Resulting and Constructive Trust in Equity & Trust - Case Study Example

RESULTING AND CONSTUCTIVE TRUST IN EQUITY & TRUST Lynn Jones v Mike Smith You act for Lynn Jones, who wishes to be advised as to the merits of her pending appeal to the House of Lords. Facts: Lynn Jones and Mike Smith are an unmarried couple. They met in 1990 and decided to set up home together. In the same year, Mike purchased a house in his sole name, the purchase money coming from his divorce settlement and by way of a mortgage. At Mike's invitation, Lynn Moved into the house shortly after completion of the purchase. In 1991, Lynn gave birth to their first child, changed her surname to Mike's and held herself out to their friends and family as his wife. A second child was born in1995. Over the years, the mortgage payments were always paid out of Mike's salary, whilst Lynn paid all the food bills and out goings on the house (I.e., council tax, water rates, gas, electricity and telephone charges) out if her own income as part-time secretary. She also, throughout the relationship, looked after the children and performed all the usual domestic duties around the home. In Sept 2003, Lynn formed a liaison with another man and moved out of the house. She brought an action against Mike claiming that she was entitled to a half-share in the house by reason of her contributions to the house hold expenses during the period the parties lived together. According to the evidence at the trial in the High Court, both Lynn and Mike had assumed that the house was jointly owned although the matter was never actually discussed between them. It is also not in dispute that, if it had not been for the fact that Lynn was working part-time, Mike would not have been able to meet the mortgage payments out of his own salary. In March 2004, the High Court held that Lynn was not entitled to a beneficial half-share in the house for the following reason. 1) Applying Lloyds Bank plc v Rosset (1994) 1 A.C. 107, (HL), in the absence of any finding of an agreement, arrangement or understanding between the parties to share beneficially, Lynn's indirect contributions to household expenses were insufficient to found a beneficial interest in the house. In particular, the court refused to follow the decision of Mr. Nicholas Mostyn Q.C. (sitting as a deputy High judge) in Le v Le Foe (2002) 2 F.L.R. 970on the ground that it was inconsistent with Lord Bridge's speech in Rosset; 2) Distinguishing Midlands Bank Plc v Cooke (1995) 4 All E.R. 562 (C.A.), it was not open to the court to assess Glady's beneficial share in the house by undertaking a survey of the whole course of dealings between the parties relevant to their ownership and occupation of the property. The principle enunciated in Cooke applied only to the establishment of an equitable interest through direct contributions. In December 2004, the Court of Appeal dismissed Lynn's appeal affirming both grounds given by the High Court. Task: Lynn now wishes to appeal to the House of Lords against the Court of Appeal's decision and seeks your written opinion on the merits of her claim. You should support your advice by reference to decided cases. Answer: The current state of caselaw on implied trust and beneficial or equitable interest in property due to indirect contributions to family home is not favourable to the appeal being considered by Lynn Jones. English courts are reluctant to adopt the remedial constructive trust principles of Canadian courts. It seems to be that judicial reasoning on implied trust rely on contributions to the purchase price and provable agreement, arrangement or understanding between the parties to share the property beneficially prevent the application of principles of justice and conscience in the present case. The facts of the problem show that the court had already struck down Lynn Jones arguments on the application of resulting trust principles because of the lack of contribution to the purchase price or proof of agreement, arrangement or understanding to share equitable interest. Not only the Rosset and Cooke cases but also the basic direction of English court decisions are inflexible enough to let go of the very premises to the existing reasons on the matter. This is basically due to the lack of cohabitation law in the case of non-married couples, which the present case falls despite the use of Mike Smiths family name and held herself out as wife to their friends. In case of property disputes in these cases, reliance must be made upon property and trust laws to obtain a fair and equitable division of the community property. There exists a minority undertow that is not ready to take responsibility for the uncertainty of excess court discretion and lack of precision that approval of Lyn Jones' case would bring to the existing English common law. The uncertainty of Lynn Jones' appeal is due to the reluctance of the English courts to adopt less rigid tests for resolving family property disputes allowing imposition of constructive trusts "whenever justice and good conscience require it."1 English tests laid down by the Rosset case2 impose a rather in appropriate burden upon appellant to establish 'an agreement, arrangement or understanding' between Lynn Jones and Mike Smith in order for the former to be able to claim a beneficial interest in the house subject of the case. If only Lynn Jones could establish that she contributed even a small fraction of the purchase price that would allow the courts to fully examine all the circumstances of the relationship and of all contributions whether financial or non-financial pursuant to the Cooke case3. If Lynn Jones would take the cudgels for all similar circumstances, the present case could be the last straw that could break the court's reluctance. Lynn Jones should assert more on the true value of domestic duties which should be converted by the court into a proportionate share in the house bought during the period of the relationship between the parties. It may be admitted that there is difficulty in predetermining the respective interests of the parties, even more difficult than in the Cooke case, but it should not deter the court from applying justice and good conscience and should not discriminate against the party who made substantial but exclusively indirect contributions. This must be so because the requirement of establishing detriment imposes the unconsionable additional artificial burden upon the claimant-appellant. Irish courts are more favourable to the present appeal because they recognize the reality that persons in a loving relationship will rarely give much thought to their respective legal or beneficial interests in their property. Most parties to a relationship will alter their position in many ways throughout the relationship. "Few spouses or partners will think of making any specific agreement about the effect which any contribution which they might make should have."4 The requirement of common intention is more appropriately applicable to commercial or contractual issues rather than in family property relationships such as the present case and the courts should be exhorted to make the necessary distinction. Lawson has asserted "the test of common intention and detrimental reliance is an inappropriate means of resolving such disputes as most relationships are based on trust and collaboration and not on organized thinking."5 It must be emphasized that in current caselaw, the absence of express common intention, the indirect contributions of Lynn Jones will not realise a beneficial interest in her favour because from their fact cannot be inferred common intention. "Courts cannot devise agreements which the parties never made. The Court cannot ascribe intentions which the parties never had."6 "(I)f an indirect contribution is to result in a wife acquiring a beneficial interest, it must be that subject of a proper agreement between the spouses."7 The same line of non-valuation of domestic contribution into equitable or beneficial interest in the family home is also seen in Burns v Burns8. These opinions are, however, in line with the tradition of resulting trusts and the appeal of Lynn Jones should focus on constructive trust9 principles. In fact, Lynn Jones is in a better position than the foregoing parties or cases because there is actual significant indirect financial contribution which she gave to the family home in the form of food bills, council tax, water rates, gas, electricity and telephone charges in addition to her domestic duties. The court must be exhorted to recognize that Mike Smith is enriched by the said contributions of Lynn Jones, that the artificiality of the insistence on proof of common intention, whether by express or implied agreements, in not in keeping with equity, justice and good conscience and that she is nearly in the same position as the case of Midland Bank v Cooke. The comments of Reid, L. in Gissing v Gissing10 deserves attention: A candid and honest wife would agree the [ownership of the home] was never discussed, that her husband never indicated any intention to give her a share, and that she never thought about it. On such evidence no judge could possibly infer that on the balance of probabilities there was an agreement. On the other hand, a more sophisticated wife who had been told what the law was would probably be able to produce some vague evidence which would enable a sympathetic judge to do justice by finding in her favour. That would be a very creditable state in which to leave the law. The present trend of judicial reasoning would tend to lead to materialism and created irresponsibility on the part of the husband who would focus his efforts on obtaining title to property rather than contribute to domestic duties and care of the children. Because a constructive trust has nothing to do with intention, presumed or otherwise, but results in a court imposing a trust upon a certain situation of fact, for the English courts to insist on determining intention or agreement where there is not would be forcing the issue and lead instead to injustice. The lack of cohbitation laws should give way to the adoption of principles based on remedial constructive trust and unjust enrichment in the present case. Due reference must be made to Canadian court decisions particularly to Pettkus v Becker11 and Peter v Beblow12 where court-imposed trusts are designed to cure injustices based on unjust enrichment which cases must be made to apply to the present case because there is direct and sufficient connection to the domestic duties and indirect financial contributions of Lynn Jones to the family home. Constructive trust may be imposed by the court in order to achieve an equitable outcome and is not dependent on the intention of the parties and in fact can actually be contrary to their real intention. Denning, L. has raised the opinion that "[a] constructive trust could be imposed by a court whenever and for any reasons, such as a remedy, when it seemed to be required by equity, justice and good conscience, irrespective of any other legal rules."13 The case of Rawluk14 deserves attention. In that case the court gave credit to the wife's substantial indirect contribution despite all the property being in the husbands name and declared that wife's interest and right arise from the beginning, from the moment that a person could have claimed relief and therefore as wife was making contributions, she was also acquiring an interest in the property and increase in property value constituted an increase in her interest in the property. In the present case, significant attention and weight must be given to the detrimental reliance of Lyn Jones on the actual maintenance and success of the family home which has direct and sufficient upon the subject property. It is well-established even in the restrictive English sense, that detrimental reliance on expectations to confer benefits on others or to receive benefits from others, which should cover the present case should be sufficient to create constructive trust similar to promissory estoppel. This should help to inject flexibility in an otherwise English viewpoint. Indeed, constructive trusts, which arise by operation of law in response to different events, should be given effect as to result to perfecting intentions, fulfilling expectations, or effecting restitutions of assets wrongfully acquired or unjustly enriching of the other party. Bibliography Delany, Equity and the Law of Trusts in Ireland (Round Hall Sweet & Maxwell, 1996) Lawson, The Things We Do For Love: Detrimental Reliance in the Family Home [1996] 16 Legal Studies 218. Millet, L, ___________ [1998] 114 LQR 399 Burns v Burns [1984] Ch 317. Gissing v Gissing [1971] AC 886. Hussey v Palmer [1972] All ER 768 CA WLR 1286 Lloyds Bank plc v Rosset [1994] 1 AC 107 HL McFarlane v McFarlane [1972] NI 59. Midland Bank v Cooke [1995] 4 All ER 562 N.A. v T.D. [1985] ILRM 153. Pettkus v Becker [1980] 2 SCR 834. Peter v Beblow [1993] SCR Rawluk v Rawluk [1990] SCR 70 SCC Read More