(back to preceding text)

    In concurring in this passage the House was unanimously, if unostentiously, agreeing that a "common intention" trust could be inferred even when there was no evidence of an actual agreement. Apart from two bare references to "a constructive trust or a proprietary estoppel" (at 132G and 133F) Lord Bridge did not refer to the elaborate arguments of counsel (at 110G-125C) addressed to him as to the varieties and interaction of these two concepts.

    26.  Lord Bridge's extreme doubt "whether anything less will do" was certainly consistent with many first-instance and Court of Appeal decisions, but I respectfully doubt whether it took full account of the views (conflicting though they were) expressed in Gissing (see especially Lord Reid [1971] AC 886 at 896G - 897B and Lord Diplock at 909 D-H). It has attracted some trenchant criticism from scholars as potentially productive of injustice (see Gray & Gray, op cit, paras 10.132 to 10.137, the last paragraph being headed "A More Optimistic Future"). Whether or not Lord Bridge's observation was justified in 1990, in my opinion the law has moved on, and your Lordships should move it a little more in the same direction, while bearing in mind that the Law Commission may soon come forward with proposals which, if enacted by Parliament, may recast the law in this area.

    27.  Any new legislation is likely to give the Court new statutory discretions comparable to (but probably less far-reaching than) those exercisable under the Matrimonial Causes Act 1973 (as amended). The law would then become more flexible (and so better able to avoid injustice) but at the price of uncertainty and a possible increase in the volume of litigation costs falling on parties with limited resources. But already there is a good deal of uncertainty and the possibility of high litigation costs, as this regrettable case shows. Lady Hale's opinion points the way to making the outcome of this type of case more predictable, so that parties can be advised with more confidence as to appropriate terms of settlement. Of course there will always remain the risk that ill-feeling between a separated couple will cloud the view of one or both of them as to where their best interests lie.

    28.  On the assumption that there is not to be some dramatic extension of the law of unjust enrichment, it is reasonably clear that the correct approach to this area lies not in contract law but in looking for a beneficial interest under a trust of some sort (or, possibly, an equity of some sort under a form of proprietary estoppel—but I shall put that on one side for a moment). Whether the trust should be regarded as a resulting trust or a constructive trust may seem a distinctly academic enquiry, especially as there is so much debate as to the true nature of a resulting trust (for a recent summary of the debate see Underhill and Hayton, Law Relating to Trusts and Trustees, 17th ed (2007) paras 3.3 to 3.5). But it is of some importance in understanding the significance of direct or indirect contributions to the acquisition of the property in question.

    29.  In Drake v Whipp [1996] 1 FLR 826, 827 (a cohabitation case in which the property was in the man's sole name, though both had made direct contributions both to the purchase of a barn and to its expensive conversion into a home) Peter Gibson LJ observed:

"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."

    30.  Drake v Whipp was an odd case because Mrs Drake's argument was that there was no common intention and that the judge should simply apply the presumption as to a resulting trust by reference to the barn's initial purchase costs (of which she paid just over 40%) and not by reference to the total costs of purchase and conversion (of which her share was just under 20%). But the judge found, at p 829, that there was a common intention:

"To purchase the property and carry out a conversion in accordance with plans earlier approved and that each should contribute, according to his or her ability, to the ultimate cost."

    He treated this as giving rise to a constructive trust in the proportions of about 80% for Mr Whipp and 20% for Mrs Drake.

    31.  Peter Gibson LJ (with whom Hirst LJ and Forbes J agreed) said, at p 830, that it would

". . . 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."

    On the facts of that case, applying the doctrine of a resulting trust in the way that Mrs Drake proposed would have been doubly artificial, as it would have unnaturally split the project into two elements, only one of which was to be taken into account in the resulting trust exercise; and it would have ignored the parties' actual common intention for the project as a whole. Their common intention, as found by the judge, was for beneficial ownership in shares corresponding to their overall contributions. In a case about beneficial ownership of a matrimonial or quasi-matrimonial home (whether registered in the names of one or two legal owners) the resulting trust should not in my opinion operate as a legal presumption, although it may (in an updated form which takes account of all significant contributions, direct or indirect, in cash or in kind) happen to be reflected in the parties' common intention.

    32.  I would (at the risk of confusion) add one qualification. The doctrine of a resulting trust (as understood by some scholars) may still have a useful function in cases where two people have lived and worked together in what has amounted to both an emotional and a commercial partnership. The well-known Australian case of Muschinski v Dodds (1985) 160 CLR 583 is an example. The High Court of Australia differed in their reasoning, but I find the approach of Deane J persuasive:

"That property was acquired, in pursuance of the consensual arrangement between the parties, to be held and developed in accordance with that arrangement. The contributions which each party is entitled to have repaid to her or him were made for, or in connexion with, its purchase or development. The collapse of the commercial venture and the failure of the personal relationship jointly combined to lead to a situation in which each party is entitled to insist upon realization of the asset, repayment of her or his contribution and distribution of any surplus."

    However, Deane J described this as a constructive trust, and he had earlier (at p 612) treated a resulting trust as excluded by evidence of the parties' common purpose (building and running an arts and crafts centre), even though that purpose had failed. Professor Birks would have treated this as a resulting trust (see Birks and Rose eds, Restitution and Equity Vol 1 (2000) pp 275-279). Other scholars disagree. Drake v Whipp [1996] 1 FLR 826 might have been analysed in this way so as to produce the same result, but only if the whole of each party's contribution had been taken into account in applying the resulting trust.

    33.  In the ordinary domestic case where there are joint legal owners there will be a heavy burden in establishing to the court's satisfaction that an intention to keep a sort of balance-sheet of contributions actually existed, or should be inferred, or imputed to the parties. The presumption will be that equity follows the law. In such cases the court should not readily embark on the sort of detailed examination of the parties' relationship and finances that was attempted (with limited success) in this case. I agree with Lady Hale that this is, on its facts, an exceptional case.

    34.  In those cases (it is to be hoped, a diminishing number) in which such an examination is required the Court should in my opinion take a broad view of what contributions are to be taken into account. In (Gissing v Gissing [1971] AC 886, 909G, Lord Diplock referred to an adjustment of expenditure "referable to the acquisition of the house." "Referable" is a word of wide and uncertain meaning. It would not assist the development of the law to go back to the sort of difficulties that arose in connection with the doctrine of part performance, where the act of part performance relied on had to be "uniquely referable" to a contract of the sort alleged (see Steadman v Steadman [1976] AC 536). Now that almost all houses and flats are bought with mortgage finance, and the average period of ownership of a residence is a great deal shorter than the contractual term of the mortgage secured on it, the process of buying a house does very often continue, in a real sense, throughout the period of its ownership. The law should recognise that by taking a wide view of what is capable of counting as a contribution towards the acquisition of a residence, while remaining sceptical of the value of alleged improvements that are really insignificant, or elaborate arguments (suggestive of creative accounting) as to how the family finances were arranged.

    35.  That is in my view the way in which the law can be seen developing through a considerable number of decisions of the Court of Appeal, of which I would single out Grant v Edwards [1986] Ch 638 (before Lloyds Bank plc v Rosset) and then Stokes v Anderson [1991] 1 FLR 391, Midland Bank plc v Cooke [1995] 2 All ER 562 and Oxley v Hiscock [2005] Fam 211. In the last-mentioned case Chadwick LJ summarised the law as follows (para 69, Lord Bridge's "second category" cases):

"But, in a case where there is no evidence of any discussion between them as to the amount of the share which each was to have—and even in a case where the evidence is that there was no discussion on that point—the question still requires an answer. It must now be accepted that (at least in this court and below) the answer is that 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. And, in that context, 'the whole course of dealing between them in relation to the property' includes the arrangements which they make from time to time in order to meet the outgoings (for example, mortgage contributions, council tax and utilities, repairs, insurance and housekeeping) which have to be met if they are to live in the property as their home."

    36.  That summary was directed at cases where there is a single legal owner. In relation to such cases the summary, with its wide reference to "the whole course of dealing between them in relation to the property", is in my opinion a correct statement of the law, subject to the qualifications in paras 61 ff of Lady Hale's opinion. I would only add that Chadwick LJ did not refer to contributions in kind in the form of manual labour on improvements, possibly because that was not an issue in that case. For reasons already mentioned, I would include contributions in kind by way of manual labour, provided that they are significant.

    37.  I add a brief comment as to proprietary estoppel. In paragraphs 70 and 71 of his judgment in Oxley v Hiscock Chadwick LJ considered the conceptual basis of the developing law in this area, and briefly discussed proprietary estoppel, a suggestion first put forward by Sir Nicolas Browne-Wilkinson V-C in Grant v Edwards [1986] Ch 638, 656. I have myself given some encouragement to this approach (Yaxley v Gotts [2000] Ch 162,177) but I have to say that I am now rather less enthusiastic about the notion that proprietary estoppel and "common interest" constructive trusts can or should be completely assimilated. Proprietary estoppel typically consists of asserting an equitable claim against the conscience of the "true" owner. The claim is a "mere equity". It is to be satisfied by the minimum award necessary to do justice (Crabb v Arun District Council [1976] Ch 179, 198), which may sometimes lead to no more than a monetary award. A "common intention" constructive trust, by contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests.

    38.  Your Lordships have in this case had the benefit of well-focused written and oral submissions from counsel, and helpful citation of relevant academic material. In addition to those mentioned by Lady Hale I have found a good deal of food for thought in Chapter 10 (the divisions of assets on the breakdown of intimate relationships) of Craig Rotherham, Proprietary Remedies in Context (2002).

    39.  For the reasons given by Lady Hale, to which the above reasons are merely a supplement, I would dismiss this appeal.

BARONESS HALE OF RICHMOND

    40.  The issue before us is the effect of a conveyance into the joint names of a cohabiting couple, but without an explicit declaration of their respective beneficial interests, of a dwelling house which was to become their home. This is, so far as I am aware, the first time that this issue has come before the House, whether the couple be married or, as in this case, unmarried. The principles of law are the same, whether or not the couple are married, although the inferences to be drawn from their conduct may be different: Bernard v Josephs [1982] Ch 391, per Griffiths LJ at 402.

    41.  It may be that, in practice, this is a temporary and transitional problem. It has come about because of developments over the last few decades which would not have been foreseen when the applicable principles and presumptions were first devised. The first development is, of course, the huge expansion in home ownership which has taken place since the Second World War and was given a further boost by the 'right to buy' legislation of the 1980s. Coupled with this has been continuing house price inflation, albeit with occasional interruptions such as occurred at the end of the 1980s. This has meant that it is almost always more advantageous for someone who has contributed to the acquisition of the home to claim a share in its ownership rather than the return of the money contributed, even with interest.

    42.  Another development has been the recognition in the courts that, to put it at its lowest, the interpretation to be put on the behaviour of people living together in an intimate relationship may be different from the interpretation to be put upon similar behaviour between commercial men. To put it at its highest, an outcome which might seem just in a purely commercial transaction may appear highly unjust in a transaction between husband and wife or cohabitant and cohabitant. This recognition developed in a series of cases between separating spouses, beginning with In re Rogers' Question [1948] 1 All ER 328, Newgrosh v Newgrosh (unreported) June 28, 1950, Jones v Maynard [1951] Ch 572 and Rimmer v Rimmer [1953] 1 QB 63. There was a period during which it was thought that the problem might be solved by resort to the power contained in section 17 of the Married Women's Property Act 1882, in disputes between husband and wife as to the title to or possession of property, to make such order "as it thinks fit". The high-water mark of this approach was Hine v Hine [1962] 1 WLR 1124, at 1127-8, in which Lord Denning MR held that this discretion "transcends all rights, legal or equitable". That section 17 conferred any discretion to interfere with established titles was firmly rejected by this House in Pettitt v Pettitt [1970] AC 777. Nevertheless, the opinions in that case and in Gissing v Gissing [1971] AC 886 contain vivid illustrations of how difficult it is to apply simple assumptions to the complicated, inter-dependent and often-changing arrangements made between married couples. As Lord Reid famously put it in Gissing v Gissing, at p 897A, "It cannot surely depend on who signs which cheques".

    43.  As between married couples, the problem has been addressed (if not solved) by the comprehensive redistributive powers in the Matrimonial Causes Act 1973, if the couple divorce, and in the Inheritance (Provision for Family and Dependants) Act 1975, if one of them dies. The question of who owns what takes second place to the statutory criteria and the approach to those criteria established in cases such as White v White [2001] 1 AC 596. The 1975 Act also gives some more limited help to the survivor of an unmarried cohabiting couple. (Neither, of course, is of any assistance in third party challenges, for example from other relatives.)

    44.  Inter vivos disputes between unmarried cohabiting couples are still governed by the ordinary law. These disputes have become increasingly visible in recent years as more and more couples live together without marrying. The full picture has recently been painted by the Law Commission in Cohabitation: The Financial Consequences of Relationship Breakdown - A Consultation Paper (2006) Consultation Paper No 179, Part 2, and its Overview paper, paras 2.3 to 2.11. For example, the 2001 Census recorded over 10 million married couples in England and Wales, with over 7.5 million dependent children; but it also recorded over two million cohabiting couples, with over one and a quarter million children dependent upon them. This was a 67% increase in cohabitation over the previous 10 years and a doubling of the numbers of such households with dependent children. The Government Actuaries Department predicts that the proportion of couples cohabiting will continue to grow, from the present one in six of all couples to one in four by 2031.

    45.  Cohabitation comes in many different shapes and sizes. People embarking on their first serious relationship more commonly cohabit than marry. Many of these relationships may be quite short-lived and childless. But most people these days cohabit before marriage - in 2003, 78.7% of spouses gave identical addresses before marriage, and the figures are even higher for second marriages. So many couples are cohabiting with a view to marriage at some later date - as long ago as 1998 the British Household Panel Survey found that 75% of current cohabitants expected to marry, although only a third had firm plans: J Ermisch, Personal Relationships and Marriage Expectations (2000) Working Papers of the Institute of Social and Economic Research: Paper 2000-27, University of Essex. Cohabitation is much more likely to end in separation than is marriage, and cohabitations which end in separation tend to last for a shorter time than marriages which end in divorce. But increasing numbers of couples cohabit for long periods without marrying and their reasons for doing so vary from conscious rejection of marriage as a legal institution to regarding themselves "as good as married" anyway (Law Commission, op cit, Part 2, para 2.45). There is evidence of a wide-spread myth of the "common law marriage" in which unmarried couples acquire the same rights as married after a period of cohabitation (A Barlow et al, "Just a Piece of Paper? Marriage and Cohabitation", in A Park et al (eds), British Social Attitudes: Public policy, social ties. The 18th Report (2001), pp 29-57). There is also evidence that "the legal implications of marriage are a long way down the list of most couples' considerations when deciding whether to marry" (Law Commission, op cit, Part 5, para 5.10).

    46.  The history of attempts at law reform is another illustration of the complexity of the problem. Under item 1 of its 8th Programme of Law Reform (2001, Law Com No 274), the Law Commission set out to review "the law as it relates to the property rights of those who share a home" (the Commission had in fact been working on the problem for some time). This therefore covered "a broad range of people, including friends and relatives who share a home as well as unmarried couples and married couples (other than on the breakdown of the marriage)". It commented that "It is widely accepted that the present law is unduly complex, arbitrary and uncertain in its application. It is ill-suited to determining the property rights of those who, because of the informal nature of their relationship, may not have considered their respective entitlements". In 2002, however, the Commission published Sharing Homes, A Discussion Paper (2002, Law Com No 278). Unlike most Law Commission publications, this did not contain even provisional, let alone final, proposals for reform. Its principal conclusion was that "It is quite simply not possible to devise a statutory scheme for the ascertainment and quantification of beneficial interests in the shared home which can operate fairly and evenly across the diversity of domestic circumstances which are now to be encountered" (para 1.31). While this conclusion is not surprising, its importance for us is that the evolution of the law of property to take account of changing social and economic circumstances will have to come from the courts rather than Parliament.

    47.  It may be otherwise with the law of personal relationships. The Law Commission's 9th Programme of Law Reform (2005, Law Com No 293) announced, at Part 3, para 306, a project focussing "on the financial hardship suffered by cohabitants or their children on the termination of the relationship by breakdown or death". Thus it was considering whether defined relationships might give rise to discretionary remedies to make specific capital or income provision on separation or death. Provisional proposals, not unlike those which have been enacted in the Family Law (Scotland) Act 2006, were made in Consultation Paper No 179 (referred to in para 44 above) and the Commission intends to publish its final report by August 2007. As the Commission undertook this project at the invitation of the Government, there may be a real chance that its proposals will be implemented. But, unlike most Law Commission reports, this one will not contain a draft Bill. Implementation will therefore depend, not only upon whether its proposals find favour with Government, but also on whether the resources can be found to translate them into workable legislative form.

    48.  It is fair to assume, therefore, that the questions with which the courts are confronted in these cases will continue to be with us for some time to come. Nor will the Commission's proposals provide a solution to the precise question which arises in this case - the effect of a conveyance into joint names without express declaration of the beneficial interests. However, there is some reason to hope that, just as this problem may have arisen because of changes in conveyancing practice over recent decades, it may eventually be resolved in the same way.

    49.  In the olden days, before registration of title on certain events, including a conveyance on sale, became compulsory all over England and Wales, conveyances of unregistered land into joint names would in practice declare the purchasers' beneficial as well as their legal interests. No-one now doubts that such an express declaration of trust is conclusive unless varied by subsequent agreement or affected by proprietary estoppel: see Goodman v Gallant [1986] Fam 106. That case also establishes that severance of a beneficial joint tenancy results in a beneficial tenancy in common in equal shares. Lord Denning's attempt in Hine v Hine [1962] 1 WLR 1124, to use section 17 of the Married Women's Property Act 1882 to interfere even with express declarations of trust was firmly rejected by this House in Pettitt v Pettitt [1970] AC 777; his suggestion, in Bedson v Bedson [1965] 2 QB 666, that severance might not automatically lead to a tenancy in common in equal shares was rightly rejected in Goodman v Gallant. The effect of such a conveyance is clear, irrespective of why the property was conveyed into joint names and of the parties' later dealings in relation to it.

    50.  The question with which we are concerned has become apparent with the spread of registration of title. The formalities required for the transfer of registered land were designed to meet the concerns of the Land Registry rather than the parties. The Land Registry is not concerned with the equities. It is concerned with whether the registered proprietor or proprietors can give a good title to a later transferee. This is entirely consistent with the simplification of conveyancing in the 1925 property legislation, which was designed to allow the legal owners of land to pass a good title to bona fide purchasers for value without notice of the equities existing behind the legal title. But it meant that the form of transfer prescribed by the Land Registry did not require, or even give an obvious opportunity to, the transferees to state their beneficial interests as well as their legal title. When this house was bought in 1993, all that the form required was all that the Land Registry needed to know. This was whether the survivor of joint proprietors was able to give a valid receipt for the capital moneys received on sale (see Form 19(JP) prescribed under rules 98, 109 or 115 of the Land Registration Rules 1925 (SR & O 1925/1093)) The version of this form in use from 1995 to 1998 did not even require this; indeed, it did not require execution by the transferee(s) at all but only by the transferor(s).

    51.  The argument that declaring that the survivor "can give a valid receipt for capital money arising on a disposition of the land" in itself amounts to an express declaration of a beneficial joint tenancy was rightly rejected by the Court of Appeal in Harwood v Harwood [1991] 2 FLR 274 and again in Huntingford v Hobbs [1993] 1 FLR 736; see also Mortgage Corporation v Shaire [2001] Ch 743. However appealing the proposition might at first sight appear, choosing "can" rather than "cannot" on the form is consistent with other intentions. The transferees may hold on trust for a third person or they may intend that, while the survivor can give a good title to a third party without appointing a new trustee, the capital moneys received should be subject to different trusts. Whether the declaration (one way or the other) is some indication of what the parties did intend is another matter, to which I must return.

    52.  The Land Registry form has since changed. Form TR1, in use from 1 April 1998, provides a box for the transferees to declare whether they are to hold the property on trust for themselves as joint tenants, or on trust for themselves as tenants in common in equal shares, or on some other trusts which are inserted on the form. If this is invariably complied with, the problem confronting us here will eventually disappear. Unfortunately, however, the transfer will be valid whether or not this part of the form is completed. The form itself states that the transferees are only required to execute it "if the transfer contains Transferee's covenants or declarations or contains an application by the Transferee (eg for a restriction)". So there may still be transfers of registered land into joint names in which there is no express declaration of the beneficial interests. However desirable such a declaration may be, it is unrealistic, in the consumer context, to expect that it will be executed independently of the forms required to acquire the legal estate. Not only do solicitors and licensed conveyancers compete on price, but more and more people are emboldened to do their own conveyancing. The Land Registry form which has been prescribed since 1998 is to be applauded. If its completion and execution by or on behalf of all joint proprietors were mandatory, the problem we now face would disappear. However, the form might then include an option for those who deliberately preferred not to commit themselves as to the beneficial interests at the outset and to rely on the principles discussed below.