Sir Francis Bacon
(2) Cohabiting couple families are the fastest growing family type, having grown by 29.7% in the 10 year period 2004 to 2014; and,
(3) 51% of respondents to a British Social Attitudes Survey in 2008 thought that unmarried couples who live together for some time had a “common law marriage” which gave them the same legal rights as married couples.
3 Of course, not all cohabiting couples own property together, but many do.
4. Despite recommendations from the Law Commission and encouragement from the Supreme Court there remains a reluctance to introduce legislation providing for the redistribution of property upon the breakdown of non-married/civil partnership relationships. Thus, upon relationship breakdown, it is the general law of property and trusts which governs the ownership of property as between cohabiting couples. In the absence of legislative reform judges have responded by simply adjusting the rules to meet the circumstances. This has been achieved in two significant ways: (a) by altering the equitable presumptions; (b) by use of the evidential tool of objectively deducing parties’ intentions from their conduct (eg. inferring parties’ intentions from their conduct, or as final resort, by imputing to the parties intentions which they did not know they held).
(A) The applicable principles
5. What matters to the separating parties, of course, is not the strict legal ownership of property but instead their respective beneficial interests, ie. their respective entitlements to the proceeds of sale. Essentially, in the case of cohabiting couples, beneficial interests in property may arise in three different ways:
(2) By way of a “common intention” constructive trust;
(3) By way of the doctrine of proprietary estoppel (which in turn will normally give rise to a constructive trust).
7. Following relationship breakdown: (a) the continued occupation by one party or the other may become an issue and (b) the principles of equitable accounting may cause the parties’ entitlements to the proceeds of sale to be adjusted.
(1) Express declaration of trust
8. By an “express declaration of trust” is meant a declaration of trust complying with section 53(1)(b) of the Law of Property Act 1925, being a declaration:
(2) signed by the person who is able to declare the trust.
10. However, that is not to say that an express declaration of trust, as with any other instrument: (a) cannot be rectified pursuant to the principles concerning rectification; or, (b) cannot be attacked as being void or voidable on the grounds of fraud, mistake, misrepresentation or undue influence.
11. As to variation of an express declaration of trust by “subsequent agreement”, such a variation would amount to a “disposition of an equitable interest or trust subsisting at the time of the disposition” within the meaning of section 53(1)(c) of the 1925 Act, and thus is required to be: (a) in writing, (b) signed by the person disposing of the same, or by his lawfully authorised agent. However, section 53(2) of the 1925 Act provides that the section “does not affect the creation or operation of resulting, implied or constructive trusts” and thus, as discussed below, the question arises whether, apart from proprietary estoppel, an express declaration of trust can subsequently be varied by a “common intention” constructive trust.
12. Thus, in any case concerning the question of beneficial interests in a property an early enquiry (if not the first enquiry) must be whether there exists an express declaration of trust. As to this:
(b) in the case of both joint proprietorship and sole proprietorship, an express declaration of trust can, and in many cases should, be provided for in a document separate from the transfer itself.
(2) tenancy in common.
14. As to the world joint tenants are in the position of a single owner, although as between themselves they can have separate rights. For practical purposes, the two important features of a beneficial joint tenancy (ie. where the co-owners are both legal and beneficial joint joints) are:
(2) Equality of interest: The interest of each joint tenant is the same in extent nature and interest, ie. there is an equal entitlement to the beneficial interest.
16. It is now settled that severance of a joint tenancy results in a beneficial tenancy in common in equal shares – also Goodman v Gallant, duly affirmed at para 49 of Stack v Dowden.
17. As to an express declaration being contained in the Transfer itself, the three options offered at box 10 of TR1/TP1 are:
- they are to hold the property on trust for themselves as joint tenants
- they are to hold the property on trust for themselves as tenants in common in equal shares
- they are to hold the property on trust:….”
19. Finally, it is also settled that a declaration in a Transfer/conveyance that the survivor “can give a valid receipt for capital money arising on disposition” of the property does not, in itself, amount to an express declaration of trust – see Stack v Dowden para 51.
(2) “Common intention” constructive trust
(a) Joint names
20. All joint legal owners hold the property on trust, by way of a trust of land.
21. Thus, in the absence of an express declaration of trust the question is: on what trusts do they hold the property?
22. The answer to that question is wholly dependent on the context, viz. “in law, “context is everything” and the domestic context is very different from the commercial world” – Baroness Hale, para 69 of Stack.
23. In short, on the basis of Stack and Kernot -v- Jones  1 AC 776, in the domestic cohabitation context, the answer to that question is arrived at by the application of the following principles:
(2) That presumption can be displaced (said to be a “heavy burden”) by showing:
(b) that they later formed the “common intention” that their respective shares would change;
(4) In those cases where it is clear that: (a) the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property “the answer is that each in entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property”.
(5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which enable the court to decide what shares were either intended (as in (3) above) or fair (as in (4) above.
25. Of course, in both Stack and Kernott having emphasised the applicability and importance of the new equitable presumption of joint tenancy, in each case, on the facts, the House of Lords/Supreme Court upheld the first instance court’s findings that the presumption was displaced by a differently held/formed “common intention”. In Stack of course the different common intention was found to have been held at the time of acquisition; in Kernot the different common intention was held to have been formed subsequently when the defendant moved out of the property and bought somewhere else.
26. In Kernott Lord Walker and Baroness Hale adopted Lord Diplock’s description, in Gissing v Gissing  2 AC 886 (at 906B), of the task of objectively deducing the parties’ common intention from their conduct:
28. Conceptually it would appear that there is no reason why an express declaration of trust cannot be varied by “subsequent agreement” arising by way of a subsequently formed “common intention” constructive trust that the parties’ respective shares should be altered. As stated above, by section 53(1)(c) of the Law of Property Act 1925 an agreement to vary an express declaration of trust is required to be: (a) in writing, (b) signed by the person disposing of the same, or by his lawfully authorised agent. However, section 53(2) of the 1925 Act provides that the section “does not affect the creation or operation of resulting, implied or constructive trusts”. In these circumstances it would appear possible that a subsequently formed common intention, similar to that in Kernot, could give rise to a constructive trust which would have the effect of varying the express declaration of trust. In practice it might be expected that the cogency of the evidence going to show such a common intention had indeed arisen in the absence of a written/signed variation would need to be greater – the parties having been careful to express their interests in writing, generally speaking, they could be expected to set out any changes in writing.
(b) Sole name
28. In joint names’ cases, a trust automatically arises and essentially all the court is doing is ascertaining the parties’ intentions in relation that terms of that trust, ie. in what proportions the beneficial interests are held.
30. However, where property is held in a party’s sole name no trust of land automatically arises and the starting point is different. The first question is whether it was intended that the other party would have any beneficial interest in the property as all. Of course, this can be deduced objectively from the parties’ conduct.
31. However, intention alone is not sufficient. Despite the absence of comment in Kernott on the need for detrimental reliance, where the property is registered in the sole name of one of the parties, it remains the case that for a “common intention” constructive trust to arise two separate factors are required:
(2) Detrimental reliance: in addition, it remains necessary to establish detrimental reliance. The other party must have acted to his/her detriment in reliance upon the parties’ common intention and in the reasonable expectation that he/she would acquire an interest in the property – Gissing v Gissing  AC 886.
32. The rules as to ascertainment of the parties’ common intention and quantifying the beneficial interests are the same as those in joint names’ cases and the principles set out at paragraph 20(3), (4) and (5) apply. It is important to note that “intention” and “detriment” are interwoven and that acts of detriment (ie. paying for/contributing towards the purchase or subsequent improvements) can support an inference that the paying/contributing party was to have/acquire a share.
33. In sole name cases, a particular type of case where the Court will infer a “common intention”is an “excuse” case, where one party gives to the other an explanation (the “excuse”) why the property is not in joint names and/or cannot be transferred into joint names (eg. “too expensive”, “too much trouble”, “bank/building society won’t allow it”). Generally speaking the Court will treat such an excuse as a clear inference of common intention that the other party should have an interest in the house – see Grant v Edwards  Ch 639.
34. As to detrimental reliance, it is apparent from the speeches in Stack that the relatively high and narrow hurdles previously set by the courts are now to be both lowered and widened. Thus, in relation to Lord Bridge’s dicta in Lloyds Bank v Rosset that, in cases where a “common intention” constructive trust only arose by inference, direct contributions to the purchase price (whether initially or by payment of mortgage instalments) were required and that it was “doubtful that anything less will do”, is no longer supported – “the law has moved on, and your Lordships should move it a little more in the same direction” Lord Walker in Stack at para 26. It is now difficult to set any clear rules, however, the basic requirement remains that there must be some sufficient connection between the claimant’s conduct and his/her belief that he has an interest in the property. Thus, even in the modern context it would seem that the performance of everyday domestic tasks (including maintenance and, perhaps even, minor works of improvement) will not suffice. It remains preferable for the acts of detriment to be referable to the property in some way (ie. generally speaking its acquisition, preservation or improvement); however, even that is not a hard and fast rule.
35. A useful recent example of a judge at first instance finding a common intention constructive trust between cohabitees where the property was in the sole name of one is Graham-York v York  EWCA Civ 72. There the parties had lived together for 33 years. In finding that there was a common intention constructive trust the judge stated:
36. Similar to common intention constructive trusts the doctrine of proprietary estoppel has been propelled forward in recent years – starting with the Court of Appeal in Gillett v Holt  Ch 210 and more recently House of Lords decision in Thorner v Major  1 WLR 776. Many of the cases following Thorner concern family farming businesses where a member of the next generation has been persuaded to remain on the farm for many years on a low income with the that promise “one day it will be yours”. However, the doctrine has important application in cohabitation cases.
37. The essential elements of the doctrine are: (a) a representation or assurance made to the claimant; (b) reliance thereon by the claimant; and (c) detriment to the claimant in consequence of his/her (reasonable) reliance. However, these three elements are not to be treated as “watertight compartments”. A useful summary of the applicable principles is set out in the judgment of Floyd LJ at paras 29 to 33 of Davies v Davies  EWCA Civ 568. The following principles apply:
(2) As to the assurance:
(b) It was a necessary element of the doctrine that the assurances should relate to identified property (even if the extent of the property was liable to fluctuate, eg. a farm) – Thorner at para 61.
(b) whether the claimant has suffered detriment must be judged at the point where the person who gave the assurance seeks to go back on it – Davies at para 32.
(c) whether the detriment is sufficiently substantial must be judged by whether it would be unjust or inequitable to allow the assurance to be disregarded – Davies at para 32.
(d) whether there is detrimental reliance in any given case is an evaluative judgment, which normally lies within the exclusive province of the trial judge.
(b) however the court must have in mind the principles of both: (i) unconscionability; and (ii) proportionality. Thus when considering the extent of the relief to be granted the court must balance the assurances and the detriment and the interests of third parties. Thus, in Jennings v Rice  EWCA Civ 195 the court declined to award the claimant all of the property he had been promised by the deceased and instead awarded him a lump sum in (generous) compensation for the care he had given to the deceased.
(c) In this regard, the court must look at the circumstances in each case to decide in what way the equity can be satisfied. The equity arises not from the claimant’s expectations alone, but from the combination of expectations, detrimental reliance, and the unconscionableness of allowing the defendant to go back on the assurances – see Jennings.
(2) The judge awarded the claimant £28,000 calculated as follows: (i) £15,00 for
the amount spent on the housing association house; (ii) £5,000 the claimant had contributed in setting up the new house; and (iii) an uplift to allow for inflation.
(3) The defendant appealed, inter alia, on the basis that the judge had failed to take account of the many benefits received by the claimant and her two daughters in living with the defendant. Dismissing the appeal, Tomlinson LJ explained:
41. By reason of section 2 of the Law Reform (Miscellaneous Provisions) Act 1970 engaged couples have the same entitlement under section 37 as married couples and civil partners.
(5) Post-breakdown occupation, exclusion and equitable accounting
42. The occupational rights of beneficiaries and the consequences of exclusion/restriction of those rights are now exhaustively set out in sections 12, 13, 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996. That statutory regime replaces the old doctrines of equitable accounting in such circumstances (see Stack at paras 93-94 and Murphy v Gooch  EWCA Civ 603).
43. Where a couple cohabits and each has a beneficial interest in the property, each will necessarily be “entitled to an interest in possession” and the purpose of the trust will inevitably include making the property available for each party’s occupation. Thereby each will have an entitlement to occupy the property in accordance with section 12 of the Act.
44. Section 13:
(b) to assume any other obligation in relation to the property.
(b) to forgo any payment or other benefit to which he would otherwise be entitled under the trust so as to benefit the excluded beneficiary.
46. Whilst section 13 gives power to the Court (in the absence of agreement between trustees) to deprive the beneficiary remaining in possession of his/her beneficial entitlement and/or to increase the beneficial entitlement of the excluded party, the situation also can arise where the party remaining in possession makes capital expenditure on the property (ie. capital repayments of the mortgage or expenditure on improvements to the property) and wants that recognised by way of a corresponding increased share in the proceeds of sale.
47. In such a case, the statutory regime does not displace the established equitable doctrines. The applicable principles in such a case, as set out in Wilcox v Tait  EWCA Civ 1867 and Clarke v Harlow  EWHC 3062, are as follows:
(2) Thus, in the ordinary case of cohabitation while the relationship subsisted, and whilst the ordinary arrangements for the discharge of the outgoings subsisted, generally speaking there is unlikely to be a breach or failure by one party to honour any obligation owed to the other. Thus, generally speaking there was no room or reason for equitable accounting for the period during which the relationship subsisted;
(3) However, after the relationship ended and the parties separated, if one party bore a disproportionate share of capital expenditure or outgoings equitable accounting could arise. Thereby, the parties’ respective beneficial interests are not adjusted; instead appropriate adjustment (by debiting and crediting each party’s entitlements as appropriate) is carried at the time of the final distribution of the net proceeds of sale.
(4) As a matter of practice it is preferable not to embark upon equitable accounting until the amount of net proceeds of sale is known.
49. As referred to above, section 14 of the 1996 Act confers a power on the Court to make any such order:
(2) declaring the nature or extent of a person’s interest in property subject to a trust,
50. That power is sufficient to determine all matters arising under sections 12 and 13 and to decide if one party or another has a beneficial interest (whether by express declaration, constructive trust, proprietary estoppel or otherwise), to determine the extent of that interest and to determine any equitable accounting.
51. Also of course the power includes a power to order sale.
52. However, in the absence of a power in the trust, one function which the Court has no power to exercise is the power to order one beneficiary to sell his/her share to the other.
53. Judicial attempts can be made to overcome this absence of power by delaying/refusing an order of sale on terms that one party sells his/her interest to the other. Further, of course, if the property is to be sold on the open-market either owner can seek permission to bid. In such a case the other owner or a third party is likely to be given conduct of sale.
54. Section 15 provides that, in exercising its powers under section 14, the Court is to have regard to the following matters:
(2) the purposes for which the property subject to the trust is held,
(3) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and,
(4) the interests of any secured creditor of any beneficiary.
56. In cases of bankruptcy, even where young children are in occupation, sale is likely to be the eventual result – see Re Citro (a bankrupt)  Ch 142, Turner v Davis  1 FLR 74 and in particular the provisions of section 335A of the Insolvency Act 1986. By section 335A:
(2) once a year has passed since the trustee in bankruptcy acquired his interest in the property: “the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt’s creditors outweigh all other considerations.”
58. Under the CPR, all proceedings are started by claim form. The procedure under CPR Part 8 will be appropriate where the court’s decision is sought on a question which is unlikely to involve a substantial dispute of fact. In all other cases, the procedure under CPR Part 7 should be used. The court may at any stage order a claim brought using the CPR Part 8 procedure to continue as if the claimant had not used that procedure and, if it does so, it will give such directions it considers appropriate.
60. Despite such claims being governed by the CPR, there is evidence to suggest that in local county courts applications between cohabiting couples under section 14 of the 1996 Act, following relationship breakdown, are being listed for a PTR to be conducted in a manner similar to an FDA/FDR appointment in family proceedings.
Sir Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?
William Roper: Yes, I’d cut down every law in England to do that!
Sir Thomas More: Oh? And when the last law was down, and the Devil turned ’round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man’s laws, not God’s! And if you cut them down, and you’re just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil benefit of law, for my own safety’s sake!