The Complexity of the Division of Property upon Divorce - Coursework Example

Since Gissing V Gissing, the court does not decide how the parties might have ordered their affairs; it only finds how they did" - A critical evaluation Facts of the Case Mrs. Gissing had been married to Mr. Gissing for 16 years, and had paid a substantial sum towards furniture and the laying of a lawn, but the house had been conveyed into the name of Mr. Gissing alone, and Mrs. Gissing had made no direct contributions towards its purchase. On their divorce, she claimed a beneficial interest. (pntodd.users.netlink.co.uk) Judgment The House of Lords held that she had no interest. (pntodd.users.netlink.co.uk) Grounds for the Court’s decision Lord Diplock observed that to constitute a valid declaration of trust by way of gift of a beneficial interest in land to a cestui que trust the declaration is required by s. 53(1) of the Law of Property Act 1925, to be in writing. If it is not in writing it can only take effect as a resulting, implied or constructive trust to which that section has no application (pntodd.users.netlink.co.uk). The court drew a distinction between express agreement and the inference of the intentions. According to the court, the intentions should get crystallized at the time of acquisition of the property, and not by the conduct of the parties subsequently. However, subsequent conduct may form as an evidence of intention when there is no express agreement at the outset, irrespective of the fact that the parties were married. Viscount Dilhorne stated, “I agree with my noble and learned friend Lord Diplock that a claim to a beneficial interest in land made by a person in whom the legal estate is not vested and whether made by a stranger, a spouse or a former spouse must depend for its success on establishing that it is held on a trust to give effect to the beneficial interest of the claimant as a cestui qui trust”. (Open Law, 1971) Analysis Understanding Constructive trust in this context is very important, as it forms the basis for the subject. According to Lawyers.com, an implied trust [is] imposed by a court to prevent the unjust enrichment of one who has wrongfully obtained (as through fraud or bad faith) title to the property or a property interest of another; and an equitable remedy to prevent unjust enrichment through the imposition of a constructive trust. Lord Hoe of Craighead observed in Stack v. Dowden that in Pettitt v Pettitt [1970] AC 777, Gissing v Gissing [1971] AC 886 and Lloyds Bank v Rosset[1991] 1 AC 107…the dispute was between a husband (or his secured creditor) and a wife; the property in question was in single legal ownership; and the matter relied on by the non-owner claimant was no more than relatively trivial work and … In Gissing itself Lord Reid (at 896F) Lord Morris (at 898B) and Viscount Dilhorne (at 901A) simply repeated the formula which appears in section 53(2) of the Law of Property Act 1925, "resulting, implied or constructive trust." For the interpretation of law, taking note of the spirit behind the law and its context under the prevailing circumstances are given due consideration by the judiciary in its judgments, though precedents play an important role in defining the fundamental policy, as upheld in the earlier cases, governing the legal decisions. Goo (2002, p. 518) states that ”The payment of installments by the son or daughter-in-law gave rise to direct proprietary interests by way of constructive trust, though it is true that, until Gissing v Gissing [1971] AC 886, the law relating constructive trusts in this field was not much considered”. Apart from the statutes and the precedents, the interpretation of the law varies from case to case. However, it should be remembered that though the broader frame work is provided by the statutes and the precedents, the court decisions are also influenced by the circumstances obtained in a particular case on account of the peculiar situations underlying need for redressing the genuine difficulties in consistent with the conventions prevailing in the society at that particular point of time. It is in this backdrop we have to critically analyze the statement, "Since Gissing V Gissing, the court does not decide how the parties might have ordered their affairs; it only finds how they did" after taking into account the developments that have taken place subsequently in the legal landscape, since much water has flown under the bridge since then. Constructive Trust The Law Commission (2007, p. 157) in its report observed, “…the crucial ambiguity in the case law on the issue of whether a court may infer a common intention from financial contributions if the parties confess to having never considered the matter of ownership. The clear lack of any actual intention might be expected to rebut an inference of common intention to share beneficial ownership…If, and in so far as, actual intention need not exist, it may be more accurate to say that the intention is “imputed” to the parties than its existence inferred.” The ambiguity in relation to constructive trust with reference to the intention, conduct of the parties, proof of financial contributions or the question of indirect contributions by the cohabitants has been considered by the Law Commission (2007, p. 158) elaborately, and it has observed “It is the applicant’s detrimental reliance on the common intention which makes it unconscionable for the legal owner to deny the applicant’s beneficial interest”. As there are constraints faced by the judiciary under these circumstances, legal reforms are felt necessary to clear the stifling legal atmosphere. Common Intention and Acting in detriment In Lloyds Bank plc v Rosset [1991] 1 AC 107 case, the claim was made by the wife against a creditor being a bank in respect of secured interest in the matrimonial home which had been purchased ten years after her marriage and was held in her husbands name. The judge found, it was the common intention of the husband and the wife that the renovation of the house should be a joint venture after which it was to become a family home to be shared by them and their children. The judge was satisfied that there was a common intention that the wife should have a beneficial interest in the property under a constructive trust and that, before completion of the purchase on 17th December, she acted to her detriment on the faith of that common intention. It was also held that regarding the parties equitable interests prior to completion it is not necessary to decide what would be the position between the bank and the wife if the wife had acquired no interest in the property until completion. Nor, for the same reason, does anything turn in this case on the "competing equities" point on distinctions between registered and unregistered land. The Development of Legal Doctrine Reid & Zimmermann (2000, p. 11) states that the present law grows out of the past, and the future out of the present…The doctrine of precedent holds that a decision of the year 1800 is as valuable as a decision of the year 2000”. The general principle is that if the title to a property is in single name, sole ownership is presumed, and in the case of joint ownership equality of shares is presumed, if the documents do not indicate otherwise. Therefore, the onus of proving beneficial ownership and the extent of one’s interest lies with the party who wants to claim beneficial ownership and the legal dimensions with regard to the joint ownership extend beyond the family as well. The cases become complicated when there is debt involved, and the families are also deprived of their homes due to its impact on the families and the communities at large.  Under Scottish law a protected trust deed acts as an alternative to a bankruptcy. The properties are transferred to a trustee and registered as protected to avoid bankruptcy proceedings. “The advantage of the Protected Trust Deed is that it stops creditors going to court to make you bankrupt”. (scottishtrustdeed.co.uk). The issues connected to the social wellbeing of the public are taken into account in legislations, and this is an evolutionary process. The underlining point here is that, generally the people who follow this line of action are able to keep their homes. There have been numerous recent cases in connection with the ‘Constructive Trust’ involving families and the verdicts given on the lines of decision in Stack v. Dowden. Though the judiciary has taken initiatives to interpret the rules of the law to uphold justice in majority of the cases, the law related to cohabitation needs to be revisited as the powers of the judiciary is limited and circumscribed by the statutes. Though the judiciary has been trying to address the lacunae based on the circumstance available in each case for fairness in the disputes as has been amply demonstrated in the case of Stack v. Dowden, the Law Commission has also recognized the lacunae in this respect in its report. In Midland Bank v Cooke and Another [1995], it was held that the wife was entitled to half share in the property. She had made a contribution equal to one half of the wedding gift, had a claim under Rossett. An equal equitable interest in a home awarded stating "I would therefore hold that positive evidence that the parties neither discussed nor intended any agreement as to the proportions of their beneficial interest does not preclude the court, on general equitable principles, from inferring one". Cash contributions were not the sole determinant of the value of a share of the equity in a home”. (swarb.co.uk, 2010) The court has very wide powers derived from Part 2 of the Matrimonial Causes Act 1973 in dealing with the issues related to property in respect of married couples for a fair remedy on divorce, but the definition of “cohabitant” is not found in the Act and neither the duration of relationship. But, the court may make an order allowing the other party to occupy the property for an unlimited period. In relation to the cohabitation, the structure of the family, the overall family policy, its impact on the institution of marriage, the autonomy of the individuals, the interrelationships within the family and the family’s relationship with the society are very important. Apart from these issues, the courts need to consider ‘the balance of harm’ after taking into account the housing needs, housing and financial resources at the disposal of the parties, the effect of the decision on the children, the conduct of the parties to each other and to and housing resources of each of the parties and the other relevant factors which have a direct bearing on the order. In Drake v Whipp (1996) the parties, an unmarried cohabiting couple disputed their respective shares in a property held in the mans sole name. It was held “A beneficial interest in a family home could be presumed from the intention of the parties and their acting in detriment. There was a constructive trust. There was undisputed evidence that she was to have an interest in the property, and she had acted to further that intention and to her detriment”. (swarb.co.uk, 2010) Principle of unjust enrichment Dyson (2008, 150) states that ultimately the manipulation of the common intention constructive trust is not a phenomenon for which judges themselves should be held accountable. As long as the doctrine remains, they face an impossible choice: subvert formal rules and generate uncertainty in the law, or sanction unfairness in the cases before them. Also, the principle of unjust enrichment plays an important role in the court decisions. Johnston & Zimmermann (2002, P. 9) states that it is well known that until comparatively recently English law regarded the notion of a law relating to unjustified enrichment as foreign. In Orakpo v. Manson Investments Ltd. Lord Diplock intoned that ‘there is no general doctrine of unjust enrichment recognized in English law”. The courts are willing to ascertain beneficial interest based on the true intention of the parties ensuring that it does not result into unjust enrichment to the parties. Conclusion It was observed in Drake v Whipp (1996) that "it is not easy to reconcile every judicial utterance in this well-travelled area of the law. A potent source of confusion, to my mind, has been suggestions that it matters not whether the terminology used is that of the constructive trust, to which the intention, actual or imputed, of the parties is crucial, or that of the resulting trust which operates on a presumed intention of the contributing party in the absence of rebutting evidence of actual intention." The courts have tried to go beyond the technicalities or documentation to ascertain the underlying intention of the parties to the extent possible and use their discretion in rendering justice to the aggrieved. However, the discretion and interpretation of the law has its limits, and are subject to evidences available in the cases. The Law Commission has been set-up under Law Commissions Act 1965 for promoting reforms and its reports presented to the Parliament take into account the outcome of the legal research projects, and the members of the Parliament support the reform processes which are in line with the shift in social perceptions and the needs of the society. For example The Law Commission (2007, p.13) states that the Social Justice Policy Group, a group advising the Conservative Party’s policy review, published its final report on 10 July 2007. That paper examined a wide range of legal and policy issues relating to family, marriage and cohabitation, including the proposals made in our CP [Consultation Paper]. In the past, the law relating to housekeeping money was relevant. However, in the modern times contribution of the housewives in the income of the family has gone up and the wife’s contributions in many cases are equivalent to or more than the husband’s contribution. Over the period of time, the practical issues have been recognized by the courts and they have used their discretion, subject to the statutory limitations, that is, inadequacy of the outdated laws. References Dyson, A. (2008), All’s Fair in Love and Law: An Analysis of the Common Intention Constructive Test, Cambridge Student Law Review, http://www.srcf.ucam.org/cslr/index?option=com_journal&task=article&mode=pdf&format=raw&id=56 Goo, S. H. (2002), Source Book on Land Law. Third Edition, Cavendish Source Book Series. Johnston, D. & Zimmermann, R. (2002) Unjustified enrichment: key issues in comparative perspective, Cambridge University Press, UK. Lawyers.com, (2010), Constructive Trust, http://research.lawyers.com/glossary/constructive-trust.html Open Law (1971) Gissing v Gissing [1970] UKHL 3 (07 July 1970), [1971] 1 AC 886, [1970] 3 WLR 255, [1970] UKHL 3, http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKHL/1970/3.html&query=Gissing+and+v+and+Gissing&method=boolean Open Law (1988) Lloyds Bank plc v Geral Marcel Rosset and Diana Irene Rosset, [1989] Ch 350, [1988] WLR 1301, [1988] EWCA Civ 11, [1988] 3 All ER 915, http://www.bailii.org/cgi-bin/markup.cgi?doc=ew/cases/EWCA/Civ/1988/11.html parliament.uk (2007) Judgments - Stack (Appellant) v. Dowden (Respondent) [2007] UKHL 17. http://www.publications.parliament.uk/pa/ld200607/ldjudgmt/jd070425/stack-1.htm pntodd.users.netlink.co.uk, Gissing v Gissing, [1971] AC 886, http://pntodd.users.netlink.co.uk/cases/cases_g/gissing.htm Reid, K. & Zimmermann, R. (2000) The Development of Legal Doctrine in a Mixed System, A History of Private Law in Scotland: Introduction and Property, Oxford University Press, scottishtrustdeed.co.uk, Protected Trust Deed, http://www.scottishtrustdeed.co.uk/debt_resources/debt_solution/protected_trust_deed.asp swarb.co.uk (2010), Trusts – 1995, http://www.swarb.co.uk/lisc/Trust19951995.php The Law Commission (2007), Cohabitation: The Financial Consequences of Relationship Breakdown, http://www.lawcom.gov.uk/docs/lc307.pdf Read More