Lloyds Bank Plc Versus Rosset - Essay Example

Lloyds Bank plc v Rosset This is a very important case as regards the beneficial interest, which found out that; the fact that an individual makes contribution to the running of the house, does not in itself confer on the individual the benefits of interests1.The case covers the subject of the rights of property in the English law, with a special emphasis on the rights of the cohabiters. The principle of beneficial interest in law establishes the rights that an individual has, in a contract that is made by other parties2. It sets out the possible benefits that the third party will reap from the agreement that is established by other parties, in which the third party is the beneficiary. Beneficial interest confers the right on an individual to use the property that he/she does not own. The case Lloyds Bank plc v Rosset, entailed a conflict on the beneficial interest regarding a property that was obtained by Mr. Rosset from a trust fund he had set up, where his wife, Mrs. Rosset claimed to have had beneficial interest on the property, owing to the contributions she had made towards the payment of the mortgages to the property and also the development of the property3. Thus, this discussion seeks to analyze the judgment given during an appeal, with a view to establishing whether the same judgment would hold today, should the same facts of the case arise now. The facts under this case provided that Mr. and Mrs. Rosset bought a property, a farmhouse that was not fully completed, using the funds from a family trust fund, but allowed the property to be registered under the name of Mr. Rosset only. The house required some renovations before it could become habitable, and thus the house vendors allowed the family to enter the house several weeks before its completion, so they could commence the repairs and renovation3. The renovation and repair work was supposed to be a joint venture between the wife and the husband, Mr. and Mrs. Rosset. Therefore, Mrs. Rosset engaged in helping with the process of renovation through guiding the builders, co-coordinating the activities and arranging for the logistics involving the supply of material, painting and house decoration until its completion. However, Mr. Rosset was not able to finance the purchase and the renovations from the family trust fund, and thus decided to take a loan from Lloyds Bank, which placed a legal charge on the property, from the day of its completion, all these, without the knowledge of Mrs. Rosset4. After the completion of the house, Mr. Rosset defaulted on the payment of the loan to the bank, and the Bank sought to effect the legal charge that was placed on the house. In this case, Mrs. Rosset sought to bar the bank from executing the charge, citing beneficial interest in the property, by the virtue of being its occupant5. She argued that the virtue of actual occupation of the property was an overriding interest. Holding that there was no evidence between the parties to share the beneficial interest, and that the contributions made by the wife were also considered secondary, the court of appeal ruled that Mrs. Rosset did not have any beneficial interest in the property. Nevertheless, there are various developments that have occurred in cohabitation cases and laws guiding beneficial interests, from the date of the ruling of this case. There are several issues that were raised in this case. First, it was the issue of common intention of ownership of the property, where it was to be determined whether both Mr. and Mrs. Rosset had any common intention to have the ownership of the property shared. Secondly, there was the issue of the quantum of sharing the common interest, raising the question of what was the common intention of the parties regarding the quantum of the shares3. While the contribution that was made by Mrs. Rosset in terms of helping in the payment of mortgage and the assistance in the renovations and redecoration of the house was considered secondary, this has seemed to change in the subsequent cases, observing that the contributions made by the partner in a cohabitee relationship does count. The subsequent issues raised from this observation are the quantum of the share of beneficial interests that individuals can claim from the property in question, based on the contributions that have been made by each4. However, despite the developments that has occurred in the laws of property as regards the beneficial interests of the cohabitees, the law still remains vague, unsatisfactory and unclear. The first development in this law is traceable in the case Stack v Dowden [2007], where Mr. Stack appealed against a ruling to have the proceeds of the sale of a home divided between him and Ms Dowden, a former partner, and their children2. The property in question was bought from the proceeds of selling a previous property they had owned, which was under the sole name of Ms Dowden, plus some savings that were made under her sole name and a mortgage they jointly paid. The new property in question was registered under joint names. However, even the payment of the mortgage was made from a large share of Ms Dowden finances. After they broke up, the court declared that Mr. Stack be excluded from the house, instead requiring Ms Dowden to pay up for Mr. Stack costs for the alternative accommodation5. Instead, Mr. Stack sought to have the house sold and the proceeds divided between them, owing to the argument that they held the house equally in trust as tenants, and thus possessed common equal share, an argument that the high court agreed with and granted the order for sale. However, Ms Dowden appealed against the ruling, and a judgment was given in congruence of the high court’s ruling, requiring that the house be sold and that the proceeds be shared between Mr. Stack and Ms Dowden in the ration of65% to 35%4. In observing this ruling, the judges departed from the earlier ruling under the case Lloyds Bank plc v Rosset [1991], where the judges had held that any contribution made by a partner in a relationship in terms of making improvements on the property, pooling resources together or making direct financial contributions to the property, constituted secondary contributions, which did not amount to any beneficial interest1. In this case, the judges held that the contributions made by the partner in a relationship in terms of improving the property, pooling resources towards its course or making direct financial contributions to the project amounted to constructive trusts, which qualified the partner for beneficial interests. Under this case, a clear distinction between beneficial ownership and legal ownership were well demonstrated, where it was held that beneficial interests constituted even the little contributions that has been made by the partner in a relationship, who may not be the owner of the property, and thus holds no legal interest in the property3. The quantum of share of the property was upheld in this case, where the judges observed that for a couple who had maintained their financial lives so separate, they had no intentions of effecting equal ownership of the property, despite the fact that they had registered it under the joint names. Therefore, this case serves as a significance developmental departure from the case Lloyds Bank plc v Rosset, where the legal interest in a property was found to override the beneficial interest. The ruling in this case paved a new direction for the law of property in cohabitee beneficial interests, providing that the mere contributions made by a partner even in a property that he/ she did not own qualified him/her for beneficial interest in the property. The second development in this law is traceable in the case Jones v Kernott [2011] that dealt with the beneficial entitlement to a family property, under the principle of law of constructive trusts2. The case entails the issues of caravan that was bought by Ms Jones in 1981, after she had met Mr. Kernott a year earlier, in 1981. When they got their first child in 1984, Mr. Kernott moved in with Ms Jones in the caravan. Later on, Ms Jones sold the caravan and he moved into a different property, where she contributed one-fifth of the new property value, with the balance being paid through interest-only loan, where both of them contributed in its payment5. The new property was registered under joint names, and they continued to share the house bills together, until they separated in 1993, where Mr. Kernott left the house and no longer contributed for the house bills or the upkeep of the children. Later on Mr. Kernott sought to have his half-share of the property where he had left Ms Jones and his children living, arguing that he had equal claim to the property, as he had contributed to the payment of the mortgage while also having it registered jointly with Ms Jones. However, the court found that the legal claim held by Mr. Kernott on the property did not amount to an equal claim on the property, since the intention to have the property owned and shared jointly had significantly been altered since the departure of Mr. Kernott from the house2 This was a significant departure from the Lloyds Bank plc v Rosset [1991], which had previously held that the legal interest in a property overrides the beneficial interest, making the contributions made by the partner who does not have legal claim to the property a mere secondary contribution, and thus irrelevant under constructive trusts. The ruling in this case held that the share of the of the property should apply the rule of fair and just rule, where every party to the relationship was to obtain beneficial interest to the property, based on the nature of their efforts and contributions to the property in question. In this case, Ms Jones had contributed 80% of the share of equity and had also been taking care of the household bills, when Mr. Kernott departed the house5. Therefore, the ruling upheld that the fair and just beneficial interest that Mr. Kernott could claim on the property was 10% of the value of the property, while the 90% share was the fair claim of Ms Jones. However, the ruling by the trial judge was overturned by the court of appeal, which held that both Mr. Kernott and Ms Jones held equal the claims to the property in equal shares. When the case proceeded to the supreme court, the court once again overturned the ruling of the court of appeal, by holding that the beneficial interests of the partners to that relationship were suitably shared according to the rules of fare and just sharing, thus upheld the ruling that Ms Jones should get 90% of the property value share, while Mr. Kernott had to contend with the 10% share2. The ruling under this case also departed from the Lloyds Bank plc v Rosset [1991], through the introduction of the fair and just share rule of quantum share, to property claims under the cohabitees’ relationship. Through the ruling, the court introduced the principle of variable beneficial interests, through the establishment of a formula that could determine which party had a fair share to which percentage of the property value. Therefore, the conclusion is clear that if facts similar to those in Lloyds Bank v Rosset went to the SC today and the issue was how to find a beneficial interest, the Supreme Court would certainly depart from the ruling of Lord Bridge. The Supreme Court would refuse to follow it on the basis of the fact that, while the Lord Bridge’s determination in the ruling under the case Lloyds Bank plc v Rosset [1991], was based on the presumption that the contributions made by a partner who has no legal interest on the property are secondary contributions, and thus irrelevant to be applied as the basis for beneficial interest, the subsequent ruling have established the rule of just and fair sharing, which caters for the interest of both parties. Bibliography 1Burrows, Andrew, James Edelman, and Ewan McKendrick. Cases and Materials on the Law of Restitution. Oxford [u.a.]: Oxford Univ. Press, 2005. 2Cohabitation: the Financial Consequences of Relationship Breakdown: A Consultation Paper. London: TSO, 2006. 3Croucher, Rosalind F. Families and Estates: A Comparative Study. The Hague: Kluwer Law International, 2005. 4Gardner, Simon. An Introduction to the Law of Trusts. Oxford: Oxford University Press, 2011. 5Renner, Karl. The Institutions of Private Law and Their Social Functions. New Brunswick: Transaction Publishers, 2010. Read More