The Test of Establishing the Presumption of Marriage - Coursework Example

? Land Law By Due PART A The Angelina and Brad, who move in and live together as husband and wife. There are several relevant issues arising in the relationship between Angelina and Brad. The first issue is that they decided to move in as husband and wife without formalizing their union. People, who live together without being married, but have a relationship similar to that of married couples, are known as cohabiters. A presumption of marriage can rise from cohabitation. The test of establishing the presumption of marriage is depended on the length of cohabitation, general repute as a man and wife and not friendship only, whether the union has children and the degree to which they bring together their financial resources. The required duration is usually three years and where there are children; the duration may be two years. There is a presumption of marriage between Angelina and Brad because they moved in the year 2005 and the present year is 2012. Cohabitors are not afforded the same legal status a civil marriage attracts (Jackson, 2012)1. In a civil marriage, the courts have power to divide the assets of the couple in affair way. The division of the assets should meet the needs of the separated parties and their children. In the UK, there is no recognition of claims made by a ‘common law’ wife or husband (claims arising solely as a result of the relationship). The courts cannot adjust ownership of assets belonging to separating spouses. They can only interpret intentions. The power to interpret is limited to certain classes of assets, mostly, property occupied by the couple during cohabitation. Courts cannot make orders relating to pensions of the parties. The power to interpret is also limited to certain circumstances. Secondly, they decided to move in together and have a fresh start in a new home, Aniston Villa. To acquire the desired home, Angelina contributes her private savings, ?40,000 as a deposit and the remaining purchase price, ?250,000 is provided with a mortgage from Celeb Bank. Angelina does not want the Aniston Villa to become a subject in her divorce proceedings. The property is registered in the sole name of Brad. Angelina lacks legal co-ownership in the family home. Brad decided last month that he does not want to continue the relationship. He is willing to refund Angelina the ?40,000 deposit she contributed to for acquisition of the land. Brad does not want to allow Angelina any share in the property. Generally, matrimonial home is not disputed unless the spouses are separating. The statement is true to the case of Angelina and Brad. Determination of the rights of Angelina and Brad in Anston Villa is now very important. Courts have a corrective power in determining disputes in cases of separation2. However this power cannot be exercised in favor of cohabitants. Cohabiters without a legal co-ownership in the family home, like Angelina, have to ascertain an equitable interest. A cohabiter can now claim for compensation for any economic contributions made during cohabitation. The cohabiter must prove they have incurred economic disadvantage. This covers scenarios where one party has financially contributed to acquisition of property even if the property is registered in the name of one party. The law operates to create an imputed trust of land (Thomas M., 2012-2013)3. Imputed trusts consist of resulting and constructive trusts. Where A provides consideration but the title to property vests in the sole name of B, the property is held by B on resulting trust for A to the extent of A’s contribution. The resulting trust can be rebutted by prove of contrary intention that A did not intend the property to be held on trust by B. In determining existence of a resulting trust, courts will look into the intention of the parties. An equitable interest can be established by prove of financial contribution. Financial contribution is vital in determining beneficial ownership of the family home. Constructive trusts arise by operation of law. Intention of the parties does not influence existence of a Constructive trust. Courts usually impose constructive trusts to prevent fraudulent and unconscionable conduct on part of one spouse. In Lloyds Bank plc v Rosset4, a couple bought a derelict property with the proceeds of a trust fund set up for the husband. The trust had a stipulation that the property must be conveyed in the husband’s name only. Without the knowledge of the wife, the husband secured a loan against the property from a bank. He was unable to pay the loan back and the bank sought possession of the property. The wife asserted that she had an interest in the property too and that had to be accounted for before the bank could take possession. She argued that her interest arose due to her contributions to the property. Her right was challenged by the bank which claimed that she had no interest in the property. It was held that the wife had no interest in the property because she had made no contributions to the purchase price. Also, the house was initially intended to be in the husband’s name alone. Before the case of Lloyds Bank plc v Rosset5, there were two lines of authority. The first line of authority was expressed in Gissing v Gissing6, and Pettitt v Pettitt7. In Gissing v Gissing8, a couple was married for 16 years. The wife paid a substantial sum towards furniture and the laying of a lawn. The house was in the name of the husband alone and the wife had not made any contribution to the purchase price. She claimed a beneficial interest in the house on separation. It was held that she had no such interest because neither there was an express agreement nor an implied intention that could create an equitable interest for the wife in the house. In Pettitt v Pettitt,9 a house bought by the wife alone in which she lived with her husband. The house was in her name alone. As she decided to be separated from her husband, her husband claimed an equitable share in the house as he had contributed considerably to the improvements to the house and garden. It was held that as there was no express agreement between the spouses, the husband had no equitable interest in the house. In the two cases, the courts seemed to refer directly to the relationship of financial contributions and acquisition of property. If there is no contrary intention, it is presumed that the parties had common intention they will be entitled to a share in the property. The share of property for each party will be directly proportional to financial contribution (Journal of planning and environmental Law)10. In Tinsley v Milligan11, a lesbian couple bought a house together which had cost ?29,000. The money was raised by obtaining a mortgage of ?24,000 and selling a car for the remainder which was owned by them jointly. To claim more in social security, the house was bought in the sole name of Miss Tinsley. Their relationship ended and they decided to part ways. Miss Tinsley moved out of the house and argued that the she was entitled to sole possession. Miss Milligan pleaded that the house was bought with the intention that it had to belong to both of them. It was held that since Miss Milligan had contributed to the purchase price, she could invoke the presumption of resulting trust as she had an interest in the house. It was held that the couple had equal shares in the house. Therefore, if there is a contribution to the purchase price, a resulting trust is created that is in proportion to the contribution. (Stroud, 2005)12 A different line of authority emerged in the case of Eves v Eves13, whereby a couple bought a house with the intention that both must live together in it. The purchase money was provided by the husband alone and the house was purchased in his name only. However, the husband told the wife that had she been 21 years of age at that time, the house would have been bought in both of their names. The wife significantly contributed to improvements in the house. When the couple broke up, the wife claimed an interest in the house. Although the husband had later told her that he had made an excuse for buying the house in his name alone, it was held that the husband held the house on trust in the proportions of one-quarter to Janet and three-quarters to himself. In the above case, constructive trust was imposed on ground of fairness and justice. Courts are ready and willing to impose a constructive trust if Angelina can establish that Brad in a way acknowledged intention to share at the time of purchasing. The claimant should show reliance on such a presentation or acknowledgement to their detriment. Thus, constructive trust is remedial. In Lloyds Bank plc v Rosset14, the House of Lords in dismissing the defendants claim set out the following principle. A claimant must establish common intention to share and detrimental reliance to acquire beneficial interest under constructive trust. The claimant must establish a presentation by the defendant of intention to share. The claimant must also incur a disadvantage for relying on the presentation. Conduct of parties can suggest Common intention where there is no express agreement. Financial contributions to acquisition of property by the claimant can also suggest intention. The contribution can be made initially as payment of deposit or subsequently towards repayment of a mortgage. Angelina contributed the initial deposit of ?40,000 towards the purchase price. This suggests common intention to create a constructive trust between her and Brad. In the given case, Angelina can easily prove that there was an implied agreement between the couple and Brad has been holding Aniston Villa on trust on the behalf of Angelina and himself. The next question is about the amount of share that Angelina is entitled to. In Drake v Whipp15, a couple bought an old barn with the intention of converting it into a house. The wife paid 40% of the purchase price and the rest was paid by the husband. The conversion costs were paid by the husband only. Upon separation, the wife claimed for 40% of the sale value of the house. It was held that the wife had one-third share in the house because the husband had paid for the conversion costs alone. In Oxley v Hiscock16, the wife contributed 28%, husband paid 48% and the rest of the purchase price was arranged by mortgage. The contributions in household expenditure, improvements, maintenance and paying off the mortgage were made by both of them. Upon separation, the wife claimed 50% of the proceeds. It was held that the wife’s contribution was not equal to that of the husband’s and she was entitled to a 40% share. In the given case, Angelina initially contributed 16% of the total purchase price. By the application of Oxley v Hiscock, her share amounts to ?81,600 which is 16% of the fair value of Aniston Villa i.e. ?510,000. The major drawback of the common intention approach is that it puts emphasis on financial contribution towards acquiring property. The financial contributions must be directly used in acquisition of the property or substantial improvements of the property for common intention to arise. Angelina’s contributions towards the costs of running their home and looking after their growing family will not be considered in determining her share in the matrimonial property. Angelina’s contribution towards running their home maybe substantial but they will be insignificant in determining her share. So the common intention approach is unfair because it does not consider economic inequality between men and women. This economic inequality between men and women affects their ability to acquire property. In this case, the inequality will affect Angelina’s access to family wealthy negatively. In Burns v Burns17, the husband bought a house through a mortgage in his name only. More than 10 years later, the wife began to work too and used part of her earnings in paying rates and telephone bills of the house. She also bought various domestic chattels for the house. After few years, the couple decided to split up. The wife argued that she had an equitable interest in the house due to her contributions from her earnings. It was held that there was no resulting interest for the wife in the house as she had not contributed to the purchase price. Another issue is division of labor in the society based on sexuality. Angelina contributed in the relationship by looking after their growing. This affected her economic position because she did not have equal time to work like Brad. So the common intention approach is biased because it effectively discriminates against female claimants. Angelina can seek a pronouncement of entitlement to a share or interest in the property. Angelina can only pursue legal aid after satisfying legal and financial entitlement to an interest in the house. Angelina has a right to defend eviction proceedings and right to apply for transfer of a tenancy of the family home (Cowen, Fox-O`Mahony & Cobb, 2012) 18. The law does not provide for transfer of property upon separation of cohabiters. An aggrieved cohabiter can make an application to court within one year of separation for an order for payment of capital sum (Property law journal, 2012)19. The capital sum is paid to the aggrieved cohabiter by the other. It can be paid in a lump sum or installments. The order for payment of capital sum is only made if the court determines the applicant has suffered a disadvantage. Part B Availability of mortgage finance has led to increase in application of constructive trusts. This is especially where one spouse remortgages the family home for more money (Jackson 2012)20. Problems will arise if there is default in repayment of the borrowed money. Banks usually seek vacant possession of the mortgaged property. If property is registered in the name of one spouse, the other spouse can assert beneficial interest on grounds of constructive trust. In the given case, Angelina decided that her name should not appear on the registered title but it put her at the risk of losing her equitable interest. Her case can easily be compared to Tinsley v Milligan. In that case too, Miss Milligan opted to leave her name out of the registered title of the house because she wanted to claim more in social security. Yet, she was able to get her equitable share in the house recognised in the court. Similarly, Angelina did not want Aniston Villa to become a subject in her divorce proceedings. It was an omission and it would have had a significant impact on the financial settlement with her ex-husband. Brads intention to take out a second mortgage on Anston Villa may compromise the interest of Angelina in the property. If Brad succeeds in getting the second mortgage and defaults in repayment of the installments, Angelina can allege existence of a constructive trust. There is another dimension to this case which is controversial in nature. Matrimonial home can also be disputed if there is a competing claim over the property by a third party. There will be a different consequence if Brad gets the second mortgage with Celeb Bank, free of Angelina’s interest, to buy a Bentley. Assuming that Brad fails to pay his second mortgage with Celeb Bank and Angelina has moved out from Aniston Villa, her equitable interest might not be very well protected. In Abbey National Building Society v Cann21, a mother contributed in the purchase price of a house in which she lived with her son. The house was registered in her name alone. They moved to a smaller house which was bought by using the proceeds of sale of their previous house and by obtaining a mortgage from a bank. Unbeknown to the mother, her son had obtained another mortgage from the same bank. He failed to pay the mortgage and the bank sought possession of the house. The mother had an equitable interest in the house but she had just moved in. She argued that her right on the house arose before the bank’s right and she had an overriding interest. It was held that she did not have an overriding interest and the bank succeeded because she was not in the actual occupation of the house. Her actual occupation had to have some degree of permanence or continuity. In the given case, since Angelina would have left the house, her actual occupation would be devoid of both permanence and continuity. Also, S 2 (1(iii))22 of Law of Property Act legalizes such conveyance of title by stating that, “the conveyance is made by a mortgagee or personal representative in the exercise of his paramount powers, and the equitable interest or power is capable of being overreached by such conveyance, and any capital money arising from the transaction is paid to the mortgagee or personal representative;” Therefore, Celeb Bank would have first charge on Aniston Villa. This seems to be a little unfair as the banks’ and moneylenders’ interests are favoured over those of the actual purchasers. As a matter of fact, the system of mortgage for the purpose of purchasing property is very confusing in itself. Traditionally, mortgage is meant to be a security for a loan. However, when mortgage is used to finance a purchase, the mortgage is the same property which is being purchased. It means that when mortgage is signed, the borrower does not own the mortgage property. The estate in the land is transferred to the new owner and shortly afterwards, a mortgage is executed over that property and the purchase price is transferred to the seller. Theoretically, there is a time gap between the two processes which is called “scintilla temporis”. As the title is transferred to the owner before the mortgage is executed, the equitable interest of the owner is also considered to have sprung up before that of the bank or the moneylender. Therefore, scintilla temporis causes some problems (MacKenzie & Phillips, 2010).23 The case of Abbey National Building Society v Cann is considered to have dealt with the problems associated with scintilla temporis as it ruled that there is no scintilla temporis between the buyer’s purchase and the execution of mortgage. The ruling of this case is considered as controversial by many but it also answers the logical questions that become unanswerable otherwise. The most important of them all is whether the property could have been purchased without the mortgage. If it could not have been purchased, there is no question of the buyer’s right emerging before that of the bank’s (Dixon, 2010). The Trusts of Land and Appointment of Trustees Act of 1996 require trustees to observe certain duties for the protection of the rights of beneficiaries. They include duties to: Consult the beneficiaries24; to have regard to the rights of beneficiaries when exercising trustees’ power25; to obtain any consent from the beneficiaries26; and duty to observe all statutory, legal and equitable rules in exercising trustee’s power27. Angelina’s case also puts forth the question of proprietary vs. personal interest. A woman needs to have a proprietary interest in property in order to save it from third parties. Personal interest in a property does not lead to any such right. In National Provincial Bank Ltd v Ainsworth, 28a couple lived in a house registered in the name of the husband. The husband moved out of the house and a year later, obtained a loan from a bank by putting his house as security. He failed to pay the loan back and the bank sought possession of the house. The wife refused to grant possession to the bank which then sought a possession order. The court of appeal granted the wife the right of possession on the basis of ‘deserted wife’s equity’. This decision was reversed by the House of Lords which held that the wife had no proprietary interest in the house and she had no right of possession of the house. The wife’s interest in the house was personal in nature. Lord Wilberforce noted, “Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability. The wife’s right has none of these qualities, it is characterised by the reverse of them.” Therefore, in this case, the courts were exposed to a conflict between social considerations of humanity and the principles of real property law; the law prevailed. It is not worthy to bemoan the prevalence of law against social considerations. It is better to understand and fulfil the requirements of the law so that it can protect the wives too. In order to protect their rights, the wives are again advised to reach a formal and express agreement in writing with the cohabitants of the house so that their personal interest also becomes a proprietary interest. S 53(1) of Law of Property Act 192529 greatly asserts the importance of writing by stating that, a. no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law; b. a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; c. a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will. When a wife is formally recorded as one of the legal owners of a family home, her rights become enforceable against the third parties too and it becomes impossible for the property to be mortgaged or sold without her knowledge and consent. Automatically, when a proprietary right is created, the right to occupy the premises against the third parties also comes into existence. This right is also transferable which gives it the quality of becoming a valuable asset. In contrast, a personal interest in property is non-transferable that has no value and is not an asset. Most importantly, a wife having a personal interest in a house would find her homeless if a bank claims its charge on the house. On the contrary, a wife having a proprietary interest would have a right of possession against the bank and would be much more secure. References Abbey National Building Society v Cann [1990] UKHL 3 Burns v Burns [1984] 1 All ER 244 Conveyancer and Property Lawyer journal, 2012, Uncertain terms: Mexfield Housing Ltd V Berrisford in Ireland, A comment by Andrew Lyall. Drake v Whipp [1996] 1 FLR 826 Eves v. Eves [1975] 1 WLR 1338 Gissing v Gissing [1971] AC 886 Journal of planning and environmental Law, Nov 2012, Economic Considerations as a Material Consideration by Samuels A, Published by sweet &Maxwell. Law of Property Act, 1925 (UK) s 2(1(iii)) Law of Property Act, 1925 (UK) s 53(1) Layton v Martin [1986] 2 FLR 227 Lloyds Bank plc v Rosset [1990] UKHL 14 MacKenzie, J & Phillips, M 2010, Textbook on Land Law, Oxford London Material Consideration, by Samuels A, Published by sweet &Maxwell Matrimonial causes Act 1973 National Provincial Bank Ltd v Ainsworth [1965] UKHL 1 Oxley v Hiscock [2004] EWCA Civ 546 Pettitt v Pettitt [1970] AC 777 Property law journal, 2012 Stroud, A., 2005, Making Sense of Land Law, Oxford, London. Tinsley v Milligan [1993] UKHL 3 Cowen D., Fox-O`Mahony L., & Cobb N., 2012, Great Debates in Property Law, Palgrave Macillan. Thomas M., 2012-2013 Blackstone’s Statutes on Property Law 20th edition, published by OUP Oxford Trusts of Land and Appointment of Trustees Act of 1996 UK Read More