Common Constructive Trust under the English Doctrine

Introduction Common Constructive Trust under the English Doctrine Constructive trust under the doctrine of English Law is construed to mean a form of trust that is occasioned by courts mainly in circumstances where the defendant has handled a given property in an “”unconscionable manner. The defendant holds the property in “constructive trust” for the party that is harmed and has the obligation of taking care of it. l Unconscionable dealings with property, unauthorized profits arising from fiduciary, and profits occasioned by unlawful acts are some of the factors hat have been considered by courts within the Jurisdiction of the English law to give rise to constructive trust.

Unlike the resulting trusts, which are mainly concerned with the equity of interest in property where some dealing concerning a property is believed to have occurred although, there are no clear intentions by the parties regarding the beneficial ownership, constructive trusts primarily regard the destination of equitable interest in circumstances where departing from the parties’ common intention vis-?¤-vis the distribution of beneficial interest would result into inequity.Under the doctrine of English Law, the claimant is usually expected to prove that there was a common intention between them to hold Jointly the beneficial interest attributed to the property under litigation. Such common intention may be implied or express. The law also requires the claimant to prove that the parties acted to their detriment and/or that they (materially) altered their circumstances in view of the common intention. The challenge associated with “common intention” and “detrimental reliance” in the absence of Joint ownership was common in the pre-Stack v Dowden era.

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This jeopardized the efforts for informally cohabiting couples to demonstrate the existence of a common intention and detrimental reliance. Like was held in Lloyds Bank Plc v Rosset5, common intention during the pre- Stack v Dowden era was either inferred or expressed, and was not imputed by the relationship between the cohabitants.The Lloyds Bank plc v Rosset is often viewed as a classical case for the implementation of constructive trust. In this case, the House of Lords developed a framework for determining the existence of common intention constructive trusts.

Central to this case was the need for the court to establish if the claimant (the wife) that had a potential of attaining priority over a mortgage that had been granted to the bank by her partner. In 1972, Mr. and Mrs.

Rosset got married. Ten years later, Mr.Rosset became entitled to an amount of money courtesy of his grandmother’s trust fund. The couple got a house requiring renovation.

Due to refusal by the Swiss trustee to advance the money required for purchase of the house in Joint names, the couple decided to purchase the house at E57,500 in Mr. Rosset’s name solely. Money required for the enovation of the house was provided by Mr. Rossett alone. Mrs. Rosset made no direct contribution towards the purchasing of the house, although she had contributed indirectly in terms of decoration and supervision.

In this regard, Mrs. Rosset claimed her entitlement to a share of ownership of the house on grounds of constructive trust. At first instance, the court held that although no express agreement existed with regard to Mrs. Rosset’s entitlement to beneficial share of the said house, she could impute a common intention to enjoy a share of ownership of the property for reasons that she had contributed towards the enovation of the house, since this indicated her interest in the house.

However, the House of Lords held that Mrs.Rosset’s contributions could not infer a common intention. In its reason, the House of Lords observed there was no constructive trust in favour of Mrs.

Rosset, and that in the absence of an express common intention, Mr. Rosset had the absolute ownership of the house. In this regard, the Court concluded that Mrs.

Rosset could not take away the priority attributed to the rights of the bank since the latter had no proprietary interest on the house under litigation. Of significance in this case is the establishment by the court that Mrs.Rosset enjoyed no interest of the house on grounds of constructive trust. In this case, the practical requirements concerning the two concepts of “detriment” and “common intention” were clearly expounded in a manner that delimitated the scope of constructive trust. As long as there is a reasonable ground to believe that there is evidence of detrimental reliance and relevant common intention by the parties, an examination of the financial contributions of the parties for purposes of assessing the quantum of heir shares becomes insignificant.This was the courts’ observations in Midland Bank Plc v Cooke6 and Hurst v Supperstone. 7 In Grant v Edwards8, the court held that a common intention constructive trust could arise from an agreement between cohabitants, the claimant could enjoy beneficial interests and where, and because of the agreement, the claimant has suffered certain detriment (either partly or wholly). In Grant v Edwards, the house under dispute had been put under the names of Edwards and his brother.

However, the property was intended to serve as a home for the cohabitants (Grant and Edwards).Edwards informed Grant about the absence of her name in the conveyance, observing that this was intentional, as it was meant to avoid prejudicing the latter’s matrimonial proceedings. This demonstrated that Grant found that the claimant was entitled to a beneficial interest based on the agreement vis-a-vis her financial contributions and the agreement between her partner and her. Determination of Beneficial Interest under the Common Intention Constructive Trust The determination of beneficial interest has been a major concern under the doctrine of common intention constructive trust.The question of when and how the courts ought to quantify the beneficial interest arising from this doctrine has been a major challenge for most courts within the English Law Jurisdiction. The enforcement of a constructive trust in ascertaining an alleged agreement between parties becomes effective in circumstances where the court establishes the existence of an express agreement between the parties vis-a-vis the ownership of the property.

Where the parties had agreed to share the accrued interests equally, the claimant becomes entitled to a half-share of the interest resulting from the property. However, in cases of no express common intention vis-?¤-vis the parties’ relative shares vis-a-vis the scenarios provided in Stack v Dowden10, the court is expected to determine the scope of equitable share emanating from the constructive trust. In Stack v Dowden, the court held that there was no express intention between the parties with regard to the proportion of their respective shares concerning the ownership of the property.

This was because the parties had not developed a meaningful understanding of the declaration on survivorship. In Lloyd’s Bank v Rossetl 1, the House of Lords’ decision ailed to address the question of determination of beneficial interest. However, principles governing the determination of beneficial interests have had to be developed in the subsequent cases. As to how the court ought to quantify the beneficial interests attributed to a constructive trust, N.Oakleyl 2 observes that the underlying principle that the fulfillment of the parties’ intentions provides the basis on which a constructive trust arises and should therefore mark the starting point for any analysis concerning the determination of beneficial interests attributed to common intention constructive trusts. His argument was applied in the case of Grant v Edwards13 where Browne- Wilkinson V-C observed as follows: “..

. prima facie the interest of the claimant will be that which the parties intended. The basic relationship between the quantification of beneficial interest and the parties’ common intention became apparent in Gissing v Gissing14 where Lord Diplock stated as follows: .. the court must first do its best to discover from the conduct of the spouses whether any inference can reasonably be drawn as to the probable common understanding about the amount of the share of the contributing spouse upon hich each must have acted in doing what each did even though that understanding was never expressly stated by one spouse to the other or even consciously formulated in words by either of them independently.It is only if no such inference can be drawn that the court is driven to apply as a rule of law, and not as an interest belongs to the spouses in equal shares. ” This therefore makes a constructive trust distinct from a resulting trust. In the latter, the determination of a claimant’s beneficial interest is based on his/her contribution to the purchase price of the property.

However, the former, entitles the claimant to an excess share of the equitable interest more than his/her contribution or the value of his/her action that provides the requisite detriment.This distinction is well elaborated in Midland Bank v Cooke15 in which the court noted that a wife who had contributed 6. 74% towards the purchase of a house was entitled to a half-share of beneficial interest on grounds of a common intention imputed from her contribution. There are a number of challenges associated with the quantification of beneficial interests arising from common intention trusts. However, two approaches have since been developed to address the challenges.The approaches require the court to consider every aspect of the relationship between the cohabitants. In Midland Bank v Cook, it was the Court of Appeal’s position that a court had a duty to explore all the existing evidence concerning the cohabitants’ assumed intentions with a view of implementing such intentions on grounds of a constructive trust. In this case, Waite LJ held as follows: “The general principle to be derived from Gissing v Gissing and Grant v Edwards can in my Judgment be summarized in this way.

When the court is proceeding, in cases like the present where the partner without legal title has successfully asserted an equitable interest through direct contribution, to determine (in the absence of express evidence of intention) what proportions the parties must be assumed to have intended for their beneficial ownership, the duty of the Judge is to undertake a survey of the whole course of dealing between the parties relevant to their ownership and occupation of the property and their sharing its burdens and advantages.That scrutiny will not confine itself to a limited range of acts of direct ontribution of the sort that are needed to found a beneficial interest in the first place. It will take into consideration all conduct, which throws light on the question what shares were intended.

Only if that search proves inconclusive does the court fall back on the maxim that “equality is equity. ” A Critique of the Common Intention Constructive Trust Despite its significant application in Lloyds Bank plc v Rosset against the foundation laid in Gissing v Gissing, the English “Common Intention” constructive trust has received a number of criticisms.Critiques to this approach argue that it adopts an rtificial process to the establishment and enforcement of the parties’ ‘common intention. ‘ For example, in Lankow v Rose16, while sitting at the Court of Appeal, Tipping J observed as follows: “English Jurisprudence appears still to be concerned with notions of express or imputed intention or understanding. That approach, essentially contractual or quasi- contractual, is in my view unnecessarily artificial.It is better to acknowledge openly that a constructive trust is being imposed in equity without the consent, express, will not allow the legal owner to deny the claimant a beneficial interest. Even though Lord Bridge regarded Eves v Eve17 and Grant v Edwards as classical cases regarding express “common intention,” the men in both cases had no intention of having their partners entitled to the beneficial shares relating to the property. While Mr.

Eves refused to include his partner’s name on the property for reasons that she was an underage (21 years), Edwards noted that he decided not to include his spouse’s name on the property because such a move would Jeopardize her expected matrimonial proceedings. Both the excuses expressed by the men involved in the two ases here above demonstrate their real intentions not to have their spouses derive any proprietary interests from the said property. It is therefore fictitious to purport, assume, or claim that the partners enjoyed a “common intention” vis-a-vis the ownership of the property.

In Westdeutsche Landesbank Girozentrale v Islington London Borough Counci118, it was clear that the “common intention” is riddled with the danger of the court’s attempt to Justify the existence of a constructive trust between cohabitants. In this case, Lord Browne-Wilkinson asserted that contrary to a resulting trust, the law rovides for an imposition of a constructive trust against the intentions of a trustee. This implies that the English language of “common intention” is inadequate for determining the scope of a constructive trust between cohabitants.Conclusion In view of the above analysis, it is clear that the English doctrine of common intention “constructive trust” is more artificially inadequate for resolving ownership disputes between unmarried cohabitants and may leave certain deserving claimants without a remedy. The English common intention constructive trust does not examine the ature of the existing relationship between cohabitants that ought to provide the basis for establishing the true ownership of the property.The Law Reform Commission has since acknowledged the inherent difficulties with the application of a common intention in determining beneficial interests and consequently proposed the inclusion of both direct and indirect financial contributions by parties towards the purchase price, in determining such interests. The Commission in its 2007 proposal recommended an adoption of a holistic approach that explores the entire ealing between the parties in disputes for purposes of determining the beneficial interests.

Nevertheless, the Commission’s recommendations have been viewed as clich?©s with critiques arguing that they may do very little to solve the current impasse. There is therefore need to modify the English concept of “common intention” and integrate it with other distinct doctrines such as estoppel, resulting trusts, and the principle established in Rochefaucauld v Boustead19. Textbooks D. Barlow, Cohabitation, Marriage and the Law, London: Oxford University Press 2005, pp. 675-694. J.

Goff, The Law of Restitution, Boston: Routledge 2008, pp. 802-814. N.Oakley, Constructive Trusts, Chicago: University of Chicago Press 2006, pp. 46-53 S. Pearce, Land Law, London: Oxford University Press 2001, pp.

182-201 Case Law Eves v Eves [1975] 1 WLR 1338 at 1341 Gissing v Gissing [1971] AC 886 Grant v Edwards (11986] Ch 638 CA Hurst v supperstone [2005] EWHC 1309 (Ch), [2005] 1 FCR 352 Lankow v Rose [1995] 1 NZLR 277, 293 Lloyds sank Plc v Rosset [1991] 1 AC107 Midland sank Plc v cooke [1995] 4 All ER 562 stack v Dowden [2005] EWCA Civ 857 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669

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