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EQUITY AND TRUSTS CONSTRUCTIVE TRUSTS (2) EQUITY AND TRUSTS CONSTRUCTIVE TRUSTS (2)

Circumstances giving rise to CTs Exhaustive categorisation not possible: will examine some other of Circumstances giving rise to CTs Exhaustive categorisation not possible: will examine some other of the categories but the main focus in this lecture is CTs of the family home.

Mutual wills CTs can arise from mutual wills. If two or more agree to Mutual wills CTs can arise from mutual wills. If two or more agree to make wills and not to revoke without mutual consent. If first to die performs then it will be unconscionable for second to deviate from terms. CT imposed on survivors property.

Proctor v Dale [1999] 4 All ER Held: not necessary for testators to agree Proctor v Dale [1999] 4 All ER Held: not necessary for testators to agree to leave property to each other. Equity will impose trust on property of survivor where each testator agrees to leave property to third party. Goodchild v Goodchild [1997] 3 All Er 63 for mutual wills must be clear evidence intent not to unilaterally revoke.

Wills and formalities Formalities: s 9 Wills Act 1837 a will must be in Wills and formalities Formalities: s 9 Wills Act 1837 a will must be in writing signed by testator and two witnesses in presence of testator If not will is void.

Wills – secret trusts Take effect on testators death + do not comply with Wills – secret trusts Take effect on testators death + do not comply with requirements of Wills Act Testator normally leaves property to someone – prima facie an outright gift But: donee has agreed to take on certain trusts = fully secret trust

Half secret trust Property left on trust in will but without specifying terms trust Half secret trust Property left on trust in will but without specifying terms trust

Why a secret trust? Usually to keep identity of beneficiary secret or testator undecided Why a secret trust? Usually to keep identity of beneficiary secret or testator undecided about dispositions Subject to some conditions secret trusts are enforceable despite not conforming with Wills Act.

Secret Trusts STs traditionally justified on basis of doctrine of fraud But: modern doctrine Secret Trusts STs traditionally justified on basis of doctrine of fraud But: modern doctrine is that STs arise independently of will Are secret trusts express or CTs? Important in case of land s 53(1)(b) LPA 1925 which applies to express only.

CTs and crime – unlawful killing A person cannot benefit from their crime If CTs and crime – unlawful killing A person cannot benefit from their crime If one person kills cannot take benefit from will or through intestacy rules. If killer acquire legal title to victim’s property he will hold it on CT for people next entitled.

Fraud CT imposed where property gained through fraud. See: Rochefoucauld v Boustead [1897] 1 Fraud CT imposed where property gained through fraud. See: Rochefoucauld v Boustead [1897] 1 Ch 196 Bannister v Bannister [1948] 2 All ER 133 Binnions v Evans

Land Contract to sell land is specifically enforceable – vendor holds it on CT Land Contract to sell land is specifically enforceable – vendor holds it on CT for purchaser. CT arises through maxim: “equity treats as done that which ought to be done. ” Contract for sale of personal property not generally enforceable unless unique see Oughtred v IRC [1960] AC 206

Imperfect gifts Substantive law relating to this dealt with in trustees’ lectures In circumstances Imperfect gifts Substantive law relating to this dealt with in trustees’ lectures In circumstances where failed transfer or gift as declaration of trust no real declaration of trust – so if settlor is to be treated as trustee then must equity must impose a trust. See: Re Rose Mascall v Mascall Pennington v Waine in lecture on creation of express trusts

CTs of the family home CTs of the family home

CTs of family home Trusts can arise where dispute as to ownership e. g. CTs of family home Trusts can arise where dispute as to ownership e. g. where property owned by one cohabitee and the other claims interest through contribution to the purchase price or improvements or payment of domestic expenses RT: when two people contribute to purchase legal owner hoods it on RT in proportion to contribution CT: if one does not make direct contribution to purchase price – interest under a CT? or proprietary estoppel?

CTs social context Family home CTs arose out of married women where property held CTs social context Family home CTs arose out of married women where property held in husbands sole name Wife may claim under CT if direct contribution to purchase But if mortgage paid by husband then only monetary contributions count. CT developed to provide share. See Gissing v Gissing 1971 AC 886 and Pettit v Pettit 1970 AC 777 and also the Matrimonial Causes Act 1973

Family home MCA 1973 does not apply to unmarried cohabitees so general law principles Family home MCA 1973 does not apply to unmarried cohabitees so general law principles apply + doctrines of CTs and RTs Also important to married couples where third party is claiming priority interest e. g. mortgagee

RTs and family home Claim under RT requires direct contribution to purchase price at RTs and family home Claim under RT requires direct contribution to purchase price at outset share is then proportionate Contrib can be payment towards mortgage instalment if agreed at outset

RTs – limitations Limitations of RT clear – no contribution to initial purchase price RTs – limitations Limitations of RT clear – no contribution to initial purchase price then useless. Proportionate basis can also be unfair. CT sometimes preferable. Not limited to contributions to the purchase price or share of entitlement

CTs – requirements Two requirements for CT: (i) common intention to share the beneficial CTs – requirements Two requirements for CT: (i) common intention to share the beneficial interest in property (ii) acted to their detriment on basis of that intention

Trusts of the family home Lloyds Bank v Rosset [1991] 1 AC 107 Lord Trusts of the family home Lloyds Bank v Rosset [1991] 1 AC 107 Lord Bridge two situations: (i) Agreement to share OR (ii) no such agreement. If no agreement then conduct is used to infer common intention to share.

“Common intention” CTs CT gives effect to common intention. Can arise from (i) express “Common intention” CTs CT gives effect to common intention. Can arise from (i) express agreement OR (ii) inferred from conduct.

(i) express agreement Agreement to share beneficial interest required. (i) express agreement Agreement to share beneficial interest required.

(i) express agreement Agreement must be expressly discussed. (i) express agreement Agreement must be expressly discussed.

(i) express agreement • Bridge considered Eves v Eves [1975] 3 All ER 768 (i) express agreement • Bridge considered Eves v Eves [1975] 3 All ER 768 and Grant v Edwards [1986] Ch 638 as outstanding examples of category (i) • In both cases female partner misled by male partner

(i) express agreement • In Grant v Edwards female partner told by male: no (i) express agreement • In Grant v Edwards female partner told by male: no joint names because she was getting a divorce • Norse LJ: facts raised inference of common intention of female’s proprietary interest

(i) express agreement Hammond v Mitchell [1991] 1 WLR 1127 Hammond said he would (i) express agreement Hammond v Mitchell [1991] 1 WLR 1127 Hammond said he would have to put house in his name because of tax problems – he had lost his accounts in fire. Hyett v Stanley [2003] All ER (D) 284 statement to claimant that no need for her name on deeds because it was on mortgage and would give her a right to the property was a clear inference of understanding to share.

Common intention without more does not give a CT. Is equal to express declaration Common intention without more does not give a CT. Is equal to express declaration of trust but ineffective unless formalities of 53(1)(b) LPA 1925 have been complied with. But does not apply to CTs see 53(2). Claimant must have acted to their detriment in reliance on common intention.

Detrimental reliance? Difficult to know what detrimental reliance is. Conduct is different from that Detrimental reliance? Difficult to know what detrimental reliance is. Conduct is different from that for inference of common intention. Nothing short of direct contribution to purchase price will give rise to such an inference Detriment not needed where express agreement

Detrimental reliance Rosset does not analyse the conduct needed to give rise to a Detrimental reliance Rosset does not analyse the conduct needed to give rise to a CT. Reference should be made to Grant v Edwards as leading authority Grant made substantial contributions to expenses of household maintenance that enabled Edwards to pay mortgage – thus detrimental reliance. Type of conduct that is acting on common intention? Uncertain.

Detrimental reliance Norse LJ: behaviour that would be unreasonable unless expected to have interest Detrimental reliance Norse LJ: behaviour that would be unreasonable unless expected to have interest in house Mustill LJ: conduct to be used to determine quid pro quo – if claimant provides this then sufficient Browne-Wilkinson VC: more liberal, any act of detriment done by claimant relating to joint lives is sufficient

Conduct as detrimental reliance Conduct that has been considered sufficient: Grant v Edwards: substantial Conduct as detrimental reliance Conduct that has been considered sufficient: Grant v Edwards: substantial indirect contribs to mortgage and bringing up children Eves v Eves: labouring work Hammond v Mitchell: unpaid business assistant as well as looking after house and children Stokes v Anderson [1991] 1 FLR 391 £ 12 k to man to pay ex-wife’s mortgage Chan v Lun: giving up political career and helping with property development projects

Contrast Rosset But Mrs Rosset’s activities – painting , decorating, supervising builders carrying out Contrast Rosset But Mrs Rosset’s activities – painting , decorating, supervising builders carrying out renovations, ordering, delivering materials – so trifling as to be de minimis.

No agreement to share • Conduct becomes basis from which to infer (i) common No agreement to share • Conduct becomes basis from which to infer (i) common intention and (ii) conduct to give rise to CT • Usually nothing less than direct contributions to purchase price

Trowbridge v Trowbridge [2002] All ER (D) 207 Court found no discussions that Mr Trowbridge v Trowbridge [2002] All ER (D) 207 Court found no discussions that Mr T to have interest in house. As no discussions possible inference from conduct? Payment to purchase price or by mortgage instalments. Common intent arose from his mortgage contributions

Contrast Buggs v Buggs [2003] All ER (D) 379 claimant contributed to common pool Contrast Buggs v Buggs [2003] All ER (D) 379 claimant contributed to common pool from which mortgage payment were made. Judge decided no trust in her favour – perverse and criticised.

Rosset: house bought from family trust. Property bought in Mr Rosset’s name. Mr Rosset Rosset: house bought from family trust. Property bought in Mr Rosset’s name. Mr Rosset obtained £ 15 k loan from Lloyds then defaulted. Possession claimed by bank and Mrs R claimed overriding beneficial interest 70(1)(g) LRA 1925

Rosset Mrs R claim that express agreement that property would be jointly owned rejected Rosset Mrs R claim that express agreement that property would be jointly owned rejected at first instance. But common intention that Mrs should have beneficial interest under CT. HL held activities insufficient to justify inference.

Express agreement Absence of express agreement not necessarily fatal – court may still infer. Express agreement Absence of express agreement not necessarily fatal – court may still infer. But only where conduct leads court to infer this is what happened I. e. court cannot infer simply if one would have been reasonable had the parties thought about it.

Direct contributions to mortgage or purchase price will readily lead the court to infer Direct contributions to mortgage or purchase price will readily lead the court to infer an agreement was present. See Burns v Burns [2004] EWCA Civ 1258 Gissing v Gissing decorating and gardening work justified on basis of making the homes more pleasant rather than gaining a share of equity.

Rosset – indirect contributions Bridge: appears to rule out indirect contributions as in Grant Rosset – indirect contributions Bridge: appears to rule out indirect contributions as in Grant v Edwards These were accepted in Burns as giving rise to CT.

Rosset – indirect contributions Fox LJ: absent express agreement then conduct is sued to Rosset – indirect contributions Fox LJ: absent express agreement then conduct is sued to infer common intention – especially expenditure. Court looks for expenditure related to purchase of house e. g. making of indirect contributions

Grant v Edwards – indirect contributions Norse LJ: expenditure referable to purchase of house Grant v Edwards – indirect contributions Norse LJ: expenditure referable to purchase of house is necessary – duel effect in establishing common intention and detrimental reliance

Rosset - indirect contributions Does Bridge rule out such contributions? Analysed Grant v Edwards Rosset - indirect contributions Does Bridge rule out such contributions? Analysed Grant v Edwards female’s indirect contributions to mortgage and Eves v Eves where labouring done. Conduct was sufficient because of express common intention. On its own conduct was insufficient to base claim to CT.

Le Foe v Le Foe HC concluded Bridge had not intended to exclude wife’s Le Foe v Le Foe HC concluded Bridge had not intended to exclude wife’s indirect contribution to mortgage. Court entitled to infer from indirect contribs of Mrs Le Foe parties intended she should have beneficial interest.

Improvements Are improvements - contributions of time and labour enough to give rise to Improvements Are improvements - contributions of time and labour enough to give rise to inference necessary to found CT? These can = detrimental reliance - see Eves But unclear whether would fall into Bridge second category (see earlier decisions Cooke v Head [1974] 2 All ER 1124 and Hussey v Palmer – but now apparently ruled out)

Rosset - criticisms Confusion of second category with that of RTs. Direct contributions traditionally Rosset - criticisms Confusion of second category with that of RTs. Direct contributions traditionally gives rise to RT but in Rosset is basis for CT.

CT/RT confusion problematic for quantification. Midland Bank v Cooke [1995] 4 All ER 562 CT/RT confusion problematic for quantification. Midland Bank v Cooke [1995] 4 All ER 562 CA held that where direct contrib made – not an RT on proportionate basis but would assess contributions the parties could be assumed to have intended by undertaking a survey of whole course of conduct relevant to ownership.

See also Drake v Whipp [1996] 1 FLR 826: D made direct contributions to See also Drake v Whipp [1996] 1 FLR 826: D made direct contributions to the purchase and claimed direct share under RT – CA found a CT not RT as evidence of express common intention to share – can employ broad brush approach set out in Midland Bank v Cooke. Here fair share was one third.

Le Foe v Le Foe Parties married 40 years. In husband’s sole name. Wife Le Foe v Le Foe Parties married 40 years. In husband’s sole name. Wife made indirect contributions to mortgage and cash contributions to second mortgage and arrears on earlier mortgage. Husband argued beneficial interest was 10%. J applied Midland Bank v Cooke. From whole course of dealing share should equal 50%.

RTs/CTs and Rosset • Direct contribution can equal RT and a proportionate share • RTs/CTs and Rosset • Direct contribution can equal RT and a proportionate share • Under Rosset such a contribution can give rise to CT or can be used to infer necessary common intention • Court not bound to apply RT formula but can take account of whole range of conduct as above

Quantification Where express common intention to share then shares equals what parties agree e. Quantification Where express common intention to share then shares equals what parties agree e. g. Hammond v Mitchell

Quantification Where there is no express agreement then principles laid down in Gissing v Quantification Where there is no express agreement then principles laid down in Gissing v Gissing apply. Can an inference be drawn from parties conduct of what share was intended. e. g. Grant v Edwards and Hyett v Stanley

Quantification e. g. half shares awarded in Grant v Edwards and Hyett v Stanley Quantification e. g. half shares awarded in Grant v Edwards and Hyett v Stanley

Quantification Could be inferred that share was to be quantified later having regard to Quantification Could be inferred that share was to be quantified later having regard to total contributions of whatever kind. Court can then determine what in all the circs is a fair share. Stokes v Anderson Oxley v Hiscock [2004] EWCA Civ 546

Oxley v Hiscock Court at first instance determined shares on basis of intention to Oxley v Hiscock Court at first instance determined shares on basis of intention to share equally. On appeal defendant argued that shares should be proportionate on basis of original contributions.

Oxley v Hiscock CA held: each entitled to share considered fair – in regard Oxley v Hiscock CA held: each entitled to share considered fair – in regard to whole course of dealings – including occasional expenses. Accounting also for defendants greater contribution fair share was 60/40.

Oxley v Hiscock Where no discussion therefore each is entitled to share court considers Oxley v Hiscock Where no discussion therefore each is entitled to share court considers fair after survey of whole course of dealing. Chadwick LJ gave leading judgement – followed Gissing. In absence of any express agreement intention must have been to agree this later on what was agreed to be fair.

Quantification • Under second limb of Rosset: CT as a result of direct contribution Quantification • Under second limb of Rosset: CT as a result of direct contribution to the purchase price then starting point in quantifying shares is proportionate entitlement. • e. g. Springette v Defoe [1992] 2 FLR 388 RT ordered after council house discount obtained. See also Ashe v Mumford 33 HLR 756 and Huntingford v Hobbs [1993] 1 FLR 736

Quantification Where direct contribution court is not bound to use proportionate basis. Midland Bank Quantification Where direct contribution court is not bound to use proportionate basis. Midland Bank v Cooke – wife made contrib of £ 550 being half of wedding gift to both parties. At first instance awarded 6. 5%.

Quantification CA held: not bound to deal with quantification on strict basis of cash Quantification CA held: not bound to deal with quantification on strict basis of cash contrib. Could attribute intention to share beneficial interest by survey of whole course of dealing and take account of all conduct relevant to issue of hat shares were intended.

Quantification Approach in Midland Bank v Cooke applied in other cases Quantification Approach in Midland Bank v Cooke applied in other cases

Oxley v Hiscock CA in Oxley criticised approach of Waite LJ in Midland Bank Oxley v Hiscock CA in Oxley criticised approach of Waite LJ in Midland Bank v Cooke that whole course of dealing should be surveyed Chadwick thought this artificial that shares should be fixed as from time of the acquisition when the evidence suggests they gave no thought to the matter.

Lloyds Bank v Rosset: appeared to provide clear statement but problems surrounding quantification of Lloyds Bank v Rosset: appeared to provide clear statement but problems surrounding quantification of beneficial interest – especially where direct contribution is made

Law Commission • • Discussion paper: “Sharing Homes” law is complicated, difficult to apply Law Commission • • Discussion paper: “Sharing Homes” law is complicated, difficult to apply and unsuited to informalities of home sharing. Much depends on what court identifies as common intention – unrealistic No clear what contribs are sufficient Quantifying shares extremely difficult – decisions inconsistent Uncertainty of law can lead to delay

Summary Considered law of CTs in variety of situations: Trustees or other fiduciaries becoming Summary Considered law of CTs in variety of situations: Trustees or other fiduciaries becoming trustees of unauthorised profit Third party when in receipt of trust property Common intention and the family home Property received as a result of killing Mutual wills Specifically enforceable contracts Imperfect gifts Unifying factor – unconscionable conduct.