In the absence of a trust deed, a nonowning cohabitee will invariably rely on a constructive trust in order to claim an equitable share in their partner’s home. Such a trust requires a common intention (either express or inferred) to share beneficially, coupled with conduct amounting to detrimental reliance (Lloyds Bank Plc v Rossett [1991]). Where the parties have expressly discussed the extent of their respective beneficial interests, the task of the court is relatively straightforward in so far as the claimant’s share will be quantified by reference to what was actually agreed or understood at the time of acquisition. The problem of quantification, however, becomes more complex where there is no shared intention as to the actual proportions in which the parties should share the property.

Over the last decade the courts have adopted two (largely inconsistent) approaches involving, at one extreme, a strict mathematical calculation of the parties’ respective financial contributions on the basis of a resulting trust (Springette v Defoe [1992]) and, alternatively, a broad (almost discretionary) approach based on a determination of what is fair between the parties having regard to the whole course of dealing between them (Midland Bank Plc v Cooke [1995] and Drake v Whipp [1996]).

Significantly, the Court of Appeal decision in Oxley v Hiscock [2004] has firmly rejected the strict (propertybased) approach in Springette in favour of the more robust analysis adopted in Cooke. Indeed, Oxley has already been followed in a subsequent High Court decision: Cox v Jones [2004].

Oxley

The claimant (Mrs Oxley) sought a declaration that the proceeds of sale of the parties’ home in Hartley, Kent, were held by the defendant (Mr Hiscock) upon trust for them both in equal shares.

Giving effect to a common intention

The Court of Appeal proceeded on the basis that both parties intended (and had communicated that intention to each other) that each should have some beneficial share in the property, but that there had been no shared intention as to the precise proportions in which the parties were entitled to the property. On what basis, therefore, was the Court to fill this gap?

In the first place, it was apparent that an express common intention (the first category recognised by Lord Bridge in Rosset) need not extend to defining the actual extent of the parties’ respective shares in the property. The quantification of the claimant’s share was invariably a secondary issue which fell to be determined by the Court itself once it was proved that there was a common intention that the claimant should have some sort of proprietary interest in the property.

In giving effect to that common intention, the Court was entitled to determine what, in all the circumstances, was a fair share, having regard to the whole course of dealing between the parties. This was because there was ‘nothing inherently improbable’ in the parties acting on the understanding that the claimant should be entitled to a share which was not quantified immediately (upon the acquisition of the home) but left to be determined when their relationship ended or the property was sold (Gissing v Gissing [1971], per Lord Diplock, and McFarlane v McFarlane [1972], Lord MacDermott). In these circumstances, the Court stepped in to determine what was fair because, when the time eventually came for that determination, the parties were in dispute and unable to agree.

Assessing the quantum of the beneficial interest

Because the quantum of the beneficial interests depended on all the circumstances, the extent of the respective beneficial interests did not have to be either proportionate to the parties’ respective contributions or equal. Similarly, if the common intention is not express but inferred from conduct (ie by means of direct or indirect financial contributions to the purchase price), the relevant common intention will be that each party should have some beneficial interest in the property without necessarily leading to the further inference that their respective shares should be proportionate to their contributions. Here again, the court will supply the common intention by reference to that which, in all the circumstances, is considered to be fair. This accords with the approach taken by Waite LJ in Cooke, who held that once a claimant’s interest is established by means of a financial contribution to the purchase price of the property, the court was not bound to award an equitable interest strictly in proportion to it. On the contrary, the court was permitted ‘to undertake a survey of the whole course of dealing between the parties’ relevant to their ownership and occupation of the house and ‘their sharing of its burdens and advantages’ in assessing beneficial entitlement.

Significantly, therefore, his Lordship concluded that the court was not required to confine itself to the limited range of acts of financial contribution needed to support a beneficial interest in the first place. It should take into account all conduct that threw light on the question of what shares were intended at the time of acquisition.

Final assessment

The Court of Appeal in Oxley set aside the trial judge’s order giving the parties an equal share in the Hartley property on the ground that it was unfair to the defendant because it failed to give appropriate weight to the fact that his financial contribution to the purchase price (£60,700) was substantially greater than that of the claimant (£36,300).

Accordingly, on the basis that there was a ‘pooling of resources’ in relation to the various other outgoings referable to the ownership of the house and the parties’ cohabitation (so as to suggest equal contributions to the balance of the purchase price), a fair division of the proceeds of sale was held to be 60% to the defendant and 40% to the claimant.

Cox v Jones

The claimant (Miss Cox) brought a claim for a beneficial share in several items of property held by the defendant (Mr Jones), including a house known as Hulls Mill in Great Maplestead, Essex, which was bought in the defendant’s sole name at a cost of £480,000. The property subsequently underwent considerable refurbishment (largely at the expense of the defendant), but the claimant played a significant role in the management and co-ordination of the various works.

Here again, the Court found as a fact that there was an arrangement or common intention regarding joint ownership of the Mill, but not as to the actual proportions of that ownership. In terms of detriment, although the claimant had clearly not made any significant financial contribution to the initial acquisition of the property (or subsequent mortgage payments), it was evident that she had put her career (as a practising barrister) on hold to concentrate on the renovation of the Mill. The vital question, therefore, was how the claimant’s beneficial interest should be quantified in the absence of any express arrangement between the parties as to what precise share she should have in the property. On this point, Mann J had no difficulty in applying Oxley and holding that the interest must be such as was ‘fair having regard to the whole course of dealing between [the parties] in relation to the property’. Although in Oxley both parties had contributed financially towards the purchase price, this was not, in his Lordship’s view, a distinguishing feature, since in both cases the Court was simply supplying (or imputing) a common intention as to the parties’ respective shares on the basis of what was fair in all the material circumstances. On this reasoning, his Lordship concluded that the claimant had made a significant contribution to the works of refurbishment, at the expense of her legal career, and should, therefore, be entitled to 25% of the beneficial interest in the Mill. An equal share was considered too much given that Mr Jones had funded the entirety of the purchase price and the works, as well as the mortgage repayments.

Commentary

The Court of Appeal’s decision in Oxley is to be welcomed as openly recognising the now widely accepted view that, in determining a claim based on constructive trust, the court is essentially embarking on a two-stage determination of the claimant’s case.

The first stage involves the court asking whether there is evidence from which to raise a (communicated) common intention that each party shall have a beneficial share in the property. If the parties have expressly discussed the matter at the time of acquisition, then that will give rise to the first category of common intention constructive trust recognised by Lord Bridge in Rosset.

Alternatively, where the matter is not discussed at all, the requisite constructive trust may be inferred from the fact that each party has made a direct (or indirect) financial contribution (ie Lord Bridge’s second category).

Assuming the common intention (either express or inferred) is coupled with detrimental reliance, the second stage involves the court assessing the extent of the parties’ respective beneficial interests in the property. In some cases, this will be a straightforward task if the parties have discussed the amount of their respective shares.

Invariably, however, the parties will have said nothing about the actual proportions in which they should hold the property. In this latter type of case, the court must determine what share is fair ‘having regard to the whole course of dealing between them in relation to the property’ (Oxley). This will include the arrangements which they make (from time to time) to meet the outgoings (eg mortgage payments, council tax, utilities, repairs, insurance and housekeeping) necessary to live in the property, as well as any work and labour performed on the property.

In many cases, this will not be an easy task given the complexity of the facts and the inherent nature of such claims (involving normally a lengthy inquiry into the parties’ relationship). As Mann LJ himself observed:

... scientific analysis is impossible in these cases [and] what the court has to do is to form an overall assessment.

The danger here is that the court’s assessment of the parties’ beneficial interests may become largely unpredictable, giving rise to uncertainty in the law and a tendency towards increased litigation. The court’s discretion, however, is not entirely unfettered and the uncertainty argument should not be overstated. As with most other equitable doctrines, a broad notion of ‘awarding what is fair’ will inevitably lead to the laying down of more specific guidelines for determining its application. Take, for example, another recent case: Lloyd v Pickering [2004] (see box below).

Comparing proprietary estoppel

What is also significant about Oxley is that the Court of Appeal has openly accepted that there is really no difference in analysis between constructive trust and proprietary estoppel in cases of this kind.

In each case, the court is supplying (or imputing) a common intention as to the parties’ respective shares on the basis of a notion of fairness (or doing justice to the parties) in the light of all the relevant circumstances. Such a notion has already been judicially recognised in earlier cases. In particular in Yaxley v Gotts [1999] where Robert Walker LJ said:

... the species of constructive trust based on ‘common intention’... is closely akin to, if not indistinguishable from, proprietary estoppel.

Undoubtedly, the decision in Oxley provides further support for a welcome relaxation of the Springette ruling, not least because it allows the court, in assessing the quantum of the parties’ respective interests, to consider a wide range of contributions relevant to their ownership and occupation of the house. These do not need to be limited to financial contributions, but may also include contributions of a non-financial nature representing labour and domestic services.

It remains the current law, however, that such contributions will not help a claimant in establishing a common intention at the primary stage of the court’s inquiry into whether or not a constructive trust has arisen (Burns v Burns [1984]), unless there have been express discussions between the parties as to their beneficial entitlement or the claimant can point to a unilateral assurance of title by the legal owner (using proprietary estoppel doctrine).

A general acceptance of the relevance of the claimant’s contributions as homemaker in this context will inevitably require a more radical change in the law, involving statutory intervention.

LLoyd v Pickering

This involved a claimant’s contribution (over a nine-year period) to the setting up and operation of a gym business with his male partner. The couple had lived together from 1990 to 2002. The business was set up in 1993. The claimant had made a contribution (in cash) to the setting up of the business and was active in its daily running as a general manager. Although there was no express agreement (or understanding) between the parties that the claimant would acquire any beneficial share, Blackburne J was able to infer a common intention based on the claimant’s substantial (and continuous) participation in the running of the business. The secondary question was then to determine the size of the claimant’s share. On this point, his Lordship was much influenced by the fact that the business was a joint venture and that the parties (until the breakdown of their relationship) were committed to each other as ‘lifetime partners’. Of particular significance also was the fact that the defendant had acknowledged (in a joint meeting) that the claimant’s involvement in the business merited considerable recognition by conceding him a half-share in it. All these aspects, therefore, clearly pointed to an award of an equal share in favour of the claimant.

Case references

Burns v Burns [1984] FLR 216

Cox v Jones [2004] EWHC 1486 (Ch)

Drake v Whipp [1996] 1 FLR 826

Gissing v Gissing [1971] AC 886 HL

Lloyd v Pickering [2004] EWHC 1513 (Ch)

Lloyds Bank Plc v Rossett [1991] AC 107 HL

McFarlane v McFarlane [1972] NI 59

Midland Bank Plc v Cooke [1995] 2 FLR 915

Oxley v Hiscock [2004] WTLR 709

Springette v Defoe [1992] 2 FLR 388

Yaxley v Gotts [1999] EWCA Civ 1680

Mark Pawlowski is a barrister and professor of property law at the University of Greenwich.  © Property Law Journal