UK Co-ownership Trusts: Understanding Common Intention & Resulting Trusts | Summaries Law

Co-ownership Trusts in the United

Kingdom- The Denning Legacy

M.J. Dixon*

The recent House of Lords decision in

City of London Building Society

Flegg

and

the enactment of the Insolvency Act 1986,2have done much to relieve the agony of

the law student faced with the complicated dossier of the law relating to

co-ownership of property. However, even though a measure of clarity now exists in

relation to the effects of co-ownership on the post-ownership rights of the parties,

when it comes to analysing the situations in which co-ownership may arise in the

first place, the student finds himself surrounded by a mass of conflicting diaa and

confusing terminology.

Questions concerning the ownership of shared property occur most frequently

in proceedings brought by one ex-cohabitee against the other,3 especially if, as is

usually the case, the house represents the parties' only capital asset. As will be seen

below, when the equitable interests in the property are expressly declared in

writing, there is little room for debate. Unfortunately, however, in many cases of

shared occupation, the property deeds are concerned only with legal title. Legal

title may reside jointly with the parties, in one partner only, or with one partner and

a third person,

yet the location of legal ownership may not be decisive of

beneficial ownership. It is now axiomatic that a person in whom the legal title is not

vested may be entitled to an equitable interest in the property by virtue of a

resulting or a constructive trust. 5

However, whilst this may fairly represent the principle, the practicalities are

altogether more complicated. When examining the acquisition of beneficial

interests in a co-ownership situation, the student has to find answers to two

"Uu Po Shan Lecturer in Law, Trinity College, Oxford.

1. [1987] 3 All E.R. 435.

2. Sections 336-338, re-enacting 55.171-173 Insolvency Act 1985.

3 The wide powers of 5.24 of the Matrimonial Causes Act 1973 are always available to secure relief

for parting spouses. While the greater part of the business of the courts will be to unravel the domestic

arrangements of unmarried cohabiting couples, in those cases where the divorce jurisdiction is not

available, identical considerations will apply to husband and wife: see,

e.g.,

remarriage of claimant,

s.28(3), M.C.A. 1973; moral objection to divorce,

Shillh

[1977] 1 All E.R. 97.

4. Bemard

Josephs

[1982] 3 All E.R. 162;

Bums

[1984] 1 All E.R. 244;

Cralll

Edlvards

[1986] 2 All E.R. 426. Although it would be rare in cases concerning co-habitees, there is no reason

why a claimant may not contend that beneficial ownership resides in only one of the joint legal owners.

5. Bl!ms

Bums; Crallt

Edwards supra,

and cases cited therein.

UK Co-ownership Trusts: Understanding Common Intention & Resulting Trusts, Summaries of Law

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Co-ownership Trusts in the United

Kingdom- The Denning Legacy

M.J. Dixon*

The recent House of Lords decision in City of London Building Society v. Flegg^1 and

first place, the student finds himself surrounded by a mass of conflicting diaa and

fundamental questions. First, how are such interests acquired? Secondly, what

type of legal mechanisms exist, or are employed, to give effect to these property

rights? The first is a "real world" problem - when will Mrs A or Miss X have a

proprietary interest, and therefore a right to a cash sum on sale, in the property she

once shared with Mr A or Mr Y. It is, crudely, what does the party claiming the

interest have to prove in order to establish that interest? The second is primarily a

theoretical problem which, as yet, has not had any "real world" implications.^6

Given that the claimant has established the "correct" criteria, what kind of trust

arises in his or her favour? Is the claimant to be regarded as a beneficiary under an

express, resulting or constructive trust? Does it matter?

Unfortunately, it is not easy to extract an answer to either of these questions

from the many reported cases concerning the existence of co-ownership interests.

The decisions of the Court of Appeal in Goodman v. Gallant^7 and Burns v. Burns^8

were thought to have settled the first issue, or at least to have returned the law to

its pre-Denning orthodoxy.9 However, the traditional trust law approach favoured

in Burns must now be questioned in the light of the decisions in Midland Bank v.

DobsonlO^ and Grant v. Edwards. II

Furthermore, when there is no express trust on view, the courts have been

content to acknowledge that the claimant has established an interest under "a

resulting or constructive trust", or "a resulting implied or constructive trust". The

two recent cases of Passee v. Passeel2^ and Turton v. Turton^13 are just the latest

examples of a general failure to differentiate between these two concepts when

discussing the basis of the applicants alleged proprietary rights in the disputed

property. Moreover, even if this failure is indicative of the fact that the rights and

duties of the parties are identical irrespective of the label attached to the trust, this

does not mean that the requirements for the establishment of the co-ownership

trust are identical for the "resulting" and "constructive" varieties. In other words,

the type of trust found by the court may be a reflection of different enabling

criteria, and the failure to differentiate between the type of trust, may be a

reflection of the failure to distinguish between the various situations in which such

trusts may arise. This connection between the practical and conceptual issues is

the reason why the student needs answers to both of these fundamental questions.

of gift or loan.^19 In order to distinguish this from Situation 3 below, it can also be

known as the immediate resulting trust - because it operates immediately on

acquisition of the property, for that is when the claimant makes the financial

contribution, and that is when the beneficial interest results to him or her.

It must be remembered that this is one of the less complicated situations with

which the court has to deal, and would not normally present much difficulty. In

most cases coming before the court, however, the claimant will not have made any

contribution to the initial purchase price, but will be claiming an interest by virtue

of subsequent events. Indeed, the latter is all the more likely, now that the great

majority of domestic properties are purchased by way of instalment mortgages.

Situation 3: common intention - a cumulative resulting trust

When the legal title to property is vested solely in one person, the presumption

is that the proprietor is also the sole beneficial owner. We have seen above how this

can be displaced in favour of a person contributing directly to the cost of the

property at the time of purchase. However, sole beneficial ownership of property

can also be displaced if the claimant can establish that it was the common intention

of the parties that he, or more usually she, was to have an interest. 20 An express

oral declaration of this common intention is dealt with in Situation 4 (ii) below.

The more frequent plea is that the claimant is to have a beneficial interest in the

property by virtue of a common intention which can be inferred from the conduct

of the parties over a number of years. What type of conduct may give rise to this

common intention, and what type of trust arises if it is successfully established, is a

matter of some debate. The leading authorities of Pettitt v. Pettitt^2! and Gissing v.

Gissini^2 are well known and would seem to suggest that the answer is to be found

by an application of traditional property law principles. However, this merely begs

the question. The core of the dispute is whether "traditional property law

principles" authorise the court to alter the property rights of couples in order to

achieve a solution that is fair and just in all the circumstances, or whether they

restrict the court to well worn equitable paths.^23

In Burns v. Burns,24 the unmarried Ms Burns claimed a beneficial interest in the

family home she had shared with the defendant for seventeen years, but which had

been acquired by the defendant in his name only. There was no express oral

declaration that the plaintiff was to have an interest in the property, and she had

made no contribution to the initial purchase price or to subsequent mortgage

repayments. She did perform routine domestic duties and did contribute to

household expenses, though the defendant did not require her to do so. The

Court of Appeal refused her application. In their judgments, Fox and May LJJ

concluded as follows:^25

(i) A common intention that the claimant is to have a beneficial interest can be