remainder came from a mortgage. D paid over half of the mortgage instalments; C paid the rest. D paid most of the utilities. C obtained an order for the sale of proceeds into equal shares.

Outcome

 The presumption that the joint tenancy in law is followed by a joint tenancy in equity was rebutted because i) D contributed more than C to the acquisition of the property and ii) the parties never “pooled their separate resources” (as everything was “strictly separate”, which is “strongly indicative” of rebutting the presumption). Therefore, D was entitled to a 65% share.

On resulting trusts

• Lord Walker: In cases about the beneficial ownership of a “matrimonial or quasi-matrimonial home” in single and joint name cases, “the resulting trust should not in my opinion operate as a legal presumption”, but it may have purpose where “two people have lived and worked together in what amounted to an emotional and commercial partnership”. 

• Lord Hope: It makes sense where parties are dealing at arm’s length to start from a resulting trust presumption in proportion to contributions. But, cohabiting couples have a relationship of “mutual co-operation and compromise”.

OBITER - DISSENT LORD NUEBERGER

Preferred outcome: The resulting trust solution (this is the starting point that was not rebutted) means C could not establish more than a 36% interest in the house as a result of his contributions. 

Rebutting the resulting trust presumption

• If the court can find an express agreement (albeit not complying with correct formalities) or an inferred agreement which is supported by some detriment, the resulting trust would be “rebutted and replaced, or (conceivably) supplemented, by a constructive trust”. 

  • Such an intention cannot be imputed, even though the distinction between inference and imputation “may appear a fine one”.

    • Inferred intentions: One which is “objectively deduced to be the subjective actual intention of the parties, in the light of their actions and statements”, which concludes what the parties did intend.

    • Imputed intentions: One which is “attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention”, which concludes what the parties would have intended.

  • The parties being in a close relationship makes it easier than in a normal contractual context to displace the resulting trust solution because this is displaced when there is a gift of property. Intentions changing over time: Work must be “substantial” to qualify – decoration or repairs that are not significant would not qualify. 

  • On Lady Hale’s criteria in para. [69]: Not all of the issues are of the same weight.

    • Did not agree with the fact that the parties have lived together for a long time with children could be very important in determining beneficial ownership.

    • Was “unhappy” with the suggestion that, just because parties share their income and outgoings, they intended the beneficial interest in the house (acquired with significantly different contributions) should be shared equally.

      • [Seems to have a greater focus on financial contributions].

    • Was unconvinced that the original ownership of the beneficial interest could be altered “merely by the way in which the parties conduct their personal and day-to-day financial affairs”.

    • See the comments on mortgages below.
      
      

  • On Oxley: “Unhappy” with this formulation that apportionment should be measured in accordance with what is fair, as this is not the appropriate yardstick and is too imprecise.

    • Prefers the Law Commission’s formula in Sharing Homes: The court should “undertake a survey of the whole course of dealing between the parties [...] taking account of all conduct which throws light on the question what shares were intended”.

  • A constructive trust can also arise when the conscience of the legal owner is affected (i.e. proprietary estoppel).

  
  

  Liability under a mortgage (does this count as direct financial contributions for RTs?)

  
  

  • Reasons why liability under a mortgage should be equal to a cash contribution: If A pays £100,000 in cash and both parties undertake a joint liability for a £200,000 mortgage, the beneficial interest would be ⅔ owned by A. If one party repays more of the mortgage advance, equitable accounting can adjust the beneficial ownership.

  • Reasons why liability under a mortgage should not be equal to a cash contribution: The cash contribution is essentially equity, whereas the mortgage liability is a secured loan. If the value of the property falls by 25%, A would lose money, whereas the party also paying under the mortgage would not.

  • Overall: This is not an appropriate case to express a finalised view. Simplicity suggests they should be treated equally, but more sophisticated analysis suggests otherwise, especially where the cash contributions substantially differ. 

  
  

  The law should be the same in domestic and non-domestic contexts

  
  

  • “In the absence of statutory provisions to the contrary, the same principles should apply to assess apportionment of the beneficial interest as between legal co-owners, whether in a sexual, platonic, familial, amicable or commercial relationship”.

    • The issue is 

  • Even though the number of cohabiting couples has increased substantially, the change does not “justify a departure from [“well”] established legal principles” – the “applicable principles are the same whether the parties are married or not, although the nature of the relationship will bear on the inferences to be drawn from their discussions and actions”. 

    • The outcome in this case and in Oxley could have been solved by a resulting trust.

• The different starting point in domestic cases invokes the presumption of advancement between unmarried cohabitants (a relationship where it has never before been applied) and when the court is unenthusiastic about such a presumption. 

• Practical reasons: The property may be bought in joint names for reasons which have nothing to do with the parties’ intentions as to beneficial ownership - the solicitor’s decision, the lender’s preference for the security of two borrowers

Consistency suggests that a party who contributes x% should have x% in beneficial interest – “the resulting trust presumption arises because it is assumed that neither party intended a gift of any part of his own contribution to the other party”.

Jones v Kernott

Facts

A and B purchased a house in their joint names. A entirely paid the deposit but the mortgage and upkeep of the house was shared between them and no declaration was made as to how the beneficial interest was to be split. B moved out after the split but A remained with the children. The house increased in price and B indicated he wanted a beneficial share of it. 

County court judgment: The house was first purchased as a family home. As it was bought in joint names, a presumption arose that they intended to jointly share beneficial ownership. After, the common intention changed when B moved out: he did not make contributions as before. Therefore, the initial presumption of joint beneficial ownership is displaced. B was entitled to 10% only

Outcome

Affirmed the county court judgment; B was entitled to 10% only, as the initial presumption of joint beneficial ownership was displaced. 

• Conflicts with resulting trusts: A constructive trust is not at odds with the parties’ legal ownership, since the equitable ownership mirrors legal ownership, but “what it is at odds with is the presumption of resulting trust”.

  • It is not possible to have a presumption of joint legal and equitable interests and a presumption that the parties’ equitable interests are proportionate to contributions.

  • Why a resulting trust is “not appropriate”: It made “a great deal more sense when social and economic conditions were different and when it was tempered by the presumption of advancement”, as the main contributor was presumed to make a gift (or joint interest) of the house – this involved imputing an intention.

    • Instead of extending the presumption of advancement and removing its sexism, the court has developed the CICT instead.

      • Gardner and Davidson (“The Future of Stack v Dowden”): The CICT is a “more promising vehicle”.

• Exceptions to the primary goal of ascertaining the parties’ actual shared intentions: i) Resulting trusts: “Rare” in a domestic context, but possibly where domestic partners were business partners. ii) Imputation: Can occur in the quantification inquiry.

Marr v Collie

Facts

C and D (a cohabiting couple) bought investments in joint legal names, but C contributed all the purchase funds. When they split, C sought a declaration that he owned sole beneficial interest in the properties upon presumed resulting trust. The Bahamian CA held the presumed resulting trust was rebutted due to clear evidence C intended D should have an equal share.

Outcome

The parties’ intentions were not sufficiently examined (as required by Stack v Dowden) by the judge so the matter should be remitted for the judge to redetermine.

• On Laskar v Laskar: This case said that Stack v Dowden should not be applied outside the “domestic consumer” context into cases “where the parties primarily purchased the property as an investment [...] even where their relationship is a familial one”.

  • Laskar is not authority for the proposition that the principle in Stack (that a conveyance into joint names indicates legal and beneficial joint tenancy unless the contrary is proved) applies only in the “domestic consumer context”.

    • There was not intended to be a “strict line of demarcation” between family homes and investment properties, as it is conceivable that partners in a relationship would buy an investment with the common intention that the beneficial ownership be shared equally.

      • ^”Where there is evidence to support such a conclusion, it would be both illogical and wrong to impose the resulting trust solution”.

  • Even where property is bought as an investment, it does not “follow inexorably” that the resulting trust solution is correct. It would be wrong to impose such a solution where the parties had the intention to share the beneficial ownership equally.
    
    

• Is there a “clash of presumptions”?: If the starting point of joint legal ownership is a presumption, does this conflict with the presumption of a resulting trust?

  • A simplistic answer: No, because if it is domestic property, the first presumption applies; otherwise, the other presumption applies (rejected, as above).

  • The proper answer: “Save perhaps where there is no evidence from which the parties’ intentions can be identified, the answer is not to be provided by the triumph of one presumption over another”, as context is key.

    • Context here is set by the parties’ common intention (or lack thereof).

      • If it is the “unambiguous mutual wish of the parties, contributing unequal shares to the purchase of property, that the joint beneficial ownership should reflect their joint legal ownership, then effect should be given to that wish.” 

      • “If, on the other hand, that is not their wish, or if they have not formed any intention as to beneficial ownership but had, for instance, accepted advice that the property be acquired in joint names, without considering or being aware of the possible consequences of that, the resulting trust solution may provide the answer.”