The Principle in Stack v Dowden in Relation to Co-ownership in Land - Essay Example

The Principle in Stack v Dowden in Relation to Co-Ownership in Land Introduction Common intention constructive trusts are a creation of the judiciary.i The common intention of the parties is the criterion used to determine whether or not a constructive trust can be implied in co-ownership of real property.ii The common intention criterion is necessary for avoiding unconscionable results in situations in which a beneficial interest is not specifically declared or where there is only one party holding the legal title to the property.iii The common intention principle deals with questions of trust and intimate relationships and thus has rendered its application and interpretation inconsistent and unclear.iv The ruling in Stack v Dowden appears to clarify the matter, by ruling that there is a general presumption that the title to the document and declaration of beneficial interests will be decisive unless there is evidence of a shared intention to divide the property differently.v However, following the decision Stack, it was ruled in Jones v Kernott that where the parties share the beneficial interests and the common intention cannot be ascertained, the court must necessarily be careful not to infer a common intention that the parties may not have shared.vi Thus there is a decided shift toward adhering to the principle that equity will follow the law unless there are unusual circumstances where an inference can be made of a common intention.vii This paper examines the principle of common intention as stated in Stack v Dowden and in subsequent cases, particularly Jones v Kernott. Stack v Dowden Stack v Dowden held that the title to property and the declaration of beneficial interests will automatically prevail unless there is clear and convincing evidence that the parties shared a common intention to divide the property differently.viii In other words, it was held that in circumstances where there legal title is held by two parties and there is no expression of the division of those shares, it will be presumed that the parties are joint tenants. Additionally, if the legal title is held by one person alone, there is a presumption that the legal owner holds the beneficial interests alone.ix The presumptions can be rebutted but only in extraordinary circumstances. In cases where the legal title is held by one party alone, the court will look at all of the facts and circumstances to ascertain first and foremost if there was a common intention that the non-legal owner shares the beneficial interest in the property. Following this determination, the court will then look at the evidence to ascertain the common intention as to how the beneficial interest should be divided. In the case of joint title and no declaration of beneficial ownership, the court will look at the manner in which the parties dealt with the property and generally how the parties dealt with their earnings and other resources.x In Stack v Dowden the court took account of the fact that the plaintiff made a larger contribution to the property than her partner did. However, this contribution by itself would not be enough to rebut the presumption. The court also looked at despite the long relationship between the parties, they maintained separate finances. Thus it could be inferred that the parties had intended that their contributions to the property would dictate their respective shares in the property.xi It might be concluded from this ruling that when parties share their finances and resources, a joint title with no declaration of trust will infer that the parties intended to share the beneficial interest in the property jointly.xii What the House of Lords essentially did in Stack v Dowden is look for the parties’ actual intentions by reference to the “whole course of dealings” rather than look at what might be considered fair.xiii Baroness Hale stated: The search is to ascertain the parties’ shared intentions, actual, inferred or imputed, with respect of the property in light of their whole course of conduct in relation to it.xiv It has been argued however, that the decision in Stack v Dowden is a setback in terms of the progress previously made in the principle of common intention under constructive trusts in co-ownership of land. Previously, the courts were more liberal in their attempt to produce a result that was fair and conscionable between the parties. However, the ruling in Stack v Dowden places far too much emphasis on financial contributions and thus creates an illusion that equity is concerned with that which is conscionable. The result of the ruling in Stack v Dowden is one that directs the court to take more account of financial contributions rather than non-financial contributions.xv This would appear to run counter to the House of Lords’ ruling in a previous case in which it was held that equity is always concerned with doing that which is conscionable.xvi Moreover, the ruling in Stack v Dowden appears to be more suited to cases of resulting trusts rather than constructive trusts. The parties’ financial contributions are the primary factors for determining the existence of a resulting trust in circumstances where there is no evidence of the parties’ common intentions.xvii It therefore follows that evidence of a common intention exists outside of mere financial contributions and thus forms the basis by which a resulting trust is distinguished from constructive trusts. However, the ruling in Stack v Dowden appears to blur the distinction between resulting and constructive trusts, by placing greater emphasis on financial contributions. After Stack v Dowden Having blurred the distinction between resulting and constructive trusts, Stack v Dowden has succeeded in creating some confusion as evidenced in the case of Fowler v Barron. In Fowler, the parties held the property in joint names. However the respondent had paid the deposit and provided the balance of the purchase price from the sale of property owned by him alone. A subsequent mortgage on the property in question was satisfied out of the respondent’s pension. The parties did not have a joint bank account. The respondent argued that he had only placed the plaintiff’s name on the title deeds so that she would inherit the property upon his death. xviii Relying on the ruling in Stack v Dowden, the judge presiding over the hearing at first instance, accepted the respondent’s argument and held that a resulting trust would be implied. Therefore the beneficial interest would be determined by reference to the parties’ financial contributions. Since the claimant had not made any financial contributions to the property, she would fail in her attempt to acquire a beneficial interest in the property. It was held on appeal however, that the judge erred in that he applied the test for a resulting trust rather than a constructive trust. Therefore the judge should have looked at the parties’ common intention. The joint ownership as evidence on the title deeds would serve to prove a common intention to own the beneficial interest jointly. Since the respondent did not prove that there was evidence against this presumption, the claimant would succeed. Moreover, financial contributions alone will not suffice to rebut the presumption that the parties’ common intention as evidenced by the title deeds should prevail.xix The Privy Council’s interpretation of the ruling in Stack v Dowden however, provides a more decisive distinction between a constructive and resulting trust. In Abbott v Abbott, the Privy Council ruled that Stack v Dowden directs the court to look at the parties’ whole course of dealing with respect to the property. In doing so, mere financial contributions will not be decisive in ascertaining the parties’ shared or common intentions. As such, when a parent gifts property to a newlywed couple for the purpose of building a home, it will be inferred that the gift was intended to be shared by the couple. Moreover, since the couple had shared financial assets and liability jointly (the mortgage), the husband would be deeded to hold the property upon trust for him and the wife equally.xx Jones v Kernott took a more restricted view of the ruling in Stack v Dowden. Based on the ruling in Stack v Dowden, the court in Jones v Kernott began with the presumption that equity follows the law provided there is no evidence to justify a departure from this general presumption. The fact is equity will generally follow the law unless there is evidence to the contrary.xxi More precisely, the court in Jones v Kernott took the position that equity commences with the presumption that the property is divided in a manner that corresponds with the title and description provided in the title deeds. In the imposition of a constructive trust, evidence of a common intention to share the property in a manner that is different from the expression of ownership in the title deed will suffice to rebut the general presumptions. In this regard, there may be evidence of a common intention to divide the property one way at the time of acquisition of the property. However, subsequent dealings by the parties may point to a changed common intention. In such a case, the court will therefore look at the whole course of dealings to reach a decision as to the parties’ common intention.xxii It can be argued that the ruling in Stack v Dowden was subsequently interpreted to indorse and restate the ruling in Oxley v Hiscock. In the Oxley case it was decided that the parties’ common intention will be inferred by reference to their “whole course of dealing”.xxiii Oxley established the principle that indirect contributions may only be relevant if it was essentially agreed between the parties that indirect contributions would result in the other party acquiring a beneficial interests in the property and thus will be a manifestation of a common intention and therefore will give rise to a constructive trust. Oxley also establishes that the fact of title and an expression of beneficial ownership in title deeds are presumptions of ownership that can be rebutted by evidence of a common intention to divide the property differently.xxiv It has been argued that Oxley and Stack have the “combined effect” of clarifying the “legal principles” applicable to the “establishment and quantification of property interests arising under ‘common intention’ constructive trusts”.xxv It therefore follows that Stack v Dowden is not intended to be read alone. Nor is it intended to represent a restatement of the law relative to constructive trusts and common intention in the context of co-ownership of land. Instead, Stack v Dowden may be viewed as a reminder of the legal principles relative to ownership. This is particularly important since, Section 53(1)(b) of the Law of Property Act 1925 provides that an equitable interest in land can only be transferred if it is evidenced in writing.xxvi Section 53(2)(b) permits a departure from this rule for the purpose of implying a resulting or constructive trust.xxvii Thus Stack v Dowden can be viewed as a reminder that the imposition of a constructive trust is an exception to the general rule and evidence supporting the existence of a constructive trust must be viewed as such. Conclusion Stack v Dowden takes a restrictive approach to the imposition of a constructive trust in co-ownership of land. It takes the position that the title to land and the declaration of beneficial interests as expressed in the title deeds and reflected in the land registry should automatically give rise to the presumption that the property is held in a manner that corresponds with the title deeds description of ownership. Only in exceptional cases can the presumption be rebutted. Evidence of a common intention will suffice and in this regard, a common intention will be inferred by reference to the whole course of dealings between the parties. It would appear that if one party’s contributions are greater than the other party and the parties course of dealing reflect that they did not equally share assets and liabilities it will be inferred that they did not intend to share the property equally. However, with the emphasis on finances, it appears that it will be difficult to rebut the presumption that legal title and the description of beneficial interests in the title deeds corresponds with ownership when a party’s contributions are non-financial. Bibliography Abbott v Abbott [2007] UKPC 53. Barnes, L. March 2008. “Oxley v Hiscock Revisited: Part 1- Establishing the Interest.” Family Law Week, 7-10. Dyson, A. 2008. “All’s Fair in Love and Law: An Analysis of the Common Intention Constructive Trust.” Cambridge Student Law Review, 149-166. Fowler v Barron [2008] EWCA Civ 377. Hicks, A. 2005. “Conceptualising the Constructive Trust.” Northern Ireland Legal Quarterly, Vol. 56(4): 521-550. Hudson, A. 2010. Equity and Trusts, 6th Edition. Oxon, UK: Routledge-Cavendish. Jones v Kernott [2011] UKSC 53. Law of Property Act 1925. Lloyds Bank Plc v Rosset [1991] AC 107. Oxley v Hiscock [2005] Fam 211. Pawlowski, M. 2006. “Estoppel, constructive Trusts and Unconscionability.” Trusts & Trustees, Vol. 12(9): 10-15. Probert, R. 2007. “Equality in the Family Home?” Feminine Legal Studies, Vol. 15: 341-353. Smithdale, J. 2011. “Inference, Imputation, or Both? Confusion Persists Over Beneficial Interests in the Family Home.” Cambridge Student Law Review, 74-88. Springett v Defoe [1992] 2FLR 388. Stack v Dowden [2007] 2 AC 432. Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669. Read More