England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HALIFAX COUNTY COURT
(HIS HONOUR JUDGE WALKER)

		Royal Courts of Justice Strand London WC2
		30th November 1995

Thursday, 30th November 1995

LORD JUSTICE PETER GIBSON: Yet again this court is asked to rule on a dispute between a man and a woman, who cohabited but were not married to each other, as to their respective beneficial interests in a property which they purchased to be their home but which was put into the man's name only. The usual lengthy litany of authorities as well as more recent additions have been recited to us and, as is notorious, it is not easy to reconcile every judicial utterance in this well-travelled area of the law. A potent source of confusion, to my mind, has been suggestions that it matters not whether the terminology used is that of the constructive trust, to which the intention, actual or imputed, of the parties is crucial, or that of the resulting trust which operates as a presumed intention of the contributing party in the absence of rebutting evidence of actual intention. I therefore like Waite L.J. in Midland Bank v Cooke ([1995] 4 All ER 562 at pp. 564,5) ) welcome the announcement earlier this year that the Law Commission is to examine the property rights of home-sharers (Item 8, Sixth Programme of Law Reform : Law Com. No. 234).

The facts of the present case are unusually simple. In September 1985 the Plaintiff, Mrs. Drake, and the Defendant, Mr. Whipp, left their respective spouses to live together. For 3 years they lived in property provided by Mr. Whipp. They did not find this satisfactory. So they looked for accommodation elsewhere. Mrs. Drake knew of a barn which might be for sale and which might be converted into a dwelling-house. But as the Judge found, "It would need planning permission and a mint of money spending on it before it would be a suitable home." They decided to buy it. On 6 September 1988 Mr. Whipp contracted to buy in his sole name the property now known as Coley Barn, Norwood Green, Halifax. The total purchase price including costs was £61,254. Mrs. Drake provided £25,000 (or 40.1% of that total), Mr. Whipp the remainder. The property was conveyed into Mr. Whipp's sole name on 8 October 1988. Neither the contract nor the conveyance made any mention of a trust.

Even before the conveyance, works of conversion began. £129,536 was spent on those works. Of that sum only £13,000 was contributed by Mrs. Drake. Mr. Whipp provided the remainder. In October 1989 they moved into the partially converted barn which was not substantially completed until 1991. Both contributed to the conversion work by way of direct labour. Of the total hours they devoted to that work, Mr. Whipp contributed 70% and Mrs. Drake 30%. When Mrs. Drake left her husband she had no job or money. Mr. Whipp had her name added to his current bank account. Into this account he paid his salary as a company director which was between £200 and £400 per week. Mrs. Drake's capital contributions were also paid into it. She worked as a textile worker receiving about £80 per week in cash out of which she paid for food and household expenses for both of them. But he took care of the household accounts and paid the tax and insurance on her car.

In September 1991 Mr. Whipp formed another relationship and from June 1992 the parties lived separately within Coley Barn. Mrs. Drake later left Coley Barn. On 8 January 1993 Mrs. Drake commenced proceedings in the Halifax County Court against Mr. Whipp by originating application. There were therefore no pleadings. The orders she sought, so far as material, were a declaration that Mr. Whipp held Coley Barn in trust for Mrs. Drake and himself in equal shares or such shares as the court might think fit, an order for sale and division of the net proceeds, alternatively a payment by Mr. Whipp to Mrs. Drake of a sum equal to her interest in Coley Barn.

Before I recount what occurred at the trial before His Honour Judge Walker, it is convenient to set out the latest statement of the highest authority on the task of any judge required to resolve a dispute between former partners as to the beneficial interest in the home they formerly shared. In Lloyds Bank plc v Rosset [1991] 1 AC 107 at pp. 132-3 Lord Bridge said:

"The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will be only necessary for the partner asserting the claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or 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 least extremely doubtful whether anything less will do."

This passage was read twice to the Judge. But nevertheless it was the submission of Mr. Carlisle for Mrs. Drake that Mr. Whipp held Coley Barn not on a constructive trust but as trustee on a resulting trust, both parties having made contributions to the purchase price, on the application of the principle of Dyer v Dyer (1788) 2 Cox Eq. Cas. 92. However that principle could not apply if (1) there was a common intention to share the property beneficially found to exist on the application of the guidance given by Lord Bridge, whether by dint of a finding of an agreement, arrangement or understanding on evidence of express discussions between the partners or by ready inference from direct contributions to the purchase price by the partner who is not the legal owner, and (2) that partner has acted to his or her detriment in reliance on the common intention.

In the present case it seems to me that the Judge made findings and there was undisputed evidence which amounted to there being a common understanding between the parties that they were to share beneficially. He found that it was their decision to purchase with contributions from each. He recited Mrs. Drake's evidence of the purchase: "I thought it was joint otherwise I wouldn't have put my money into it. He said he would put my name on it in about a months time. I trusted him completely." He also recounted that later she had asked Mr. Whipp about it a number of times and that he usually said he was busy, and at the end of their relationship he expressly refused to have her name put on the deeds. His reluctance stemmed from the fact that he thought even as late as the trial that if property were put in joint names, that meant that the joint holders shared the beneficial interest equally. The Judge recounted Mr. Whipp's evidence that he was always willing that Mrs. Drake should have her fair proportion of the value of the house according to what she had contributed. All this is supported by the verbatim evidence that can be seen from the transcript. This shows that Mrs. Drake said, "We were buying [Coley Barn] together as our home", that she said that it was when he was going to get the barn that he promised to put her name on the title, that Mr. Whipp's evidence was that he told her at the time of the purchase he would put the matter right and by that he meant that since he was using her money, she would get a percentage of the value of the property in proportion to her contributions. There were in effect no challenges to this evidence.

It is therefore all the more remarkable that, notwithstanding this evidence and notwithstanding the fact of a direct contribution to the purchase price, when Miss Newton for Mr. Whipp came to address the Judge she expressly conceded that there was no agreement and no common intention, and based her argument on a resulting trust. The debate before the Judge turned on whether it was permissible to take account of the respective contributions to the costs of conversion in addition to the costs of acquisition, Mrs. Drake's case being that this could not be done under the doctrine of a resulting trust whereas Mr. Whipp's case was that it could and should be done on the facts of the present case in order to achieve fairness. The Judge agreed with Mr. Whipp. He found that both parties knew that in order to achieve the purpose of a home for which the barn was bought, substantial sums would have to be spent and the bulk of the cost met by Mr. Whipp as he had the savings and the earning capacity. He found that their common intention was to purchase the property and carry out a conversion in accordance with plans earlier approved and that each should contribute, accordingly to his or her ability, to the ultimate cost. He therefore held that Mrs. Drake's share of the total expenditure of £195,790, viz. £38,000, entitled her to a 19.4% share. He found that the value of Coley Barn was £225,000 and ordered that unless Mr. Whipp paid to Mrs. Drake 19.4% of that £225,000, viz. £43,650, the property be sold.

Mrs. Drake now appeals to this court. Mr. Carlisle submits that the Judge wrongly conflated the separate doctrines of constructive trust and resulting trust, whereas he was only concerned with a resulting trust. That, he submitted, required attention to be paid only to the cost of acquisition of the property, the cost of its subsequent enhancement being irrelevant. When it was put to him that this was a case of a constructive trust by reason of a common understanding or intention acted on by his client to her detriment, he submitted that there had to be a common understanding or intention as to the respective shares to be taken by the intended beneficial owners. That is an impossible argument in the light of the authorities (see, for example, the speech of Lord Diplock in Gissing v Gissing [1971] AC 886 at pp. 907-9). All that is required for the creation of a constructive trust is that there should be a common intention that the party who is not the legal owner should have a beneficial interest and that that party should act to his or her detriment in reliance thereon.

Given the clear view which I and, I understand, my Lords have formed that the present case is one of a constructive trust and that Miss Newton's concession that there was no common intention was wrongly made, it would in my judgment be artificial in the extreme to proceed to decide this appeal on the false footing that the parties' shares are to be determined in accordance with the law on resulting trusts. However it would be wrong to proceed on the true basis if Mrs. Drake were thereby put at a disadvantage which would not have happened but for the concession. As Mr. Carlisle rightly pointed out, in constructive trust cases, the court can adopt a broad brush approach to determining the parties' respective shares. He accepted that Miss Newton's concession, coming as it did after the evidence was concluded, had not affected the evidence which he called or his cross-examination of Mr. Whipp, but he submitted that he would have presented a wider argument based on indirect contributions had the concession not been made. Both Mr. Carlisle and Miss Newton asked that if this court took the view that there was a constructive trust, we should not remit the case to the County Court but should come to our own conclusion as to the appropriate beneficial shares.

In Grant v Edwards [1986] Ch.638, the judgments in which I have found particularly helpful and illuminating, Sir Nicolas Browne-Wilkinson V.-C. said at p. 657:

"What then is the extent of the plaintiff's interest? It is clear from Gissing v Gissing that once the common intention and the actions to the claimant's detriment have been proved from direct or other evidence, in fixing the quantum of the claimant's beneficial interest the court can take into account indirect contributions by the plaintiff such as the plaintiff's contributions to joint household expenses : see Gissing v Gissing [1971] AC 886 at 909A and D-E.....

Where, as in this case, the existence of some beneficial interest in the claimant has been shown, prima facie the interest of the claimant will be that which the parties intended: Gissing v Gissing [1971] AC 886, 908G. In Eves v Eves [1975] 1 WLR 1338, 1345G Brightman L.J. plainly felt that a common intention that there should be a joint interest pointed to the beneficial interests being equal. However, he felt able to find a lesser beneficial interest in that case without explaining the legal basis on which he did so. With diffidence, I suggest that the law of proprietary estoppel may again provide useful guidance. If proprietary estoppel is established, the court gives effect to it by giving effect to the common intention so far as may fairly be done between the parties. For that purpose, equity is displayed at its most flexible: see Crabb v Arun District Council [1976] Ch 179. Identifiable contributions to the purchase of the house will of course be an important factor in many cases. But in other cases, contributions by way of the labour or other unquantifiable actions of the claimant will also be relevant."

In Lloyds Bank v Rosset Lord Bridge at p.133 referred to Eves v Eves (in which a woman partner was held to have a 25% interest in a house through her contributions in the form of the work she did on the house) and to Grant v Edwards (in which a woman partner was held to have a 50% interest by reason of her substantial indirect contributions in cash), and said:

"It is significant to note that the share to which the female partners in Eves v Eves and Grant v Edwards were held entitled were one-quarter and one-half respectively. In no sense could those shares have been regarded as proportionate to what the judge in the instant case described as a "qualifying contribution" in terms of the indirect contributions to the acquisition or enhancement of the value of the houses made by the female partners."

In the present case the Judge has found what was the common intention of the parties as to their beneficial shares, but the only direct evidence in support of that finding was Mr. Whipp's evidence as to his own intention. The Judge appears to have imputed the like intention to Mrs. Drake although there is nothing in her evidence to support it. Further the Judge refused to take into account the contributions of the parties by way of their labour, being unquantified in monetary terms, and similarly Mrs Drake's other contributions to the household were ignored. No doubt this was because he was not invited to consider the matter on the basis of a constructive trust.

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. I would take into account not only those direct contributions but also the fact that Mr. Whipp and Mrs. Drake together purchased the property with the intention that it should be their home, that they both contributed their labour in 70%/30% proportions, that they had a joint account out of which the costs of conversion were met, but that that account was largely fed by his earnings, and that she paid for the food and some other household expenses and took care of the housekeeping for them both. I note that whilst it was open to Mrs. Drake to argue at the trial for a constructive trust and for a 50% share, she opted to rely solely on a resulting trust and a 40.1% share. In all the circumstances I would hold that her fair share should be one third.

I would allow the appeal to this extent, and grant a declaration that Mr. Whipp holds Coley Barn in trust for Mrs. Drake and himself in the proportions one third and two thirds respectively and I would direct that unless Mr. Whipp pays Mrs. Drake £75,000, the property be sold. I would hear Counsel on how much time Mr. Whipp should be given to make that payment.

MR JUSTICE FORBES: I agree.

LORD JUSTICE HIRST: I also agree.

ORDER:

(1) Appeal allowed with costs here and below on the normal standard basis;

(2) Legal Aid Taxation;

(3) Judgment with interest at 8% from 19th April 1994 on full amount until the first tranche is paid, and on the balance until that is paid;

(4) The first tranche (£43,000) to be paid within 6 weeks from today and the balance, including interest, 3 months later.