Determination of rights of property in the context of trusts relating to the family home in England and Wales
Possibly the most familiar situation in which rights in property conferred by the operation of the constructive trust is encountered is in respect of occupation of the family home. While section 25 of the Matrimonial Causes Act 1973 (as amended) confers wide ranging powers and a broad discretion as to their use upon the court when regulating the interests in such a property of spouses upon divorce, the fact that these powers are not available in respect of non-spouses and cannot be used to adjust the interests of occupiers and third parties such as banks has the result that recourse is frequently had to the equitable device of the constructive trust in order to achieve a just result. Perhaps for this very reason a simple definition of such a trust is not available. Edmund Davies LJ has observed :
“English law provides no clear and all-embracing definition of a constructive trust. Its boundaries have been left perhaps deliberately vague, so as not to restrict the court by technicalities in deciding what the justice of a particular case may demand.”
Oakley in the passage which immediately precedes the extract under discussion herein agrees that there is no reason in principle why the categories of situation in which the English courts will impose a constructive trust should be closed. However, he is concerned as to the impact of such principles upon established property rights:
“The proprietary nature of these liabilities affects the existing property rights not only of the constructive trustee, and, in the event of his bankruptcy, of his general creditors. As a matter of principle, such alterations of existing property rights should not ensue merely from the desire of the courts to do justice in the instant case in the way in which it is used in the USA.”
While legislation seeks to define and regulate interests in land and their acquisition with precision, there has long been recognition that on occasion absolute compliance with formal requirements can create injustice. Thus, for example, s.53(2) of the Law of Property Act 1925 provides that the requirement of a signed written document for the creation or disposal of interests in land does not affect the creation or operation of resulting, implied or constructive trusts. However, a tension has arisen over whether the constructive trust properly arises from the imposition of a just and equitable remedy by the courts or whether it must be the product of the actual intentions of the parties. The impact upon third parties is illustrated by the landmark case of Williams & Glyn’s Bank Ltd v Boland in which a mortgage was entered into by the husband alone posing as being solely entitled to the fee simple. In fact, by virtue of a contribution by the wife to the purchase price, she was entitled to a half share and the husband held this on trust for her. In ensuing litigation with the lending bank, the wife successfully claimed that her interest bound the bank under the now notorious s.70(1)(g) of the Law of Property Act 1925.
However, it should not be assumed that a desire to do justice to an occupant of a family home will necessarily in every case wreak havoc upon the rights of third parties. In Burns v Burns , an unmarried partner contributed to the family home by means of housework, childcare, decorating and the purchase of chattels over a period of 17 years but was not allowed a share on the basis that “mere” domestic duties would not be sufficient to found the acquisition of an interest n the home. In Lloyds Bank v Rosset , Lord Bridge placed emphasis upon the need for direct contributions either to the initial purchase price or to the payment of the mortgage in order to establish the requisite common intention that the partner should acquire an interest. It should be noted, however, that the familiar earlier cases of Eves v Eves and Grant v Edwards do not fall foul of this stricture since in each of those cases there was evidence of an expressed common intention.
Thus it will be seen that the operation in English law of the constructive trust is such as to set it apart from the concept developed in other jurisdictions of the “remedial constructive trust” that is, one which is imposed in order to achieve a just and equitable result irrespective of the actual or implied intentions of the parties. Cretney et al opine:
“Although the doctrines of implied, resulting and constructive trusts are all based on the underlying principle that it would be unconscionable to allow the legal owner to assert the absolute ownership which appears on the title documents, the element of unconscionability is a necessary but not a sufficient condition for the establishment of an equitable interest.”
With characteristic innovation, Lord Denning attempted in the 1970’s to push at the boundaries of the constructive trust promoting a ‘new model’ in which the guiding principle was the fairness of the outcome “wherever justice and good conscience require it”. This reflects the perceived advantages of the approach in the USA and certain Commonwealth jurisdictions where the device is used to create and confer a new proprietary interests and conflicts with the traditional approach of the English law which is to struggle on occasions to deduce from circumstances the existence of an interest that is in conflict with strict proprietary rights. In Westdeutsche Landesbank Girozentrale v Islington LBC Lord Browne-Wilkinson applauded this as “a more satisfactory way forward” recommending that the courts be empowered to impose a constructive trust on a defendant who knowingly retains property of which the claimant was unjustly deprived and arguing that “since the remedy can be tailored to the circumstances of the particular case, innocent third parties would not be unjustly deprived…”. Oakley (Op. Cit., p.24) seems to regard such progress with resignation stating that the House of Lords will undoubtedly have to decide in due course between the radical approach of Lord Denning in the 1970’s and the more conservative approach which while often straining to achieve the “just and equitable” at least pays lip service to the existence of proprietary rights.
Bibliography
- Cretney, S., Masson, J., Bailey-Harris, R., Principles of Family Law, (7th Ed., 2003)
- Martin, J., Hanbury and Martin, Modern Equity, (16th Ed., 2001)
- McKenzie, J-A. & Phillips, M., Textbook on Land Law, (10th Ed., 2004)
- Oakley, A., Constructive Trusts, (3rd Ed., 1996) (NB New edition due 2005)
- Todd, P. & Wilson, S., Textbook on Trusts, (6th Ed., 2003)
- Westlaw
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