Learning Outcomes
This article explores the creation and operation of implied trusts, specifically resulting and constructive trusts, with a focus on their application to the family home. It also examines the doctrine of proprietary estoppel. For the SQE1 assessment, you will need to understand the fundamental principles of these concepts, how they establish beneficial interests in property, especially in domestic settings, and the requirements for proprietary estoppel. This knowledge will enable you to analyse factual scenarios and identify the correct legal outcomes in SQE1-style multiple-choice questions.
SQE1 Syllabus
For SQE1, you are required to understand the formation and effect of implied trusts and the principles of proprietary estoppel, particularly concerning property rights in the family home. Your knowledge should cover:
- The circumstances giving rise to resulting trusts, including voluntary transfers and purchase money contributions, and the presumptions of resulting trust and advancement.
- The requirements for establishing a common intention constructive trust, focusing on common intention (express or inferred) and detrimental reliance, especially in the context of sole and joint legal ownership of the family home.
- The quantification of beneficial interests under such trusts.
- The requirements for proprietary estoppel: assurance, reliance, and detriment.
- The nature of the remedies available where proprietary estoppel is established.
- The distinction and potential overlap between constructive trusts and proprietary estoppel in family home disputes.
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.
- True or false: A constructive trust requires written evidence to be enforceable.
- In which situation does the presumption of advancement typically arise? a) Transfer from wife to husband. b) Transfer from father to child. c) Transfer between business partners. d) Transfer between siblings.
- What are the three core requirements for establishing proprietary estoppel?
- Can a claimant succeed in establishing a common intention constructive trust based solely on carrying out domestic duties and childcare?
Introduction
When the legal title to property, particularly the family home, does not reflect the contributions or shared understandings of the parties involved, equity may intervene through implied trusts or proprietary estoppel. Unlike express trusts, which arise from a clear declaration by the settlor, implied trusts arise by operation of law based on the presumed intentions or conduct of the parties. Proprietary estoppel prevents a legal owner from denying rights to another party who has relied on an assurance to their detriment. These doctrines are essential for resolving disputes over beneficial ownership, especially in cohabitation scenarios where statutory property adjustment rules available to married couples or civil partners do not apply.
Resulting Trusts
A resulting trust arises in two main situations: apparent gifts (voluntary conveyances or purchases in another's name) and incompletely disposed of beneficial interests under an express trust. For SQE1, the focus is typically on the former.
Voluntary Conveyance and Purchase Money Resulting Trusts
Equity presumes bargains, not gifts. Where property is transferred voluntarily (ie, without consideration) or purchased wholly or partly by one person in the name of another, a presumption of a resulting trust arises. The transferee (legal owner) is presumed to hold the property on trust for the transferor or contributor.
Key Term: Resulting Trust A trust implied by law where property is transferred to someone who pays nothing for it, and they are then presumed to hold the property for the benefit of the transferor or contributor.
Example: Alex provides the full £200,000 purchase price for a flat, but the legal title is registered in Ben's name only. The presumption is that Ben holds the flat on resulting trust for Alex.
If Alex contributes £50,000 and Ben contributes £150,000, Ben holds the flat on resulting trust for himself and Alex in shares proportionate to their contributions (Ben 75%, Alex 25%).
Presumption of Advancement (Gift)
The presumption of resulting trust can be rebutted by evidence showing the transferor intended a gift. Furthermore, in certain relationships, equity presumes the transferor intended a gift – this is the presumption of advancement.
Key Term: Presumption of Advancement A counter-presumption to the resulting trust, arising in specific relationships (e.g., father to child, husband to wife), where a voluntary transfer or contribution is presumed to be a gift.
Example: If a father buys property in his child’s name, the presumption of advancement applies, suggesting a gift was intended.
Rebuttal: Both the presumption of resulting trust and the presumption of advancement can be rebutted by evidence of the transferor's actual intention at the time of the transaction. Subsequent declarations of intention are generally inadmissible. Evidence of illegality may prevent a party relying on either presumption (Patel v Mirza [2016] UKSC 42).
Note: While the presumption of advancement still exists, its application, particularly regarding gender distinctions, is viewed critically and may be rebutted more easily in modern contexts (Pecore v Pecore [2007] 1 SCR 795 – Canadian Supreme Court, influential but not binding in E&W). Section 199 of the Equality Act 2010 will abolish the presumption when brought into force.
Constructive Trusts of the Family Home
Constructive trusts are imposed by law where it would be unconscionable for the legal owner to deny the beneficial interest of another. In the context of the family home, the most common type is the common intention constructive trust.
Key Term: Constructive Trust A trust imposed by equity, regardless of the parties' intentions, to prevent unconscionable conduct, often arising from a common intention regarding property ownership coupled with detrimental reliance.
For SQE1, you need to understand how these trusts establish beneficial interests where legal title does not reflect the parties' understanding or contributions.
Establishing a Common Intention Constructive Trust
The key requirements were established in Lloyds Bank plc v Rosset [1991] 1 AC 107 and refined in later cases like Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53. A claimant must establish:
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Common Intention: That the parties shared a common intention regarding beneficial ownership. This can be:
- Express: Evidenced by oral agreement, discussions, or potentially an excuse given by the legal owner for not including the claimant on the legal title (Eves v Eves [1975] 1 WLR 1338; Grant v Edwards [1986] Ch 638). The agreement must relate to ownership, not just occupation.
- Inferred: Deduced from the parties' conduct. Historically (per Rosset), only direct financial contributions to the purchase price (initial payment or mortgage contributions) were sufficient. Post-Stack, the court takes a broader view in joint names cases, and potentially in sole name cases too, looking at the 'whole course of dealing'.
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Detrimental Reliance: The claimant must have acted to their detriment or significantly altered their position in reliance on the common intention.
- Direct financial contributions clearly qualify.
- Significant contributions to household expenses may count if they enable the legal owner to pay the mortgage (Le Foe v Le Foe [2002] 1 FCR 107).
- Substantial improvements to the property can also constitute detriment (Eves v Eves).
- Domestic contributions alone are generally insufficient (Burns v Burns [1984] Ch 317).
Quantifying the Share
Once a common intention constructive trust is established, the court must quantify the parties' shares.
- Joint Legal Ownership: The starting point is joint and equal beneficial ownership (Stack v Dowden). This presumption is strong and can only be displaced by evidence of a different common intention, deduced from the parties' whole course of dealing (financial contributions, reasons for joint ownership, nature of relationship, how finances were managed etc.). It is unusual for the presumption to be rebutted.
- Sole Legal Ownership: There is no presumption of joint beneficial ownership. If an express agreement on shares exists, it will generally be upheld. If not, the court will infer or impute an intention based on the whole course of dealing to determine what shares are fair (Jones v Kernott). The shares awarded need not be proportionate to direct financial contributions.
Worked Example 1.1
Chloe and David, an unmarried couple, buy a house together. Chloe contributes £20,000 to the deposit, and David contributes £10,000. The house is registered in David's sole name. David pays the mortgage, while Chloe pays all household bills and funds significant renovations. They discussed that the house was "theirs" but never specified shares. They separate. Advise Chloe on establishing an interest.
Answer: Chloe needs to establish a common intention constructive trust. There appears to be an express common intention ("theirs"). She has acted to her detriment by contributing to the deposit, paying bills (potentially enabling David to pay the mortgage), and funding renovations. A constructive trust likely arises. Quantification will be based on the whole course of dealing, aiming for fairness, not just her initial 20% deposit contribution.
Proprietary Estoppel
Proprietary estoppel provides a potential remedy where one party (A) has acted to their detriment in reliance on an assurance by another party (B), the legal owner of property, that A has or will acquire rights in that property. Equity may intervene to prevent B from acting unconscionably by denying the rights A expected.
Key Term: Proprietary Estoppel An equitable doctrine preventing a property owner from denying rights to another who has acted to their detriment in reliance on the owner's assurance regarding those rights.
Requirements for Proprietary Estoppel
The claimant must establish three elements (Thorner v Major [2009] UKHL 18):
- Assurance: A representation or assurance by the legal owner relating to the claimant's rights in the property. This must be "clear enough" in the context. It can be express or inferred from conduct (eg, passive acquiescence).
- Reliance: The claimant must have relied on the assurance. There is a presumption of reliance if assurance and detriment are established, which the defendant must rebut.
- Detriment: The claimant must have acted to their detriment as a result of the reliance. Detriment is judged broadly and need not be purely financial (eg, working for low wages, giving up opportunities, providing care - Jennings v Rice [2002] EWCA Civ 159). The detriment must be substantial.
Satisfying the Equity (Remedy)
If estoppel is established, the court has discretion to award a remedy to satisfy the equity, doing the minimum necessary to achieve justice and avoid an unconscionable result. The remedy is proportionate to the detriment suffered in reliance on the expectation. Possible remedies include:
- Transfer of the freehold.
- Grant of a lease or right to occupy.
- Monetary compensation.
- Grant of an easement or other limited right.
The court will consider the claimant's expectation but is not bound to award it; proportionality is key (Jennings v Rice).
Worked Example 1.2
An elderly farmer repeatedly told his nephew over 30 years that he would inherit the farm. In reliance, the nephew worked long hours on the farm for very low pay, foregoing other career opportunities. The farmer died leaving the farm to someone else in his will. Can the nephew claim the farm?
Answer: Yes, likely via proprietary estoppel. There was a clear assurance (inheritance promise), reliance (working for low pay, foregoing opportunities), and substantial detriment over many years. It would be unconscionable to deny the nephew's expectation. The court has discretion regarding the remedy, but given the long period and extent of detriment, awarding the farm itself might be deemed proportionate (Thorner v Major).
Interaction with Constructive Trusts
While distinct, proprietary estoppel and common intention constructive trusts can overlap, particularly in family home contexts. Both involve notions of assurance/agreement, reliance, and detriment/unconscionability.
- Focus: Estoppel focuses on preventing unconscionable denial of an assurance; constructive trusts focus on giving effect to a common intention regarding ownership.
- Outcome: A successful constructive trust claim establishes a beneficial interest. Estoppel leads to a discretionary remedy aimed at satisfying the equity.
- Formality: Constructive trusts of land are exempt from the formality requirement of writing (s.53(2) LPA 1925). The position regarding proprietary estoppel and the formality requirements for land contracts (s.2 LP(MP)A 1989) is complex, but estoppel claims can succeed despite lack of writing.
Exam Warning
Be prepared to distinguish between resulting trusts (contribution-based), constructive trusts (common intention + detriment), and proprietary estoppel (assurance + reliance + detriment). Note that the 'whole course of dealing' approach from Stack primarily applies to quantifying shares in joint names cases but can inform the court's view of fairness in sole name cases too. Rosset remains the starting point for establishing an interest in sole name cases, though its strictness regarding inferred intention (requiring direct financial contributions) has been questioned.
Key Point Checklist
This article has covered the following key knowledge points:
- Resulting trusts arise from voluntary transfers or purchase money contributions, based on presumed intention, but can be rebutted by evidence or the presumption of advancement.
- Common intention constructive trusts require a common intention (express or inferred) about ownership and detrimental reliance by the claimant.
- In joint name cases, equity presumes equal beneficial shares (Stack v Dowden), rebuttable by evidence of contrary common intention based on the whole course of dealing.
- In sole name cases, the claimant must first establish a common intention trust (Lloyds Bank v Rosset), after which the court quantifies the share based on fairness and the whole course of dealing (Jones v Kernott).
- Proprietary estoppel requires assurance, reliance, and detriment, leading to a discretionary remedy to prevent unconscionability.
- The doctrines can overlap but have different requirements and outcomes.
Key Terms and Concepts
- Resulting Trust
- Presumption of Advancement
- Constructive Trust
- Proprietary Estoppel
