The decision in Oxley v Hiscock (6 May 2004) has been inaccurately reported in the national press as representing a complete change in the circumstances which would give rise to the ascertainment of a beneficial interest. To do so would have involved the Court of Appeal overruling several decisions of the House of Lords!

Oxley does, however, represent a clarification of the approach to determining the respective shares once an interest in property has been established. There are two anomalous decisions which stood out from the swathe of caselaw surrounding determination of beneficial interests: Midland Bank and Cooke (CA) and Drake v Whipp. These two decisions take a slightly different stance to the remainder of the authorities in determining shares. The traditional view was to interpret the dicta of Lord Bridge in Lloyds Bank v Rosset as being applicable not only to establishing the existence of a beneficial interest but also to the size of that share where the claim is based on a contribution to the equity:

"...In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement of arrangement to share, however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis from which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities it is at lease extremely doubtful whether anything less will do."

This approach, put simply, has been applied not only to establish a beneficial interest but also as the method of quantifying that beneficial interest: where there is no agreement (actual or implied) the presumption of resulting trust is not displaced and the quantification of shares is referable to financial contributions effecting the equity. It was followed by Lord Justice Dillon in Springette v Defoe:

"In Walker v Hall [1984] FLR 126 I expressed the view that it was not open to this court, in the absence of specific evidence of the parties' intentions, to hold that the property there in question belonged beneficially to the two parties in equal shares, notwithstanding their unequal contributions to the purchase price, simply because it was about to be their family home and they intended - or possible one should say 'hoped' that their relationship should last for life. The effect is that, in the absence of an express declaration of the beneficial interests, the court will hold that the joint purchasers hold the property on a resulting trust for themselves in the proportions in which they contributed directly or indirectly to the purchase price, unless there is sufficient evidence of their common intention that the should be entitled in other proportions - e.g. in equal shares notwithstanding unequal contributions to rebut the presumption of a resulting trust... The common intention must be founded on evidence such as would support a finding that there is an implied or constructive trust for the parties in proportions to the purchase price. The court does not as yet sit, as under a palm tree, to exercise a general discretion to do what the man in the street, on a general overview of the case, might regard as fair."

This is a clear and predictable approach, but has been departed from by judges who simply couldn't hold themselves to the mathematical calculation where this is an affront to fairness. Notably in Drake v Whipp, a case where the parties had purchased jointly a barn for conversion, Mrs Drake having put far less into the venture financially but carrying out the majority of the physical conversion works herself:

"In my judgment the judge's finding on common intention cannot stand in the absence of any evidence that Mrs Drake intended her share to be limited to her direct contributions to the acquisition and conversion costs. I would approach the matter more broadly, looking at the parties' entire course of conduct together."

Further confusion is added by the misreporting of Drake v Whipp as a resulting trust case; it is not.

The fairness-based method was applied again in Midland Bank v Cooke:

"...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."

These two approaches (the mathematical approach and the fairness approach) have been impossible to reconcile. Attempts have been made to construe the intention of the parties at the time of purchase as to the size of their beneficial interests by reference to their later conduct. In Oxley Lord Justice Chadwick accepted that approach was unnecessarily artificial. He attempted to resolve the tension between the two approaches as follows:

"In the absence of evidence that they gave any thought to the amount of their respective shares, the necessary inference is that they must have intended that question would be answered later on the basis of what was then seen to be fair... each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property... "the whole course of dealing" ...includes the arrangements which they make from time to time in order to meet the outgoings (for example, mortgage contributions, council tax and utilities, repairs insurance and housekeeping)".

It would seem, therefore, that the test in Lloyds Bank v Rosset for establishing a beneficial interest remains good but that when it comes to quantification of that interest in circumstances where the parties did not form any intention the court is required to "sit under a palm tree" and assess what would be a fair division by reference to the whole course of dealings between the parties. © Hardwicke Building