To What Extent Is a Non-Owing Trustee Entitled to Financial Relief from Proceeds of Trust Property - Term Paper Example

 LAW AND CRIMINALITY To what extent is a non-owing trustee entitled to financial relief from the proceeds of the trust property after the breakdown of the cohabitation relationship? Traditionally, marriage has been viewed as the preferred family portrait, providing ideal emotional and financial stability to family life. In this era of modernity, this perception is no longer valid since most families of today are very different. In today’s society, marriage is no longer considered important and this is prompting many couples to consider cohabitation as the best option rather than marriage (Ann et al., 2005). Over the past decade the rate of couples who choose to cohabite have increased tremendously. The major challenge with this phenomenon is that many are not aware of the fact that they need to get married to be entitled to financial relief upon termination of the relationship failure to which an estranged partner is forced to seek the assistance of the law for leverage. The assumption that many have is that they are protected under the legal framework of “common law marriage.” What would happen if a man and a woman lived together for several years, each party contributing financial assistance to their well-being, and finally broke-up. The question would be who would benefit? In some instances a child is not involved. This paper will try to give an in-depth analysis of the extent to which a trustee is entitled to a portion of the trust property if the property is registered on the name of one partner in a cohabitation relationship that breaks before marriage. In seeking legal assistance, the trustee partner will be the accuser while the beneficiary will be the defendant/accuser. Legality of Cohabitation ‘A patchwork of legal rules’ are entailed in the legal rights available to cohabitants upon relationship breakdown.1 This is because the procedure of reclaiming a right over a property in a cohabiting situation is complex, expensive and uncertain to rely on and not applicable to family circumstances.2 This can be highlighted by the disparity that exists with the relief available to married couples under the Matrimonial Causes Act 1973 (MCA) (Hale, 2004), which enables the court to deal with the entirety of a couple’s assets and provide for complete discretion when making orders, with the courts ‘largely left to get on with it for themselves.’.3 The property that may be under contention if registered under one party there might be no great problem. In sole ownership cases, the difficulty arises for the non-legal owner who must traverse their way through strict property law and complex equitable principles under the Trust of Land and Appointment of Trustees Act 1996, which is supposed to establish an equitable interest in the property. There are also complications that arise in regard to joint ownership cases and this precedence has been hugely used to determine the cases of cohabitee. The reason as to why this is largely the case is because, the present law perceives cohabiting couples at the completion of their relationship as two unrelated individual (Wong, 2003). There is no comprehensive structure to determine a fair outcome for former partners who cohabited to take into account the financial or any other contribution they might have made in their shared lives. The only way a former cohabitant claiming compensation can make a claim in regards to the property contended is under the “implied trust.” Nevertheless, one must prove an agreement to share that property or a financial contribution to the value of the property. The only way that contending cohabitant can get some financial compensation is if he/she can prove in the court of law his financial contribution towards the welfare of the contended property. Legally, a trustee is obligated by some duties and responsibilities to hold the legal title to the trust property which is referred to as fiduciary obligations. A trustee is required by law to legally and morally own the property on behalf of another person and manage it in a transparent, productive and accountable way. The conduct of the trustee on behalf of another should solely be for the benefit of the beneficiary of the trust. It is therefore essential to evaluate the duties of contending cohabitant as a trustee so as to qualify his rights in the property. Contending cohabitant’s duties towards the other cohabitant as a trustee come with fiduciary responsibility. He stands a fiduciary role with respect to the cohabitant who has acquired the property. The plaintiff is expected to exhibit high standard of responsibility which he has generally exhibited by investing his own money and effort in taking care of the property under defendant name. It is thus important to note that he respects his fiduciary responsibility by being attentive to whatever happens to the property and taking necessary measures to ensure that it is well taken care of. Furthermore, he should demonstrate respect for his duty of investment standards by being prudent in whatever he is placing his money in with regards to the accused property. His any move to renovate the property should be done in good faith to improve their lives currently and in the future and therefore, it is an appreciation of the value of the property. Establishing Beneficial Interest In order for the accuser to establish any claim on the property solely registered on accused name, he has to show that he has beneficial interest in the property, which will then give him the right to occupation and in the sharing of the proceeds from the sale of the property. It is important for accuser to establish that he had the beneficial interest in the property. This will be his defense in reclaiming his share of the property. In this context, beneficial interest can be defined as an interest that allows a non- owning cohabiting partner to possess the right of occupation of a property and to a financial share from the proceeds following the sale of a property. In the general case of cohabiting couples, there are three ways in which the beneficial interest can manifest itself; Express trust Resulting or implied trust A constructive trust Express trust Cohabiting couples can make an express declaration on the way they intend to share the property. This can be done by making a written agreement or a trust deed.4 In the case, Goodman v Gallant, it was held that the property will be held as joint tenancy since there was a express declaration of trust entitling the two partners to equal sharing of the property in case of severed ties.5 In this case, the declaration is said to speak for itself, and the sharing fate is therefore, conclusive. However, in the dispute between plaintiff and defendant, there is no express trust in form of a declaration or a written agreement to specify their sharing ratio, and therefore, the ‘principle of equity’ is applied in order to find evidence for implied trust which is either constructive or resulting. As such, plaintiff can rely on the doctrine of implied trust to establish his beneficial interest.6 Implied trust Implied trust arises when the court rules that the actions of the non-owning cohabiting partner at the time of their relationship resulted in the establishment of trust between the partners. There are two types of implied trust; constructive or resulting implied trust. Plaintiff can establish his beneficial interest on the property by relying on constructive trust as opposed to resulting trust because resulting trust is only applicable if plaintiff had contributed something towards the initial purchase of the property. In the case, Stack v Dowden, it was held that resulting trust gave beneficial share to the partners in a ratio that is proportionate to their initial contribution towards the purchase of the property.7 Following the limitation of this doctrine in giving fairness to the non-owning partner in a cohabiting relationship, Stack gave a declaration that this doctrine was no longer relevant in a domestic context.8 As such, the doctrine of constructive trust was preferred. Doctrine of Constructive trust This doctrine holds that the behavior of a partner during the cohabiting period can make one a trustee for another. As such, it would be unconscionable for the owning partner to deny the other partner his trust regardless of whether the property in solely owned. Constructive trust was established in Pettitt v Pettitt by Lord Diplock when he advised for the search of a common intention of the claimant partner (Barr et al., 2010) The basic principles of constructive trust were then set out in Gissing V Gissing where the non-owning partner was seeking to establish a beneficial interest in the absence of an express trust.9 The reaffirmation of the principle can also be examined on the basis of Lord Bridge’s ruling on Lloyds Bank v Rossett. plaintiff and defendant may have lacked an express trust in the sharing of their house in case they broke up without ever getting married, but drawing from such conduct, it is imperative to note that one can rely on the common intention that they both owned the house and had a future together in the home. Application of the doctrine of proprietary estoppel The application of this doctrine can be used by a plaintiff to reclaim his share of the property’s proceeds from defendant, but it takes a different perspective from the doctrine of constructive trust. This doctrine introduces the concept of fairness (Barr et al., 2010) In order to establish the doctrine of estoppel, plaintiff must establish the following elements; An assurance or representation made to him by defendant at the time of their cohabitation, That the plaintiff relied on the assurance made to him and Plaintiff suffered detriment as a consequence of his reliance on defendant’s assurance.10 This doctrine considers the time when the assurance was made whether expressly or by inference. In this case the plaintiff has to fulfill the claim that the defendant misled him into thinking that he had acquired the beneficial interest in their home after cohabiting for a long time and participating in developing the property. This doctrine will then question whether it is acceptable that the defendant did not fulfill the assurance made to him. Once the assurance has been established, the court will then rely on the maxim of ‘fairness’ to award justice to both parties by awarding the minimum amount to the plaintiff.11 This differs from the award he would receive if the doctrine of constructive trust was applied since the doctrine or proprietary estoppel will award him far less than the alternative. In this case, the defendant is only likely to receive his contribution towards the renovation of the house and the efforts he put on the renovation he did himself. Action to be taken to Bring about the Sale of Property If the relationship cannot be salvaged and the defendant allowed occupancy into the house, the accuser can seek the assistance of the court to bring about the sale of the house so as to recover his compensation. Furthermore, if it is not possible for the cohabitants to reach an agreement about the compensation that each should receive after the sale of their property, the plaintiff can seek the solution of the court which will enable him to lay a claim on the defendant’s property.12 Since by establishing a beneficial interest the plaintiff gets long term rights on the property they shared with the defendant. As such, the plaintiff can apply for an order to sell the property under the trusts of Land and Appointment of Trustees Act 1996. The plaintiff can also apply for the order of selling the property through the Married Women's Property Act 1882 since they had been cohabiting for more than three years which is the limitation provided by the law. The application for the sale of the property should be made in the High court or in the county court (Clarke and Greer, 2012). References Anne B, Simon D, and Grace J, ‘Research: Why don’t they marry? Cohabitation’, Commitment and DIY marriage (2005) CFLQ 383 Wong S, ‘Trusting in Trust(s): The Family Home and Human Rights’ (2003) 11 Feminist Legal Studies 119 Law Commission, ‘Cohabitation: The financial Consequences of Relationship Breakdown’ (Law Com No 307 Barr W, Pearce R and Stevens J, The Law Of Trusts and Equitable Obligations (OUP Oxford; 5 edition 2010) Clarke S and Greer S, Land Law Directions, OUP Oxford; 3 edition. 2012. Read More