Cases of implied co-ownership arise where one party (A) alone holds the legal title to the land, but a court determines that they aren’t exclusively entitled to the value of the land because another (B) has acquired an equitable right against them for a share of that value.
Issues in these cases are about B’s equitable entitlement to proceeds of the sale, not actual occupation (B won’t be arguing that they should be entitled to stay in the property, but that they should receive some of the sale price).
Also known as ‘sole title-holder’ or ‘acquisition’ cases.
Married and Civil Partner Couples:
The courts have broad statutory discretion to settle property rights upon divorce. [1]
This only automatically applies when the dispute is between the couple; if the dispute is with a third-party (typically a mortgage lender), a property right has to be established first and is not dealt with via this legislation.
Trusts of Land:
Since the other party isn’t a legal joint tenant by virtue of their position in these cases, they cannot claim an entitlement under an express trust of land.
The LPA 1925 is premised on assumptions that trusts of land would be expressly created, with readily identifiable beneficiaries, holding defined shares, often as investments and primarily in respect of larger land holdings. [2] This is no longer the case with land today.
Implied co-owners are in a weaker position than express co-owner. [3]
Implied Trusts:
Interests in land are usually acquired through consensual transfer or creation. As such, parties must normally satisfy certain formality requirements. However, implied trusts of land are not subject to these requirements. [4]
If the claimant establishes a constructive or resulting trust, they will be entitled to a share of the equitable interest. The legal title will remain with the legal owner, but they will also become a trustee holding the equitable interests of the land for themselves and the successful claimant as a tenancy in common.
Resulting Trusts:
A resulting trust is where the other party gets back their proportion of the contribution to the purchase price of the land once it is sold (and all debts secured on the land have been extinguished).
Property that ‘results’ is property that ends up back where it started.
Normally, a resulting trust is presumed (prima facie) because of the contribution. However, if the money given as a gift by B to A is then used to reduce the debt on the land (by A’s choice), no resulting trust arises. [5]
Direct Financial Contribution:
Direct financial contributions can be towards the purchase price, mortgage payments, [6] or entitlements that lower the cost of the land (such as under the right to buy scheme). Where this happens, the contributor has a beneficial entitlement.
In Oxley v Hiscock, A bought a local authority property as the sole legal title holder, intending on living in it with B. B contributed to the purchase price and was entitled to a discount on the price (due to benefits). The court held that, since B’s discount reduced the price for A as well as B, it was part of their direct contribution.
Contributions which add something permanent to, and substantially increase the value of, the land to the effect of increasing the sale price may also count as a direct contribution and give rise to a beneficial entitlement. [7]
Simply spending money on the land won’t necessarily establish a beneficial entitlement.
In Hosking v Michaelides, H constributed £20,000 towards an installation of a swimming pool. The court held that this did not give rise to a beneficial interest as the pool had not increased the value of the land.
Indirect Contributions:
Generally, only a direct contribution will raise a beneficial entitlement.
Even where value has been added to the land over time, the courts generally prefer to treat this improvement as an indirect contribution. As such, it is doubtful whether this gives the contributor a beneficial entitlement.
Indirect contributions may also made by paying (or contributing to) utility bills, shopping, school fees etc. These will not give a beneficial entitlement. [8]
Using Indirect Contributions to Establish a Beneficial Interest:
The sole title holder may only be able to cover the direct cost of the land purchase by virtue of the other’s indirect contributions.
As such, many academics agree that a person who makes indirect contributions should be able to use this to establish a beneficial entitlement. [9] However, this is not the case legally (or is at least unclear).
In Lloyds v Rosset, the HL held that a direct contribution sufficed to establish a beneficial entitlement under a constructive trust (but not a resulting trust).
Bridge LJ: ‘Direct contributions to the purchase price by the partner who is not the legal owner [B] … will readily justify the inference necessary to the creation of a constructive trust. But … it is at least extremely doubtful whether anything less will do’
(Common Intention) Constructive Trusts:
A constructive trust allows more flexibility when quantifying the beneficial entitlement compared to a resulting trust. Because of this, constructive trust principles are normally applied, and preferred, by the courts when ruling on beneficial entitlements of claimants who have informally acquired rights in land.
‘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’ [10]
B has a beneficial entitlement under a constructive trust if there is an intention to share between both A and B, and B relies on this common intention to their detriment. [11]
Common intention + detrimental reliance = beneficial interest.
Where this entitlement under a constructive trust arises, the legal owner holds the land on trust for both themselves and the equitable owner(s).
Express Common Intention to Share:
Where the sole title holder articulates something that can be interpreted as an expression of their intention to share the property with another, there is a constructive trust entitling the other party to a share of the proceeds of sale.
EG: saying ‘although title to the house is in my name alone, I consider the house to be as much yours as mine.’
The expression does not have to be so clear or precise. In fact, the words of the sole title holder could be to the effect of avoiding or being unwilling to share.
In Eves v Eves, A and B were unmarried and moved into a house together. B wanted to be an express co-owner with A, but A told B that, because she was under 21, the legal title to the house had to be in his name alone (untrue). B accepted this lie and put work into the property. After they split, A argued that B had no beneficial entitlement.
The CA held that B did have an entitlement, awarding B a 25% share of the proceeds on the basis on A’s lie as evidence of the common intention to share, and the work which B had put into renovations (indirect contributions).
In Grant v Edwards, B wanted to be an express co-owner with A, but A told B it was inadvisable for her name to be on the legal title as it could prejudice her divorce proceedings (untrue).
The CA held that A’s statement was evidence of a common intention to share the property and that B had a beneficial entitlement under a constructive trust.
Note: This is because, but for the title holder’s lie, both would’ve been express co-owners.
In Curran v Collins, A, already holding sole title, met B and made it expressly clear to B that he would not add her name to the title because it would require them both to take out costly life insurance (untrue). The CA held that this statement didn’t indicate an express common intention to share.
Lewison LJ at [69]: ‘it cannot be right that the giving of a reason why someone is not on the title deeds invariably leads to the inference that it must have been agreed that they would have an interest in the property. If one who is not versed in the difference between legal and beneficial ownership asks to be on the deeds and is told ‘No’, the more usual inference is that they would have understood that they were not to become owners or part owners of the property.’
Lewison LJ: The case is distinguished from Grant and Eves:
- since, in Curran, A’s property was not acquired together with B to be a home (A already owned it).
- In Curran, it was made explicitly clear that the title holder didn’t want to share their title. A must not indicate to B that there are circumstances in which they would’ve shared the title, even if this is untrue.
Direct and Indirect Contributions:
Direct contributions to the purchase price will always show detrimental reliance.
However, the detriment necessary doesn’t have to be a direct contribution; it can take many forms. The detriment need not be ‘detrimental’ in the sense of harmful to the claimant.
Detriment could also be in the claimant’s conduct, [12] or through financial support towards paying bills or settling household expenses.
Implied Common Intention to Share:
Often, such express arrangements do not exist. The court may also infer a common interest to share from the conduct of the parties.
Direct Financial Contributions:
Under Rossett, the only sufficient evidence of the detriment in cases of an implied common intention to share is direct contributions to the purchase price. [13] Without this, there is no beneficial entitlement in cases of implied common intention. [14]
These contributions can be made either as an initial lump sum payment, paying towards some of the mortgage instalments, or by virtue of securing a discount on the purchase price. [15]
Reasons to Reform This to Allow Indirect Contributions to Establish Beneficial Interests: [16]
If the courts only accept direct contributions as establishing beneficial entitlements, a claimant might be awarded a large beneficial share despite only making a small direct contribution. On the other hand, is they make no direct contribution but significant indirect contributions, they are not entitled to any share at all. This seems unfair.
The current position does not reflect reality of life - most cohabitants make choices about how to split expenses based on convenience and practicality, not to establish beneficial entitlements.
As long as men earn more than women on average, only treating direct contributions as establishing beneficial entitlements inherently favours men.
Judges have also expressed discontent with the current law (in obiter), [17] suggesting that indirect contributions should be capable of establishing beneficial entitlements.
As a result of this rule, B could direct contribute a little amount to the purchase price and result in a larger award, or indirectly contribute a lot to (ongoing) costs / bills and be awarded nothing.
In Midland Bank v Cooke, C purchased a house in his name alone with his savings, a mortgage, and £1100 given to him and his wife as a wedding present from C’s parents. C and his wife never came to any agreement regarding their beneficial interests.
Upon separation, the CA ruled that half of the wedding present (£550) was the wife’s direct contribution. Although that only amounted to a share of the sale under 7%, the CA awarded her a 50% beneficial share due to her detriment (she had career on hold, second mortgage etc.).
Direct contributions are always the detriment.
Joint Legal Tenants vs Sole Title Holder Cases: [18]
2-Stage Test: establish whether there is a common intention to share, then look at the course of conduct to quantify the beneficial share. [19]
Joint Legal Tenants:
Where both parties are legal joint tenants (property is purchased in joint names for joint occupation), the beneficial entitlement is established automatically under common intention constructive trust, regardless of whether a direct contribution is made.
Each party is presumed to have a 50% (or equal, if more than 2) beneficial interest (even if one contributed nothing) – equity follows the law. One of the parties may seek to have a share greater than 50%.
This presumption can then be (rather difficultly) rebutted by showing that the common intention was that the shares would not be divided equally, either at the time of acquisition or later.
In Stack v Dowden, A and B owned property as legal joint tenants but had not discussed their shares in the property. When they separated, B had been responsible for repaying over 65% of the overall price.
The HL held that their unequal contributions to the purchase price and their broader financial arrangements rebutted the presumption of equal shares. B awarded a 65% share of the beneficial entitlement.
Hale LJ at [69]: ‘cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual’
Sole Title Holders:
For cases where only one party holds legal title, the other must either show express evidence of a common intention to share or have made direct contributions to establish a beneficial interest (see above).
EG: buying a family house together.
This is especially hard to establish where the property was acquired before the relationship began.
If they do show sufficient evidence, there is no presumption of joint (equal) beneficial ownership. The court can holistically and objectively look towards a common intention, contributions and broader financial dealings and arrangements to qualify the distribution of shares in the property.
In either type of case, once it is established that the parties have a common intention to share, a court can look at the ‘whole course of conduct’ between the parties to determine the share of beneficial interests. Financial contributions are relevant, but not the only factor in play.
Therefore, while indirect contributions do not establish a beneficial entitlement, they are important in quantifying the entitlement once it is found.
‘whole course of conduct’ = considering the purpose for which the home was acquired; the nature of the parties’ relationship; whether they had children; how the purchase was financed; how the parties arranged their finances, whether separately or together or a bit of both; how they covered outgoings on the property and other household expenses. [20]
Where the court cannot determine what the intentions of the parties was, they may impute an intention to quantify the beneficial entitlement.
In Jones v Kernott, K and J bought a house together as legal joint tenants. J paid the deposit, paid some of the mortgage, and built an extension. K paid small amount to household expenses over period of 8 years. When K later moved out, they made no further contributions to the property and paid very little child maintenance.
When K and J cashed in a joint life insurance policy and split the proceeds, K used his half to put a deposit on a house of his own. K asserted his rights, claiming that there was nothing displacing the presumption that they were entitled to 50% of the sale price.
The SC held that, although they originally intended to share joint beneficial ownership of the house equally, this changed after K moved out. Value divided 90:10 (in favour of J).
Inference and Imputation (of Equitable Share):
A court might conclude that a claimant’s share should be substantial because it can be inferred from the parties conduct that this is what they had both actually intended.
‘the search is primarily for the parties’ actual shared intentions, whether express or to be inferred from their conduct’ [21]
Imputation, rather than inference, focuses on what a reasonable person would interpret what the arrangements were and how this should affect the share. This should be seen as a last resort when an inference cannot be made from the conduct of the parties (where a genuine intention can be found, this is conclusive).
‘if [the court] cannot deduce exactly what shares were intended, it may have no alternative but to ask what their [the parties’] intentions as reasonable and just people would have been had they thought about it at the time’ [22]
While the courts aren’t convinced that there is a distinction between inference and imputation in practice, [23] both the Supreme Court and Court of Appeal agree that imputation can only apply to the question of quantifying entitlement, not establishing the entitlement. [24]
The biggest issue with imputation is that the courts are imputing intentions of two opposing parties: as a result, the winner will be happy but the loser will likely object to the guesswork imputation.
Resources:
References:
[1] Matrimonial Causes Act 1973, s24; Civil Partnership Act 2004, s65-6, 72, schedules 5-7 [2] Dixon, “To Sell or Not to Sell” (2011) 70 Cambridge L. J. 579 [3] Dixon, “To Sell or Not to Sell” (2011) 70 Cambridge L. J. 579 [4] Law of Property Act 1925, s53(2) [5] EG: Bradbury v Hoolin (1998); Re Sharpe (A bankrupt) [1980] 1 WLR 219 [6] Laskar v Laskar [2008] EWCA Civ 347 [7] (Note: limited substantial authority) see Aspden v Elvy [2012] EWHC 1387 (Ch) [110] (Behrens J) [8] Burns v Burns [1984] Ch 317; Pettitt v Pettitt [1970] AC 777 [9] EG: Dixon, Modern Land Law [10] Oxley v Hiscock [2005] 1 Fam 21 at [69] (Chadwick LJ) [11] Lloyd’s Bank v Rosset [1991] 1 AC 107; initially established in Gissing v Gissing [1971] AC 881 [12] EG: extraordinary renovations to a house in Eves v Eves [1975] 1 WLR 1338 [13] Lloyd’s Bank v Rosset [1991] 1 AC 107 (Bridge LJ) [14] Stack v Dowden [2007] UKHL 17 (technically obiter) [15] EG: Springette v Defoe 728 (1992) 65 P & CR 1, Oxley v Hiscock [2004] EWCA Civ 546, [2005] Fam 211 [16] See Webb and Akkouh, Trusts Law (5th edn, Bloomsbury Publishing 2017) 235 [17] See Abbott v Abbott [2007] UKPC 53; see Kahrmann v Harrison [2019] EWCA Civ 2094; Stack v Dowden [2007] UKHL 17 (Hale LJ and Walker LJ) [18] Jones v Kernott [2011] UKSC 53 [19] Stack v Dowden [2007] UKHL 17 [20] Stack v Dowden [2007] UKHL 17 at [69] (Hale LJ) [21] Jones v Kernott [2011] UKSC 53 [22] Jones v Kernott [2011] UKSC 53 (Walker JSC and Hale JSC) [23] SeeBarnes v Phillips [2015] EWCA Civ 1056; Jones v Kernott [2011] UKSC 53 (Collins JSC and Kerr JSC) [24] Jones v Kernott [2011] UKSC 53 at [84]; Capehorn v Harris [2015] EWCA Civ 955 at [17] & [21] (Sales LJ)
Cases Mentioned:
Oxley v Hiscock [2005] 1 Fam 21; also seeLaskar v Laskar [2008] EWCA Civ 347
Hosking v Michaelides [2004] All ER 147
Lloyd’s Bank v Rosset [1991] 1 AC 107
Eves v Eves [1975] 1 WLR 1338
[1] Grant v Edwards [1986] Ch 638
[1]Curran v Collins [2015] EWCA Civ 404
Midland Bank v Cooke [1995] 4 All ER 562
Stack v Dowden [2007] UKHL 17
Jones v Kernott [2011] UKSC 53
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