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Constructive Trusts: Overview

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Constructive Trusts: Overview

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  • constructive trusts / arise operation of law / imposed on T because his conscience is affected Paragon Finance v DB Thakerer

Legal ownership: joint names

  • joint names: legal joint tenants / beneficial interests TICs proportions usually stated
  • if not: domestic property / joint names / cohabitants / without declaration of trust: prime facie both legal & beneficial interests JTs / onus of proof: party seeking to establish otherwise / prove common intention beneficial interests different legal / factors: whole course of conduct / factors other than financial contributions unusual Stack v Dowden
  • purchase of property / joint names for joint occupation / married or unmarried couple / presumption: parties intended JT in law & equity / rebuttable: evidence contrary intention (more readily shown where financial resources not shared) Jones v Kernott

Legal ownership: estate in name of one party only

  • absence of express declaration of trust / owner holds on trust for C / resulting or constructive trust may be found

Resulting trusts: capital contributions

  • home in D's name & C contributed to purchase price / traditionally: C obtained interest proportionate to contribution by resulting trust / since Stack v Dowden role of resulting trust less clear (direct contribution likely indicate common intention required for constructive trusts)
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Constructive Trusts: Overview

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Constructive trusts: common intention

  • 2 stages / determine whether C has beneficial interest / C must show: common intention both have an interest / & C acted to detriment as result of common intention
  • common intention: shown by express agreement or inferred from conduct / insufficient: C supervised builders renovation & decorated / sufficient: direct payment purchase price or mortgage Lloyds Bank v Rosset
  • only payments / at time of acquisition give rise to a resulting trust Curley v Parkes
  • common intention inferred: express agreement 1 pays mortgage / & other household expenses / moved on from Stack v Dowden / whole of course of dealings not solely direct contributions Le Foe v Le Foe & Woolwich
  • quantify: incorrect: mathematical calculation proportion of purchase price/ correct: whole course of dealing between parties (inc indirect contributions) Midland Bank v Cooke
  • relevant factors: discussion at time of purchase / nature of parties' relationship / how finances arranged / children Stack v Dowden
  • correct approach: determine if equitable interest arose under constructive trust / quantify interest: if not possible to ascertain shares parties intended / what fair having regard to whole course of dealing (financial & non-financial contributions) Jones v Kernott
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Constructive Trusts: Overview

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Proprietary estoppel

  • doctrine of proprietary estoppel: entitled to equitable interest without formalities / oral assurances & C acted in reliance / despite no written evidence of declaration of trust (contrary s.53(1)(b) LPA 1925 ) Pascoe v Turner
  • proprietary estoppel / cause of action / not remedy / equity assist if: legal owner acted in way C has expectation rights / & C acted in reliance to detriment / unconscionable legal owner insist on strict legal ownership
  • assurance: active Pascoe v Turner / passive Inwards v Baker / future rights Gillett v Holt / C reasonably understood could rely Thorner v Major
  • C show: causal connection between assurance & detriment / not sole reason
  • detriment: personal & financial Gillett v Holt / improving land Inwards v Baker / care provided Greasley v Cooke / beyond natural love & affection Re Basham
  • remedy: minimum to satisfy equity & depends on facts of each case
  • mutual bargain: court fulfil expectation / if expectations less certain: C's expectation starting point / consider: extent of detrimental reliance / unconscionability / misconduct / alterations in D's finances / financial obligations owed by D to others / taxation / benefits C derived from situation / proposed remedy is practical & proportionate Jennings v Rice
  • transfer of whole estate Gillett v Holt & Thorner v Major / or equitable interest in property under constructive trust
  • overlap: C entitled interest / by proprietary estoppel & under common intention constructive trust Yaxley v Gotts
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Constructive Trusts: Overview

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Secret trusts

  • secret trusts: device keep details of gift out of public domain / fully secret trust: no indication money will be held on trust to be decided in future / half secret trust: clause leaving legacy to be dealt with as agreed

Fully secret trusts: requirements

  • intention to impose trust on secret trustee / communication of obligation to ST / acceptance by ST Ottaway v Norman
  • intention T to subject ST to trust in favour of SB / ordinary civil standard of proof (balance of probabilities) / higher if possible ST fraud Re Snowden / T's intention: sanction for ST not executing trust not merely relying on ST's conscience McCormick v Grogan
  • T must communicate terms of obligation to ST & ST must accept / or ST takes property as absolute owner Wallgrave v Tebbs / sufficient: details in sealed envelope if ST agrees bound / if ST agrees but terms not communicated: ST not take property / resulting trust Re Boyes / silence presumed acceptance
  • half secret trust requirements / same 3 / interpreted differently Blackwell v Blackwell
  • fully secret trust: danger ST deny / no legal requirement but good practice T to ask ST to confirm acceptance in writing

Secret trusts: express or constructive?

  • theory secret trusts declared outside the will: suggests express not constructive trusts / practical implication: express trusts of land subject to s.52 Law of Property Act 1925 (written, signed & witnessed) / consistent with older case law: half secret trust unenforceable due to lack of written evidence Re Baille / more recently enforceable: fully secret trust of land orally communicated to ST Ottaway v Norman
  • argument secret trust constructive trust: involves element of unconscionability / departure from requirements of Wills Act 1837 justified by maxim equity will not allow a statute to be used as an instrument of fraud / ST would be attempting use lack of formal document as justification for fraud (this type of trusts usually constructive trust)
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Constructive Trusts: Overview

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Mutual wills

  • doctrine of mutual wills: agreement between two Ts how dispose of property by will / mutual wills made in pursuance of agreement / not necessarily identical / property subject-matter of agreement / specified & held on trust for B from death of first testator (T1) / survivor (T2) may make new will / on T2's death property subject to trust held by T2's PRs for agreed B Re Dale
  • contract between T1 & T2 required before there can be any finding of mutual wills Re Goodchild / s.2 Law of Property (Miscellaneous Provisions) Act 1989 enforceable contract relating to land: written & incorporate all terms / lack of written document not fatal if unconscionable Healey v Brown / enforceable contract requires valid consideration / consideration: T1 having acted to detriment: dies not revoked will (as was his right) leaving will in agreed form Re Dale
  • evidence express agreement: certain & unequivocal Re Oldham / clear & satisfactory Re Cleaver / sufficient: express words & solicitor note Olins v Walters
  • onus of proof: person claiming to be B under the contract / signing identical or mirror insufficient
  • remedy: imposition constructive trust on property / subject matter of the contract / T2 cannot divert affected property from constructive trust / arises on death T1 Re Hagger
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