Vardags Family Law Essay competition 2023/24 | Manpreet Kaur

Manpreet Kaur - University of Law

The family home is one of the most valuable assets in a family home. The current law provides no obligation for cohabitants to support each other upon the breakdown of their relationship. The courts have attempted to use the law of trusts to address the division of assets. The law of trusts in relation to beneficial interests in the family home has been the subject of much criticism. In particular, the complexity and uncertainty of the law have been highlighted as major concerns, leading many to call for reform. This essay will critically discuss the above statement and will focus on the recent case of Hudson v Hathway to illustrate the difficulties that can arise in this area of law.

The presumption is that equity follows the law; in other words, that prima facie the legal estate carries with it the whole beneficial interest. If one party wishes to establish that the beneficial interest does not coincide with the legal title, he or she will therefore have to establish trust. Likewise, if the couple hold legal title, they will be presumed to be the joint beneficial owner. Lord Reid in Jones v Kernott stated that the decision in Stack v Dowden gave rise to difficulties, as couples (married or unmarried), rarely make agreements about their respective shares in their names. To ascertain as to how the shares are decided by the courts in the absence of an agreement, trust principles are applied. Express declaration of trust concerning land, such an express trust, would need to be evidenced in signed writing or else it would be unenforceable.

However, as Virgo points out, parties often fail to prepare any written documentation identifying their beneficial interests. In Gissing v Gissing, Lord Diplock stated the legal principles applicable are those of the English law of trust and in particular the kind of disputes between spouses, the law relating to the creation and operation of resulting, or constructive trust. The process of determining the respective interests in a property for cohabiting couples when their relationship breaks down is complicated by economic barriers and a lack of legal knowledge, resulting in many partners being unable to register the property in joint names. In the case of Burns v Burns, the claimant’s attempt to establish a resulting trust was unsuccessful as she did not directly contribute to the purchase or mortgage payments, despite her assistance with finances and purchase of consumer goods. When a non-owner makes a direct contribution to the purchase price of the home, equity presumes a resulting trust in their favour as there must have been an intention to gain beneficial interest rather than make a gift. In Cowcher v Cowcher, the claimant’s significant financial contribution towards mortgage payments was deemed sufficient to establish a resulting trust, despite the property being conveyed solely in the husband’s name. Recently, courts have moved away from using resulting trusts as a rigid tool, as demonstrated in the case of Stack v Dowden, with the exception of Lord Neuberger. Baroness Hale emphasized that resulting trusts are not a legal rule and that the law has evolved to consider changing social and economic circumstances.

As a result, the courts are left to establish a formula for common intention constructive trusts, which Lord Bridge addressed in the landmark case of Lloyds Bank v Rosset. It was established that a constructive trust can only be established if there is a mutual intention between both parties that the claimant will have an interest in the property, and this intention must have been relied upon to the claimant’s detriment. This ruling preceded the decision in Stack v Dowden and Kernott v Jones. His judgement emphasised the importance of identifying a prior agreement or understanding between the parties to share the property, but in the absence of such an agreement, the court can infer from their conduct that such an understanding exists, often through financial contributions.

Whilst promoting a relative degree of certainty, the approach has attracted widespread criticism of unfairness. Given that men have higher employment rates than women, they are more likely to be able to contribute financially, which perpetuates gender disparity. The courts’ examination of cohabitant relationships has been criticised for reinforcing gender stereotypes and impeding equity within the context of childbearing due to its inadequate consideration of non-financial contributions. Moreover, the lack of clarity surrounding the list of considerations and the vague nature of the context-based approach have led to accusations that the courts can exercise their discretion by cherry-picking factors that determine the allocation of the beneficial interest.

Considering the parties conduct and intention, can be criticised for its complexity as this can make it difficult for parties to predict the outcome of a dispute and can result in lengthy and costly legal proceedings. Furthermore, difficulties and potential unfairness arises when there is no express agreement or direct financial contribution to the family home. The decision in Burns v Burns, underlines the challenges faced by those have shared a home for a long period of time but unable to establish common intention or establish financial contribution despite her payments of the upkeep of the home and raising children. It was acknowledged that although the complaint may have ‘worked just as hard as the man’, this was not a sufficient contribution to have a share in the property.

Rossett argues that simply having a common intent to share is not sufficient enough to establish a constructive trust, and that there must also be acts indicating that a party has relied on that common intention to their disadvantage. However, there is much uncertainty regarding this requirement. The law regarding detrimental reliance in both areas has been accused of gender bias, to the potential disadvantage of both female and male claimants, in generally requiring ’conduct on which the claimant could not reasonably have been expected to embark, unless they was to have an interest in the house. A feminist legal study taken by Flynn and Lawson showed that the courts’ construction of normality reflects the belief that women should stay at home while men work. Domestic behaviours are considered acceptable, while behaviours outside of this sphere are seen as abnormal and must be explained as transactions rather than acts of love. Female claimants must demonstrate that they went above and beyond what judges consider typical for women. Nourse LJ’s test encourages the use of stereotypes to establish deviations from the norm.

In Eves v Eves, it recognises that direct contribution towards the household does not necessarily have to be financial to determine reliance, as the conduct of the woman doing ‘heavy manual labour’ constitutes to a detriment reliance as this was not the kind of conduct one would expect from a ‘normal’ female cohabitant. In contrast to Thomson v Humphrey, the man performing the role of a “tradition wife”, did not amount to detrimental reliance. These examples demonstrate the danger of gender stereotyping when determining whether a party is able to establish detrimental reliance or not.

Once interest is established, the next step is to quantify the shares the parties are entitled to under constructive trust which are determined by the parties intention. In cases where the parties have set out clearly what percentage share they are to have, the court will follow that. When the parties’ intentions regarding the division of a property are unclear, the court will seek to determine those intentions.

In cases where the property is not in joint names, the court must infer the parties’ intentions by considering all the evidence in the case. In the case of Oxley v Hiscock, Chadwick LJ raised that in the absence of an agreement on the division of shares, the court determines each party’s fair share of the property’s beneficial interests based on their dealings. The House of Lords in Stack v Dowden rejected an approach of determining a fair share for each party based on the whole course of dealing between them and emphasised that the focus must be on the parties’ intentions. This principle was reiterated in a subsequent decision.

In cases where a property is jointly owned without specifying each party’s share, it is generally assumed to be divided equally. However, this presumption can be rebuted with clear evidence of unequal ownership intentions. The standard of evidence required to challenge this presumption is complex and uncertain, as demonstrated in Stack v Dowden. In Jones v Kernott, unequal financial contributions and overall conduct were considered to successfully challenge the presumption. Ultimately, all relevant factors will be evaluated to determine whether the presumption of equal sharing has been successfully rebutted.

The case law demonstrates that the principles of quantifying shares in constructive trust can be uncertain and complex, further leading to inconsistent and challenging decisions. In the case of Midland Bank Plc v Cooke, the court ruled that the wife of the legal owner had gained a beneficial interest through a common intention constructive trust. In determining her share, the court used a broad approach, awarding her a one-half interest despite her financial contribution being less than one-twelfth of the property purchase price. This decision contrast with the outcome in Drake v Whipp, where a significantly larger financial contribution resulted in a much smaller beneficial interest.

The Hudson v Hathway case highlights the importance of detriment reliance in common intention property disputes. The case was about a couple’s beneficial shares in a family home purchased in joint names (and equal shares), during their unmarried relationship. Following the breakdown of their relationship, the parties agreed, over a series of email exchanges with Hudson ending his emails with “Lee”, that Mr Hudson would have no further interest in the property of the picnic house, on the basis that Ms Hathway would lay no claim to Mr Hudson’s shares and pension. Later, Mr Hudson ceased to contribute to the mortgage and Ms Hathway took over payments. Mr Hudson issued a claim for an order for sale and equal division of proceeds. Ms Hathway contended she should be solely entitled to the proceeds under a CICT.

In the trial proceeding by Kerr J who held that when seeking to establish a common intention constructive trust in a family home where the property is jointly owned, it was stated that an express agreement between former cohabitees regarding beneficial shares can itself supply the requirement of unconscionability. Thus, there is no need to establish detrimental reliance or change of position in reliance on the promise. Furthermore, there is no mention in Stack v Dowden and it was confirmed in Jones v Kernott that there is no requirement for the claimant to show evidence of detriment for joint cases as ‘it attracts no discussion’.

In the appeal, it was considered by Lewison LJ, whether the communications between the parties expressing their common intention that Ms Hathway should have the whole beneficial interest in the property comply with the statutory formalities and whether detriment is still required. Lewison LJ in the appeal, clarified that an equitable joint tenant cannot assign their interest to another joint tenant as they are jointly entitled to the entire property. Instead, a joint tenant may release their interest to the other joint tenants under section 36 of the LPA 1925, as amended by the Trusts of Land and Appointment of Trustees Act 1996. In this case, the court found that the emails sent by Mr. Hudson evidenced a clear intention to immediately divest himself of his equitable interest rather than making a promise to do so in the future. Although emails were not considered in the LPA 1925, the law should cover technological advancements if they serve the purpose.

Courts have ruled that an email signature counts as a legal signature. In this case, Mr. Hudson’s emails counted as signed document, effectively transferring his beneficial interest in Picnic House to Ms. Hathway. This showcases how technological development have brought in complexity.

In this case, the exchange of emails between the parties was sufficient evidence to establish that it was unconscionable for Mr. Hudson to back out of the agreement. The agreement itself established a common intention, which, in turn, established the constructive trust.

While it was not necessary to prove Ms. Hathway’s detriment due to the agreement, the Lord agreed with the trial judge that the agreement itself was crucial to determining any detrimental impact. Ms. Hathway gave up her perceived claims in exchange for the promise made by Mr. Hudson, which was sufficient to establish her detrimental reliance.

The recent appeal decision shows how subsequent events can alter intentions in joint ownership of a family home and make the constructive trust flexible, not fixed at the date of purchase. This flexibility of the law of common intention constructive trust can be beneficial but also leads to uncertainty and complexity. Reform is needed as the current requirements for establishing the existence of an interest under a trust are not ideally suited to the typical informality of those sharing a home.

Although equity attempts to assist cohabitants, the complexity and strictness of the court’s approach often lead to difficult decisions. The law undervalues non-contributors, which are women and leaves them at a disadvantage as it gives insufficient weight to the kind of sacrifices that women tend to undertake, such as raising a family’. The existing law is uncertain and expensive to apply because it was not designed for cohabitants. The law commission report proposed for a reform of the law relating to the ownership of property of the unmarried couples, where its proposed some financial claims can be made by the cohabitant couples but at a lower level than would be if they were married to protect them and their children from financial issues in the event of separation.

However, the reformation of the law could undermine the value of Marriage. It would be illiberal to force marriage-like rights on all cohabitating couples as many would not prefer to share their assets with their new current partner. More importantly, by affirming cohabitation as the equal of marriage, the government is giving its approval to a family structure that is fundamentally more unstable than marriage.

To conclude, it can be said the courts do not have any discrepancy between married couples and cohabite, as they have followed the principle of trust. In order to ascertain a fair amount, the courts utilised the principle of trust the pursuit of the common intention of the parties. The current law decisions lead to gender disparity as the law of trust was not designed for cohabitants. Thus, reform is necessary, where a fixed legal framework is available for the parties to rely on.

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Bibliography

Legislation

Law property Act 1925

Trusts of Land and Appointment of Trustees Act 1996

Books

Dawn Oliver, Cohabitation the Legal implication ( 1 edn, CCH Editions Limited) Martin Parry, The Law relation to Cohabitation (3 edn, Sweet & Maxwell 1993) Miles Joanna and others, Family Law (4th edn, Oxford University Press 2019) Jonathan Herring, Family Law (9^th edn, Oxford University Press 2019)

Paul Davies and Graham Virgo, Equity and Trusts: Text, Cases and Materials (Oxford University Press)

Richard Clements & Ademola Abass, Equity and Trust (3 edn Oxford University Press 2013)

Cases

Burns v Burns [1984] 1 All ER 244

Cowcher v Cowcher [1972] 1 wlr 425 Crossley v Crossley [2007] EWCA Civ 1491 Drake v Whipp [1995] EWCA Civ 25

Eves v Eves [1975] 1 WLR 1338

Gissing v Gissing [1971] AC 886

Grant v Edwards[1986] 3 WLR 114

Hudson v Hathway 2022] EWHC 63

Jones v Kernott [2011] UKSC 53

Lloyds Bank v Rosset [1991] A.C. 107 Midland Bank Plc v Cooke [1995] EWCA Civ Oxley v Hiscock [2004] EWCA Civ

Stack v Dowden [2007] UKHL 17

Thomson v Humphrey [2009] EWHC 3576