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Constructive trusts - implied rules relaxed |
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The courts can use the equitable device of a ‘constructive trust’ to give a
property interest to someone who does not have ‘legal’ rights. Typically, this
will be done when the relationship between an unmarried couple comes to
an end, so as to give the non-owner a stake in the property. Likewise, it can
be used to protect the interest of a married (unmarried) partner when a
mortgage lender seeks possession of the property (or when a
creditor/trustee in bankruptcy seeks possession).
There are two ways in which the partner (married or unmarried) can claim a
constructive trust. Firstly, it could be argued that there was an express
bargain (ie a promise was made that he or she would own part of the
property). The second method, and the one that creates more problems, is
when there was an implied bargain – and so the court will make an inference
from the pattern of conduct and mutual dealings between the parties.
Needless to say, this is an area of law that the courts have grappled with for
over 30 years in trying to decide the extent to which one can imply a
constructive trust through the behaviour of the parties. However, the CA
changed the law in 2004 and, in effect, relaxed the requirements. In the
past, the courts would look for an (artificial) common intention between the
parties, usually based on a minute analysis of behaviour. Now the approach
is to say that an intention to share will ‘readily be inferred’ from the fact that
both sides have made some sort of financial contribution to the purchase
(with even a small financial contribution being enough to trigger the creation
of a constructive trust). This can, of course, include contributions to the
running of the household. In practical terms, this is likely to be a significant
relaxation. In particular:
- under the old law, the court could not find a constructive trust (common
intention) if the parties admitted that they had never previously considered
the question of ownership. Now, however, a constructive trust is possible;
- likewise, a trust can now be found even if there was no previous precise
quantification of the respective beneficial interests;
- it will only be in very rare cases that a partner is unable to point to some
financial contribution, however small, towards the purchase of a property,
sufficient to allow the court to infer an intention to share beneficially. Once
that inference has been made, the court can order a share of beneficial
ownership which is larger than that money contribution.
See note on Oxley v Hiscock [2004] EWCA Civ 546 in [2006] 164 Property
Law Journal 18.
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April 2006 |
