Learning Outcomes
This article examines how beneficial interests in family homes are established under implied trusts, particularly where legal title does not reflect the parties' contributions or intentions. It focuses on the requirements for common intention constructive trusts (CICTs), distinguishing between express and inferred common intention, and the necessity of detrimental reliance. For the SQE1 assessments, you need to identify when an implied trust might arise in a family home context and apply the principles for establishing a common intention to share beneficial ownership, especially in disputes between cohabiting couples.
SQE1 Syllabus
For SQE1, you are required to understand the creation and operation of implied trusts, specifically in the context of family homes. This includes applying the relevant legal principles to determine beneficial interests where there is no express declaration or where the legal ownership does not mirror the intended beneficial ownership. As you revise this topic, focus on:
- The distinction between resulting trusts and common intention constructive trusts (CICTs) in family home scenarios.
- The requirements for establishing a CICT based on express common intention, including the nature of discussions or agreements needed.
- The requirements for establishing a CICT based on inferred common intention, particularly the significance of direct financial contributions and the approach outlined in key case law.
- The concept of detrimental reliance and the types of conduct that may satisfy this requirement in both express and inferred intention cases.
- How the courts quantify beneficial interests under a CICT once it has been established.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
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Which type of trust is most commonly applied by courts to determine beneficial interests in a family home where cohabiting partners dispute ownership and there is no express declaration?
- Express trust
- Resulting trust
- Common intention constructive trust
- Secret trust
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According to Lloyds Bank plc v Rosset, what is required to establish an express common intention constructive trust?
- Significant non-financial contributions only.
- Direct financial contributions to the purchase price only.
- Evidence of express discussions, agreement, or understanding between the parties regarding shared ownership, plus detrimental reliance.
- Registration of the property in joint names.
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True or false: Paying household bills generally allows the court to infer a common intention to share beneficial ownership of the family home.
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What type of conduct might constitute 'detrimental reliance' for the purposes of establishing a common intention constructive trust?
- Making significant financial contributions towards property improvements.
- Giving up a career to look after the home and children based on an agreement to share ownership.
- Making substantial mortgage payments.
- All of the above.
Introduction
Disputes often arise concerning the beneficial ownership of family homes, particularly between unmarried couples upon relationship breakdown. While married couples or civil partners have recourse to statutory remedies (under the Matrimonial Causes Act 1973), cohabiting couples must rely on the principles of trust law to establish their respective interests. Where legal title is held solely by one partner, or jointly but without reflecting the true intended shares, the court may imply a trust to determine the beneficial ownership. This article focuses on the common intention constructive trust (CICT) as the primary mechanism used by the courts in this context, specifically examining how a common intention to share beneficial ownership can be established through express or inferred agreements, and the requirement of detrimental reliance.
Distinguishing Implied Trusts in the Family Home
When the legal ownership of a family home does not accurately reflect the beneficial interests, equity may impose an implied trust. The two main types are resulting trusts and constructive trusts.
Resulting Trusts
Historically, resulting trusts were sometimes used, based on the presumption that a contribution to the purchase price gives rise to a proportionate beneficial interest. However, this approach is now largely confined to investment properties rather than family homes occupied by cohabiting couples. The courts prefer the flexibility of the CICT framework in the domestic context, which allows for a broader range of contributions and conduct to be considered beyond just the initial purchase price contribution (Stack v Dowden [2007] UKHL 17).
Common Intention Constructive Trusts (CICTs)
The CICT is the principal tool used by courts today to determine beneficial ownership in family homes involving cohabiting couples. It arises where the legal owner and the claimant shared a common intention that the claimant should have a beneficial interest in the property, and the claimant acted to their detriment in reliance on that intention.
Key Term: Common Intention Constructive Trust (CICT)
A trust imposed by equity in relation to a family home, based on the parties' shared intention (express or inferred) regarding beneficial ownership, coupled with detrimental reliance by the claimant.
The establishment of a CICT involves two key stages:
- Establishing the common intention (either express or inferred) and detrimental reliance.
- Quantifying the respective beneficial shares based on that common intention or the parties' whole course of dealing.
This article focuses primarily on the first stage: establishing the common intention.
Establishing Common Intention
A shared understanding or agreement regarding beneficial ownership is essential for a CICT. This common intention does not need to be legally formal but must be genuine. It can be established in two ways: through express discussions or inferred from conduct.
Express Common Intention
An express common intention arises from evidence of actual discussions, agreements, or understandings between the parties that the beneficial ownership of the property was to be shared.
Key Term: Express Common Intention
A shared intention regarding beneficial ownership derived from explicit discussions or agreements between the parties, however informal.
The benchmark case, Lloyds Bank plc v Rosset [1991] 1 AC 107, indicated that evidence of express discussions about sharing the property, even if imperfectly remembered or imprecise, could suffice. This might include statements made at the time of purchase or later. Excuses made by the legal owner for not putting the property into joint names (e.g., due to the claimant's age or potential prejudice in divorce proceedings) have also been accepted as evidence of an express common intention (Eves v Eves [1975] 1 WLR 1338; Grant v Edwards [1986] Ch 638). However, the excuse must genuinely reflect an actual agreement to share, not merely be a plausible reason to placate the claimant (Curran v Collins [2015] EWCA Civ 404).
Detrimental Reliance (Express Intention)
Once an express common intention is established, the claimant must demonstrate that they acted to their detriment or significantly altered their position in reliance on this agreement.
Key Term: Detrimental Reliance
Action taken by the claimant, based on the common intention to share beneficial ownership, which results in some form of loss, disadvantage, or change of position for the claimant.
Conduct constituting detrimental reliance can be varied and does not necessarily require direct financial contribution to the purchase price. Examples include:
- Making substantial contributions to household expenses, thereby enabling the legal owner to pay the mortgage.
- Undertaking significant renovation or improvement works beyond minor repairs or decoration.
- Giving up employment or making other significant life changes based on the assurance of shared ownership.
The conduct must be something the claimant would not reasonably have undertaken unless they believed they had an interest in the property.
Worked Example 1.1
Chloe and Ben, an unmarried couple, decide to buy a house together. Ben tells Chloe the house will be "theirs", but it is registered in his sole name because Chloe has a poor credit history which might affect the mortgage application. Chloe pays the deposit. After moving in, Chloe pays all household utility bills and food costs, while Ben pays the mortgage. Chloe also undertakes significant re-plastering and re-wiring work herself. They later separate. Can Chloe establish an express common intention constructive trust?
Answer: Possibly. Ben's statement that the house would be "theirs" and his excuse for sole registration could indicate an express common intention to share ownership. Chloe acted to her detriment by paying the deposit, contributing indirectly to the mortgage by paying other bills, and carrying out significant improvement works. The court would assess if these actions were done in reliance on the shared understanding.
Inferred Common Intention
Where there is no evidence of express discussions, the court may infer a common intention from the parties' conduct.
Key Term: Inferred Common Intention
A shared intention regarding beneficial ownership deduced by the court from the parties' conduct, primarily their financial contributions to the property.
Lloyds Bank plc v Rosset suggested that only direct contributions to the purchase price (whether initially or by paying mortgage instalments) would be sufficient to infer common intention. Contributions to household expenses or undertaking improvements were deemed insufficient on their own.
However, subsequent case law, notably Stack v Dowden and Jones v Kernott [2011] UKSC 53, while primarily dealing with joint ownership cases, indicated a more flexible approach might be taken even in sole ownership cases. The court may look at the "whole course of dealing" between the parties in relation to the property to infer intention. This potentially includes a broader range of financial contributions, although direct contributions remain the most compelling evidence.
Detrimental Reliance (Inferred Intention)
Where common intention is inferred from conduct (like direct financial contributions), that same conduct will usually also suffice as evidence of detrimental reliance. The act of contributing financially is typically seen as being undertaken in reliance on the inferred shared intention.
Worked Example 1.2
David buys a house in his sole name. His partner, Sarah, moves in later. There are no discussions about ownership. Sarah uses a small inheritance to pay for a substantial loft conversion, significantly increasing the property's value. David pays the mortgage and all other household bills. They separate years later. Can Sarah establish an inferred common intention constructive trust?
Answer: Under the strict Rosset approach, Sarah's contribution to improvements might not be enough to infer common intention, as it wasn't a direct contribution to the purchase price or mortgage. However, post-Stack/Jones, a court might consider her substantial financial contribution to the improvement as part of the "whole course of dealing", potentially inferring a common intention and finding detrimental reliance. The outcome is less certain than if she had contributed to the purchase price directly.
Exam Warning
Be aware that the precise scope of conduct sufficient to infer common intention post-Stack and Jones in sole ownership cases remains debated. While direct financial contributions are strongest, arguments might be made for substantial improvements or significant indirect contributions, but Rosset's stricter approach has not been explicitly overruled for the initial stage of establishing any common intention (as opposed to quantifying shares once intention is found). Focus on direct contributions as the clearest path in exam scenarios.
Quantifying the Shares
Once a common intention constructive trust is established (either expressly or by inference), the court must quantify the parties' respective beneficial shares. If there was an express agreement about the shares, that will usually be upheld. If not, the court determines the shares it considers fair having regard to the whole course of dealing between the parties in relation to the property (Stack v Dowden; Jones v Kernott). This allows the court to consider a wide range of factors, including financial and non-financial contributions over the entire relationship, not just contributions at the time of purchase.
Key Point Checklist
This article has covered the following key knowledge points:
- Unmarried couples must rely on trust law (primarily CICTs) to resolve disputes over family home ownership.
- A CICT requires proof of a common intention to share beneficial ownership (express or inferred) and detrimental reliance by the claimant.
- Express common intention is based on evidence of actual discussions or agreements about shared ownership.
- Inferred common intention is deduced from conduct, primarily direct financial contributions to the purchase price or mortgage payments.
- Detrimental reliance involves the claimant acting to their disadvantage based on the common intention.
- The quantification of shares under a CICT involves assessing the parties' whole course of dealing to determine what is fair, unless shares were expressly agreed.
- Resulting trusts are generally not the primary mechanism for resolving family home disputes between cohabitees.
Key Terms and Concepts
- Common Intention Constructive Trust (CICT)
- Detrimental Reliance
- Express Common Intention
- Inferred Common Intention
