Law of Property Act 1925 - Essay Example

In 1991, Harry purchased a small house for his son and daughter-in-law, Ivor and Jane, as a wedding present. The purchase price was ?12,000 and title to the house was put in Harry’s name. He paid a deposit of ?500 and borrowed the rest of the money from a wealthy friend. Harry was fond of his daughter-in-law and thought her a sensible woman and so he told her that the house was hers and Ivor’s if they paid off the loan. On the first day of every month Jane visited her father-in-law and paid an instalment. In 2006, Jane and Ivor split up and Ivor left to live elsewhere. Jane carried on paying the instalments on the loan. In 2009 Harry became ill and died. Jane has continued to pay the instalments to the friend direct. Under Harry’s will, all his property passes to his widow, Helena. There is ?1,000 still owing on the loan. Helena, as executrix of and sole beneficiary under the will, has applied for a possession order against Jane. Advise Jane. Students are advised not to consider the Land Registration Acts but to answer the question within the syllabus. 2. Augusta had a friend Julius, who was in financial difficulties. Augusta lent Julius ?5,000 " to get himself sorted out". At Augusta's insistence, Julius put the money into a separate bank account and told the bank, to whom he owed money, that the money was a special loan from Augusta. Julius used ?2,000 of the money to pay various debts before he was declared bankrupt. ?3,000 remains in the account. Augusta died leaving a will containing the following provisions: “To my son Cassius I leave ?20,000 to enjoy as he likes during his lifetime, provided that, at his death, he leaves any of the money that remains to his sister Demeter, The rest of my estate I leave to Gaius and Lucius on trust, so that they may make grants out of the income from this fund to any of the descendants of my illustrious ancestor Tarquin and their families.” Tarquin lived two hundred years ago and is reputed to have had many children both legitimate and illegitimate. Advise Cassius as to his rights and duties over the ?20,000. Advise Augusta’s executors as to whether they will be able to recover the balance of ?3,000 in Julius’ bank account. Advise Gaius and Lucius as to their powers and obligations with the regard to the residue of Augusta’s estate. Question 1 In the above, it is necessary to consider what rights Jane might have over the property. This will involve analysing how proprietary rights over property can be established. Under the Law of Property Act 1925 the person registered on the deed for the property will be the legal owner of the estate1. This effectively means that Harry would have been the legal owner despite his promise to give the property to Jane if she paid off the loan. The effect of the Will would mean that the house would transfer in ownership to Helena, which would entitle her to dispose of it in any manner she sees fit2. However, this would create unfairness to Jane who has been paying the money owed to Harry and latterly to his friend on the understanding that she would have a right to the property. As there is no written agreement between Jane and Harry, and Harry has not expressly left the property to Jane in his Will, the only rights she might have in relation to the property would be an equitable interest3. As a result of this, Jane might have to rely on the doctrine of implied trusts to be able to claim a share of the property. Implied trusts can exist through statute or as a resulting or constructive trust. The latter 2 trusts exist in equity only and are applied by the courts to rectify any unfairness caused by the denial of legal property rights through the property only being registered in one parties’ name. A resulting trust occurs where there is evidence that the claimant has made payments towards the purchase price of the property but was not included on the register as an owner. Those relying on this principle have to prove that they expended the money in the belief that they would acquire an interest in the property, proportionate to the amount they have paid4. Lord Diplock in Gissing v Gissing5 stated A resulting, implied or constructive trust…is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny the cestui que trust a beneficial interest in the land acquired. Under the doctrine of a resulting trust there is an express declaration that persons contributing towards the purchase price will have an interest in the property6. Effectively this creates an interest in the property7. This was demonstrated in Tinsley v Milligan8,in which the respondent was hoping to disavow the interest of her partner in relation to the property, by relying on the fact that the property had been registered solely in her name. The court disagreed, holding that the claimant was entitled to a share in proportion to the amount she had paid towards the purchase price, thereby giving the claimant a proprietary right over the property. If money has not been paid directly towards the purchase price, then the doctrine of constructive trusts might become applicable. This occurs in situations where the claimant has paid towards the mortgage payments, household bills or repairs on the property. The conduct of the parties will be taken into consideration when determining whether such a trust has been created. It was deemed that contributions towards the mortgage was sufficient evidence of a constructive trust in Grant v Edwards9 and Passee v Passee [1988] 10. However, in Buggs v Buggs [2003]11, the court refused to accept payments towards the mortgage as evidence of a constructive trust. This occurred because the owner was able to prove that the claimant was fully aware that she would not acquire a right over the property, even if she paid towards the mortgage. The court also rejected a claim for a constructive trust in Griffiths v Cork [2007]12 as the money paid had only been for repairs and not towards the mortgage. The court regarded the money spent on repairs to be a gift to the property owner, and was not given in the expectation of acquiring an interest in the property. Persons claiming under the doctrine of constructive trusts have to show that they acted in their detriment in expectation of acquiring an interest. This was evidenced in Lalani v Crump Holdings Ltd [2007]13, where the claimant was relying on a promise made by the defendant that she would be entitled to a share of the property if she made the payments as agreed. In this case the court rejected the claim as there was no proof of the verbal agreement, and the money supplied by the claimant was for furnishings and repairs only. In the above, Jane could try to rely on the doctrine of constructive trusts as the money she has paid has been for the repayment of the money borrowed to buy the house. She would struggle to rely on a resulting trust as she made no direct contribution to the purchase price. If Jane can prove that she has acted in her detriment on reliance that she would acquire an interest in the property as a result of paying the loan, then the doctrine of proprietary estoppel could be applied. Lord Kingdown, in Ramsden v Dyson14 stated that proprietary estoppel should be applied and ruled that If a man, under a verbal agreement with a landlord for a certain interest in land, or under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and, upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation. Proprietary estoppel was rejected in Thorner v Curtis [2007]15 because the applicant was unable to prove that he had acted in his determent16. In Thorner the claimant could not prove there had been an agreement as this had been a verbal agreement only, and no one was able to corroborate his account. A mere hope that an interest will be gained is likely to be rejected by the court17, as demonstrated in Gillet v Holt18. Although there is no legal requirement of written evidence in order for a claim to a constructive trust to succeed verbal agreements might fail due to lack of corroboration of the facts19. In the above, if Jane can prove that she acted in her detriment and can provide corroborating evidence of the verbal agreement, she might be able to successfully claim an interest in the property. If this is the case, she can prevent Helena from claiming possession of the property, and she will gain rights over the property as though she were entered onto the register. If the courts do not accept this, Helena would be entitled to take full possession of the property and dispose of it as she pleases. Question 2 In order to advise the parties in the above it is necessary to consider which of the bequests will be enforceable. In order for the trusts to be enforceable that has to be certainty of intention20, certainty of beneficiary21 and certainty of property22. In the first case, in relation to the ?20,000 left to Cassius the bequest is likely to fail as there is no express amount that he has to leave to his sister. If Cassius spent the whole amount during his lifetime, Demeter would be unable to bring a claim against the estate as there is no specific amount to which she would be entitled23 as was the case in Re Adams and the Kensington Vestry (1884)24. In this case the court held that there was only a moral obligation to comply with the bequest and not a legal obligation25. Sir William Grant MR in Morice v Bishop of Durham26 commented that Every trust must have a definite object. There must be someone in whose favour the court can decree specific performance. From this, it would appear that as there is lack of certainty in relation to the property, as there is no specific amount to be left to Demeter27, Cassius would only have a moral obligation to ensure that there was money left for Demeter. If he decided to ignore his moral obligation Demeter would not be entitled to bring a claim against the estate as she cannot determine the percentage of the money she would be entitled to. Such trusts frequently fail as they are not legally enforceable, and the beneficiary will not be prevented from using the whole amount of the bequest for their own needs. The trust in Sprange v Barnard (1789)28 failed as the bequest stated that the remainder of the property should be given to the respondent. The court felt that it was impossible to determine the amount to be bequeathed to the respondent. This was also the case in Boyce v Boyce (1849)29 where the statement ‘all my other houses’ was deemed to be unascertainable. With regard to the money lent to Julius, this has become the property of the bank as it was placed into the account which he owed money to. In order to claim this back the executors of the estate would have to show that this money was lent to Julius and they would have to register as a creditor as Julius has now been declared bankrupt. Depending on the amount of debt owed by Julius, and the number of creditors to whom Julius is in debt, the executors might not be able to recover any of the money owed. There is no mention above that there was any written agreement between Augustus and Julius, and there is no mention of any agreement between the parties as to how and when the money would be repaid. This is likely to mean that it will be impossible to claim the money back, as the courts are likely to consider that the money was given to Julius as a gift. If this is the case, then all of the ?5,000 would be lost. In relation to Gaius and Lucius this trust is also likely to fail as there is uncertainty in relation to who the beneficiaries would be30.As there are several descendants of Tarquin, some legitimate and some illegitimate, it would be impossible to determine how the money should be distributed. This was held to be the case in Gold v Hill [1999] 31, where the wording of the bequest was for the beneficiary to look after Carol and the kids. The court held that there was insufficient information to identify the intended beneficiaries and the trust failed. Similarly, in IRC v Broadway Cottages Trust 195532 the court concluded that the trust would only be enforceable if a full list of the beneficiaries could be compiled. However, the court took a more relaxed approach in McPhail v Doulton [1971]33 in which the trust succeeded despite the fact that the certainty of the beneficiaries was in question. Lord Parker of Waddington in Bowman v Secular Society34 made the point that for a trust to be valid it must be for the benefit of individuals35. In Re Baden’s Trust (No 2) 36 the trust was declared to be valid so long as the beneficiaries could provide proof that they were members of a certain group. From the above, the advice to Cassius would be that he only has a moral obligation to reserve some of the money in order to give this to Demeter. If he fails to do so, Demeter would not be entitled to claim against the estate as there is uncertainty in relation to the bequest, and there is no legal obligation for Cassius to ensure that there is any money left to her. The executors of the estate are unlikely to be able to reclaim the money lent to Julius as there is no documentary evidence that the money had to be repaid, nor any agreement between the parties as to how this money would be repaid. As Julius told the bank this was a special loan from Augustus the bank might imply that this was to be repaid at some point in time, however, unless Julius told the bank of the specific terms of repayment, it is likely that the money would be construed by the courts as a gift. This would mean that it would be impossible to reclaim the money. If there was proof of the loan, the executors would have to register a claim against Julius as a creditor, and would only receive any money back if there was any money remaining once the primary creditors had been paid. With Gaius and Lucius, it would be impossible for the bequest to succeed as the number of potential beneficiaries is impossible to determine. This would mean that the residue of the estate would become the property of Gaius and Lucius, and they would not have any duty to distribute this between the descendants of Tarquin. If the bequest had specifically named which descendants of Tarquin were to be entitled to a share then the trust would succeed. Similarly, if the bequest had stated all the female descendants or male descendants of Tarquin that are of a specific age, then the trust might not have failed, as it would be possible to identify a specific group of beneficiaries. Bibliography Bibliography Ashburner, W, (1933), Principles of Equity, 2nd Ed, Butterworths Birks, P, (1985), An introduction to the Law of Restitution, Oxford University Press Bridge, M, (2002), Personal Property law, Clarendon Press Bryn P, (2000), Understanding Land Law, 3rd Ed, Cavendish Publishing Ltd Civil Procedure, (2002), The White Book, Volumes 1 & 2, Sweet & Maxwell Cockburn, T & Shirley, M (2005), Equity in a Nutshell, Lawbook Co Cockburn, T, Harris, W, & Shirley, M, (2005), Equity & Trusts, Butterworths Dixon, M. (2005). Modern Land Law, 5th Ed, Cavendish  Glover, N & Todd, P, (1995), ‘Inferring share of interest in home: Midland Bank v Cooke’, 4 Web JCLI 28 September 1995. Gravells, N P, (1999), Land Law Text and Materials, 2nd Ed, Sweet and Maxwell Gray, K & Gray, S, (2005), Elements of Land Law, 4th Ed, Oxford University Press Gray, K & Gray, S F (2006), Land Law, (4th Ed), Oxford University Press. Hayton, D J, (2001), The Law of Trusts and Equitable Remedies, 11th Ed, Sweet & Maxwell Pearce, R and Stevens, J, (1998), The Law of Trusts and Equitable Obligations, 2nd Ed, Butterworths Smith, R J, (2006). Property law: Cases and materials, 3rd Ed, Pearson Education Thomas, M, (2001) Statutes on Property Law, 8th Ed, Blackstone’s Zander, M, (1998), The Law-Making Process, 3rd Ed, Weidenfield & Nicolson www.bailli.org www.opsi.gov.uk www.westlaw.ac.uk Read More