Source: https://culs.org.uk/per-incuriam/articles/for-your-equitable-interest-should-the-common-intention-constructive-trust-and-proprietary-estoppel-be-merged/
Timestamp: 2019-03-21 20:03:29
Document Index: 519182970

Matched Legal Cases: ['UKHL ', 'UKHL ', 'UKHL ', 'UKPC ', 'UKHL ', 'EWCA ', 'EWCA ', 'UKHL ', 'EWCA ', 'EWCA ']

For Your (Equitable) Interest: should the Common Intention Constructive Trust and Proprietary Estoppel be Merged? — Cambridge University Law Society
For Your (Equitable) Interest: should the Common Intention Constructive Trust and Proprietary Estoppel be Merged?
Written by: Colette Watt
Much of land law is governed by formalities. The formalities play a variety of functions: discouraging action incompatible with overall policy; channelling the intentions of the parties and it acts as evidence of the promise between parties. Where these formalities are too inflexible and lead to marked unfairness, equity has developed to provide relief. Law of Property (Miscellaneous Provisions) Act (LPMPA) 1989 s2(1) “A contract for the sale or other disposition of an interest in land can only be made in writing…” and Law of Propriety Act (LPA) 1925 s53(1)(b) that a declaration of trust must be ‘manifested and proved’ in writing. However, s2(5) LPMPA 1989 and s53(2) LPA 1925 exempt implied trusts from the writing requirement. Proprietary estoppel is another way of establishing an equitable interest in land without meeting the requisite formalities. However, some think that line between the two doctrines has blurred. In 1990 Hayton called for an end to “pigeon-holing circumstances” into Common Intention Constructive Trusts (CICT) and proprietary estoppel.1 Judges still keep the distinction alive2 but should we consider merging the two?
A property right is very important. It provides the ability to control access to the land and is enforceable against the world at large, rather than just between the parties (like a personal right). Equitable ownership establishes a persisting right to an inherently valuable economic asset. As social 63% of households own their own home, there is also an social and psychological important to property rights.3 A proprietary interest in the land will be allow you to enjoy the land that you consider your home. However, in order for land law to function efficiently, effectively and fairly the rules regarding the creation of property rights need to be clear. Land law needs to be certain in order to allow the various actors looking to use to the land to do so. Mnookin and Kornhauser explain “the lack of coherent principle does not assists parties or their lawyers in attempts to arrive at a compromise”.4 With formality comes clarity, so the circumstances in which these formalities are being put aside should be well sign-posted and explained.
The Law Commission explains trust as a “device” for the division of property into legal title and beneficial (equitable) ownership.5 The legal owner(s) (trustee(s)) hold the legal title of the land on trust for the benefit of one or more other parties (the beneficiaries). The beneficiary is an equitable owner. There can be no more than four trustees to a trust in land, but a trustee can also be the beneficiary.6 They cannot benefit in their capacity as trustees but they can take what is due to them as beneficiaries.7 This scenario is very common, especially for homeowners. In Williams & Glyn’s Bank v Boland held that a trust should be implied for all cases of co-ownership of a home.8 Equitable co-owners may be either joint tenants or tenants in common9 which means they each have a distinct and quantifiable share in the land.
A simple way to split up the many forms of trusts is to divide them into expressly and impliedly created trusts. An express trust is created where there is a disposition expressly subject to a trust or an express declaration that the trustees hold property on trust for the beneficiaries.10 This declaration is conclusive between the parties as to the division of equitable ownership but for fraud11, mistake12, rectification or non-consent.13 An implied trust is one that is not expressly created, but arises by way of “implication from particular circumstances”.14 It is these implied trusts that escape the general formality rules required for the creation of a trust.15
When looking at property law two types of implied trusts are particularly relevant; the resulting trust and CICT. The Law Commission notes that they are “separate and distinct doctrines”.16 A resulting trust is implied where a person purchases property in name of another person or makes a direct financial contribution to the acquisition of property in the name of another.17
A CICT is more difficult to describe, in fact many think it “is not capable of price definition and is continually developing”.18 A CICT is implied in order to give effect to the “common intention” of persons where there is an understanding that the equitable ownership of the property should be shared beneficially. One party must then rely on this understanding to their detriment.19 There are two stages to establishing an interest under CICT: the acquisition stage (establishing that a right arises) and the quantification stage (establishing the size of that share).
In Lloyd’s Bank v Rosset Lord Bridge drew attention to the distinction between express CICT and inferred CICT. An express CICT is where there is evidence of express discussions establish shares in the property. A party may act in reliance on this discussion to their detriment which may vary the distribution of these shares. An inferred CICT is where there is no evidence of this understanding and so the court must “rely entirely on the conduct of the parties… to infer a common intention to share the property beneficially”.20 Previously, it seemed “extremely doubtful that anything less” than financial contributions would suffice to establish an inferred common intention.21 However, Lord Walker noted in Stack v Dowden that “the law has moved on”22 and that shared intention is to be established “in light of their whole course of conduct”.23
The law of proprietary estoppel has wide application, so much so that its boundaries are uncertain and its effects not entirely clear.24 The basic requirements were laid out in Taylors Fashions Ltd v Victoria Trustees Co Ltd by Oliver J. There needs to be an assurance or representation made which one party then relied on to their detriment in circumstance in which it would be “unconscionable to deny a remedy” to the claimant.25 Robert-Walker LJ made it clear in Gillett v Holt that the prevention of unconscionable conduct is the heart of the doctrine.26 The assurance must be to a right relating to property27 and the more specific the right claimed, the more specific the assurance must be.28 Lord Walker emphasised in Thorner v Major29 that the assurance had to be clear enough but this is very context-specific. In uncertain findings will be made along a ‘sliding scale’ whereby the clearer the expectation, the greater the detriment and the longer the passage of time during which the expectation was reasonably held, the greater would be the weight that should be given to the expectation.30
Should we Combine CICT and Proprietary Estoppel?
There are undeniable similarities between CICT and proprietary estoppel. Browne-Wilkinson LJ summarised them neatly in Grant v Edwards:
In both, the claimant must to the knowledge of the legal owner have acted in the belief that the claimant has or will obtain an interest in the property. In both, the claimant must have acted to his or her detriment in reliance on such belief. In both, equity acts on the conscience of the legal owner to prevent him from acting in an unconscionable manner by defeating the common intention. The two principles have been developed separately without cross-fertilisation between them: but they rest on the same foundation and have on all other matters reached the same conclusions.31
Both doctrines require belief in an interest, detrimental reliance on this belief and circumstance in which it would be unconscionable. The Law Commission has argued that the doctrines have separate foundations which is perhaps part of Browne-Wilkinson LJ’s “without cross-fertilisation”. That CICT is based on frustrated bargain whereas proprietary estoppel frustrated expectation. However, this suggestion seems contrary to Browne-Wilkinson LJ above. Furthermore, it is questionable whether that distinction works in practice. Eves v Eves32 was a case of inferred CICT where the property was registered in the sole name of the man, who refused to name his co-habiting partner was joint legal owner, and told her, falsely, that this was because she was under 21 years old. She then carried out work to do up the house. The court imposed a trust in her favour. However, this seems more like an expectation than a bargain. Moreover, the overall purpose of both CICT and PE is to cure unconscionability, as Browne-Wilkinson LJ says above. It may make more sense to have an integrated framework to tackle more effectively combat these problematic circumstances.
The expansion of the means acceptable for evidencing a common intention may encourage the merger of CICT and proprietary estoppel. Following Stack, evidence of CICT must be gathered from the whole course of conduct. Proprietary estoppel also undertakes this holistic exercise. However, it has been held that the court “will be slow to infer from conduct alone that parties intended to vary existing beneficial interests at the time of acquisition”33 and Bray indicates that there is yet to be a successful claim using the Stack holistic approach.34 If proprietary estoppel and CICT were one exercise then perhaps it may ensure that the courts really were practicing an exercise of looking at the whole course of conduct.
The idea of common intention is extremely artificial, a “myth” even.35 Gardner explained that “agreements are in reality found or denied in a manner quite unconnected with their actual presence or absence”.36 Evidential problems arise regarding “imperfectly remembered” conversations or “imprecise” original agreements.37 Moreover, the Law Commission noted that “to demand proof of an intention to share the beneficial interest in the home can be somewhat unrealistic, as people do not tend to think about their home in such legalistic terms”.38 In cases like Eves v Eves where one party clearly does not intend them to have any ownership afinding of common intention is very artificial. This artificiality is unpredictable. It lacks certainty and transparency which are important for a functioning legal system. If the only principle at work, underneath the veil of common intention is, actually curing unconscionability then perhaps merging the two doctrines would focus the law and improve certainty. Furthermore, the two doctrines arise on similar facts and are often pleaded at the same time.39 If there was one doctrine which covered the same subject matter, this could save time and make it clearer whether the claimant would be successful.
Should we Keep the Doctrines Separate?
A central reason that proprietary estoppel and CICT should be kept as separate doctrines is the difference in remedies available. A trust establishes that the claimant has a share in the equitable ownership of the property. However, there are a range of remedies available under proprietary estoppel and they do not need to be proprietary.40 Proprietary estoppel generates a mere equity that needs to be satisfied but need only be done so by the minimum required to do justice.41 This is a sensible distinction as there may be some cases in which it is inappropriate to give a proprietary right, especially since the consequences are so long lasting. There is a difference in when the interest arises as well. Under a CICT the claimant’s right arises as soon as they have acted in their detriment whereas a proprietary estoppel must “mature” or ‘crystallise’ in the form of a court award.42 An interest under a trust is not a discretionary award it is an entitlement. There is too great a difference in the impact of the doctrines to merge them.
The flexibility of estoppel which makes it so attractive also makes it unpredictable.43 The need to combat unconscionability is well recognised and admirable however the value of certainty is a central tenet of land law. People need to be able to predict what will happen to their land, who has rights over their land and whose rights they are bound by. This deeply entrenched not only property law but the formal conception of the rule of law which most democratic societies subscribe to. Dixon explained that “a ‘proprietary remedy’ in the absence of normally required formality has to be rooted in clear, well-established principle in order to avoid it becoming an exercise in ‘palm tree’ justice or simply a remedial device.”44 Proprietary estoppel is more of a value judgement on what the judge considers to be unconscionable. If CICT and proprietary estoppel were to be subsumed it would be necessary to have clear and certain rules to prevent arbitrary and inconsistent judgements.
Combining CICT and proprietary estoppel could have larger, knock-on economic consequences. Many homeowners have a mortgage and if proprietary estoppel and CICT were merged this could have detrimental effects on mortgagees who may not be able to predict whose rights they will be bound by. This could then have a chilling effect on economic activity. An appreciation for the need for certainty supports the relationship the doctrines have at the moment whereby CICT will be established upon a finding of “common intention” creating a property right, and proprietary estoppel functions somewhat as a backstop for unconscionable conduct where a common intention cannot be shown or where a benefit under a trust is not an appropriate remedy.
Hayton has recognised a serious problem with transparency and overlap between CICT and proprietary estoppel. Land law requires clear rules in order to ensure certainty and efficiency. However, whilst there are strong similarities and they do overlap, in the end they perform different functions. There is no guidance on how the two could be brought together, what the remedies would look like and what the organising element would be. Other states organise their doctrines of constructive trust around other principles. In Australia theirs is focussed around unconscionability45, in Canada its unjust enrichment46 and in New Zealand it is “reasonable expectation”.47 However, all of these principles have problems too, especially ones of certainty. Furthermore, changing the organising element of a constructive trust or merging it with proprietary estoppel would be a fundamental change, greatly impacting Equity in the UK. This sort of change would require have to be done via statute. However with no plan, no incentive and no guaranteed benefit, why on Earth would Parliament do so?
1. D. Hayton, Equitable Rights of Cohabitees [1990] Conv 370, 378
2. Stack v Dowden [2007] UKHL 17
3. https://www.ethnicity-facts-figures.service.gov.uk/housing/owning-and-renting/home-ownership/latest
4. R Mnookin and L Kornhauser “Bargaining in the Shadow of the Law: The Case of Divorce” [1979] 5 Yale LJ 950
5. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002] 2.4
6. Trustees Act 1925 s34(1), s34(2)
7. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002] 2.7
8. [1981] Ac 487 503
9. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002] 2.11
10. Ibid. 2.3
11. CIBC Mortgages’ PLC v Pitt [1994] 1 AC 200 209
12. Pink v Lawrence(1978) 36 P & CR 98
13. Wilson v Wilson[1963] 1 WLR 601, Pettitt v Pettitt [1970] AC 777 813
14. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002] 2.3
15. LPA 1925 s53(1)(b), s53(2)
16. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002] 2.55
17. (Ibid. 2.3 See also Lloyds Bank v Rosset
18. Snell’s Equity para 9-38
19. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002] 2.3.
20. Lloyds Bank plc v Rosset [1990] UKHL 14 132
22. Stack v Dowden [2007] UKHL 17 [26]
23. Abbott v Abbott [2007] UKPC 53 [3]
24. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002] 2.88
25. Taylors Fashions Ltd v Victoria Trustees Co Ltd [1982] QB 113
26. Gillett v Holt [2001] Ch 210 255
27. West End Commercial v Trocadero [2017] EWHC 2175 (Ch)
28. Secretary of State for Communities and Local Government v Praxis v Care [2015] NICh 5
29. Thorner v Major [2009] UKHL 18
30. Davies v Davies [2016] EWCA Civ 463
31. Grant v Edwards [1986] Ch 638 656, 2.101
32. Eves v Eves [1975] 3 All ER 768
33. James v Thomas [2007] EWCA 1212 [24]
34. J Bray, Cohabitation: The Long Slow Road to Reform [2016] 46 Family Law 1428
35. N E Glover & P N Todd “The Myth of Common Intention” (1996) 16 Legal Studies 325
36. Gardner Rethinking Family Property (1993) 109 LQR 263
37. Lloyds Bank plc v Rosset [1990] UKHL 14
38. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002]
39. E.g. Southwell v Blackburn [2014] EWCA Civ 1347
40. In Inwards v Baker [1965] 2 WLR 212 the claimant was granted a mere licence (a personal right)
41. Campbell v Griffin [2001] EWCA 990
42. (LAW COM No 278) SHARING HOMES A Discussion Paper [2002] 2.104
43. Ibid. 2.110
44. Dixon, More Moves in constructive trusts and proprietary estoppel, The Conveyancer and Property Lawyer, 2017
45. Ibid. 4.5
46. Ibid.10
47. Ibid. 4.16
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