Property ownership and transfer

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Introduction Property ownership and transfer give rise to concerns about equity and fairness.

According to s 53(1) (b) Law of Property Act 1925, declarations of trusts of land should be made in writing to address issues of fraud. Nevertheless, the law of equity and trust steps in to ensure that even where there is no written agreement; parties are treated fairly and justly in distributing benefits in the property.1 Equity denotes fairness in deciding any given matter, in this case, property ownership and sharing. The decision arrived at, and the procedure used should be fair and impartial to all to avoid discrimination whatsoever. Trust law governs situations in which someone or people entrusted someone else to take care of their affairs. For example, the succession of properties or wealth left behind by the deceased can be done under trust. In this regard, a person entrusts another person with the responsibility of implementing his or her wishes or will on how properties should be distributed among benefactors or utilized upon his or her demise.2 Trust can be express or implied. Implied trusts arise when the testator does not use the words trust in the will or does not specify who the beneficiaries are. Implied trusts can be further classified into constructive and resulting trusts.3 The Court has to determine if the trust exists to ensure that there is a fair distribution of the properties involved. Cases of 53 Cross Street and Swettenham Cottage properties raise concerns about the interests of Denver in the property, which can be solved by understanding the type of trust involved in relation to the law.

53 Cross Street Although it was a result of the two, the purchase of the property did not involve an express trust for Watson to manage the share of Denver. The investment property in Sheffield 1 2 3

Scott Atkins, Equity and Trusts (1st edn, Routledge 2015), pp. 34-35.

Archibald v Alexander [2020] EWHC 1621.

Stack v Dowden [2007] UKHL 17; Scott Atkins, Equity and Trusts (1st edn, Routledge 2015), p. 35.

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was bought together in 2005, making it unfair for Denver to be denied interest in it. As a contributor to its purchase, he developed a constructive trust that is operational. Therefore, the sale of the property ought to take into account his interests. A constructive trust arises in this case also because of the shared interest of Watson and Denver that the latter should have a beneficial interest in the property they bought in 2005. It is also explicit that Denver has acted to his detriment on the basis of this intention by not only contributing to its purchase but also carrying out repairs and settling utility bills.4 Express Trust There is no express trust entered because the two were brothers, implying that they operated on goodwill. The purchase of investment property in Sheffield and its ownership lacks express trust because there were no clear and specific words used to express an intention that property is held in trust by Watson on behalf of Denver.5 The two did not discuss nor document anything about the shares each held in the property. For an express trust to exist, the legal owner of the property should declare that he or she holds the property on trust for particular beneficiaries. Watson, who is the legal owner of the property in question, did not clarify this.

Consequently, there is no express trust developed, making it unattractive to try and invoke it to claim a fair share of the proceeds from the sale.

Intention Before The intention at the outset of the purchase of the house was joint ownership of the house, but with Watson as the registered sole owner for reasons best known to Denver. The act of the two brothers buying the property using contribution from each underscores the intention to jointly own the housing property. If the property was not jointly owned, it would be hard to 4 5

Stack v Dowden [2007] UKHL 17; Jones v Kernott [2011] UKSC 53.

Smith v Bottomley [2013] EWCA Civ 953.

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understand why Denver contributed £50,000 without expecting a refund. On the other hand, Watson contributed £150,000. The shared contribution indicated some level of trust between the two brothers to co-own the property in question. It is also imperative to note that the contribution to the purchase was made in 2005, anchoring a common intention constructive trust.6 Since then, the two brothers have, through their actions, demonstrated joint ownership of the property. The contribution and conduct of the two brothers can be taken into account to explain the resultant trust. In a nutshell, Denver knew that he held the same shares in the bought property courtesy of his contribution.

Later intentions of trust also arise through the actions of the parties. In 2010 Denver paid £10,000 for the renovation of the house. He can claim detrimental reliance to affirm his interests in the property.7 The act of spending his money on renovation is an indicator of his interest in the house. Watson did not contest the move by Denver to carry out renovations, ostensibly because he understood that his brother had shares in the house. Watson accepted Denver to pay for renovation because it is presumed that they co-owned the property. Denver went ahead to also clear utility bills as a part of a show of his interests in the property.

Resulting Trust In Westdeutsche Landesbank Girozentrale v Islington London Borough Council, the Court defined resulting trust as "Under existing law, a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays for the purchase of property which is vested either in B alone or in joint names of A and B, there is a presumption that A did not intend to make a gift to B.8” In the case at hand, it is clear that Denver contributed 6 7 8

Smith v Bottomley [2013] EWCA Civ 953 Ibid.

Westdeutsche Landesbank Girozentrale v Islington LBC [1996] UKHL 12

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towards the purchase of the property without an indication he had made a donation. Therefore, he created a resulting trust with Watson, with whom the property was registered in his name.

Watson may try to rebut the presumption that an intention of sharing the property with his brother was not created. However, if he attempted this, the behaviour of the two in the period after the purchase suggests they jointly owned the property. Even without adducing more evidence that Denver has been benefiting from the income generated by the property, it is presumed that he spent money on the repair of the property because he held some stakes in it. He further went ahead to settle utility bills and fund renovation work because he believed that he held some shares in the property. Thus, the act per se underscores the existence of resulting trust.

Moreover, the resulting trusts can be said to have been influenced by the intents of the property owner. In this case, the transfer of the legal title to property took place but did not show the intent of Denver and Watson to deprive themselves fully of all their interest in that property.

In this respect, Watson would not be allowed to receive the property absolutely for his own benefit without considering the interests of Denver. Therefore, he held the property on trust for Denver, paying attention to his shares. The case of property on 53 Cross Street involved Denver transferring his funds to Watson to purchase the house, but for some reason, he did not register his interests in the title.

The property on 53 Cross Street gives rise to resulting trust based on the behaviours of parties. Watson did not pay the property fully from his own finances. Denver paid £50,000 as part of his contribution to the purchase, an amount that was never refunded to infer sole ownership of the property. By accepting Denver’s contribution of £50,000 and doing nothing in terms of repaying him back the money paid or lack of such an agreement to indicate that he had

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no interests in the said property, a resultant trust was created.9 Denver made a voluntary conveyance of the property to Watson. The financial contribution is presumed to have created a resulting trust. The Court would be interested in ensuring that there is fairness in how the proceeds from the sale of property are shared, regardless of whom it is registered. The financial contribution by Denver cannot be overlooked on the strength of the resultant trust that was created by the joint funding of the purchase.

Implied Trust The contribution of Denver to the renovation of the property creates implied trust as advanced in Stack v Dowden. In this case, Lord Hope asserted that indirect contributions to the value of the property, such as repairs that add significant value to the property, must be taken into account.10 He went further to affirm that the financial contributions by parties made directly towards the purchase of a property must be accounted for when determining the existence of the constructive trust. In the case at hand, Denver directly contributed to the purchase of property on 53 Cross Street and went on the fund renovations that helped improve its value. However, because the parties did not document any agreement between them on property ownership and that the property was registered in the name of Watson, implied and resulting trust are more effective in helping Denver pursue his interests.

Imputing Common Intention There was no express agreement on the shares each party owns in the property, which implies that the Court would look at the conduct of Denver and Watson in relation to the property. The prevailing situation creates a common intention that can create constructive trust in the absence of an express agreement. The common intention the parties had about the property 9

Westdeutsche Landesbank Girozentrale v Islington LBC [1996] UKHL 12.

10

Stack v Dowden [2007] UKHL 17.

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can either be expressed or inferred. Looking at the evidence adduced, it is clear that Denver contributed directly to payments for a significant improvement to the property. The act can be interpreted by the Court infer that this must have been because there was a common intention between the two parties to share the property.11 It is unusual to pay renovation of another person’s property for no financial gain at all. Funding the renovation indicates that Denver, the beneficiary, acted to his detriment on the grounds of common intention as to the beneficial ownership of the property in question. In Marr v Collie, the Privy Council asserted that common intention is applicable to investment property, underlining the relevancy of the case in the current case.12 Consequently, Denver can cite his contribution to renovation to assert his interests in the property.

Denver and Watson also rented the property out, which implies that there was a way they shared the proceeds if they so did. Denver can consider looking at this as a way of asserting his interests in the property. The intentions or sharing the proceeds from renting the property, if proven, would imply that there existed a common intention constructive trust, which Denver can leverage to claim interests in the said property. The common intentions can be inferred from the conduct of the parties, in this case, Watson agreeing to Denver to have a share of the proceeds from renting the property.

Furthermore, it would be a fraud on Denver if the legal owner, Watson, affirmed that he did not have a beneficial interest in the property when he contributed to its purchase, renovation, and settling utility bills.13 The repair works were done in 2010 at the cost of £10,000. The presumption is that without these repairs, the value of the property would be lower than 11 12 13

Marr v Collie [2018] AC 631.

Ibid.

Smith v Bottomley [2013] EWCA Civ 953

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£300,000. The Court would be invited to look at the implied intentions based on the conduct of Watson and Denver with regard to the property on 53 Cross Street. It will seek to understand why each party behaved in a particular way.14 In essence, it would be a fraud and unfair on Denver for Watson to claim that the former did not have any share in the property.

Swettenham Cottage Swettenham Cottage property was co-owned by Denver and Petra. The property can also be considered a quasi-matrimonial home because the two lived there with their children. In addition, the property is registered in joint names, underpinning the existence of both legal and beneficial joint tenancy that Denver must be aware of.15 From the outset, it is explicit that they intended to co-own the property.

Earlier Intentions The parties had common intentions to have varying shares in the property at the time of purchase. Denver contributed £ 200,000 to the purchase price, whereas Petra contributed £100,000. The variance gave Denver an upper hand when it comes to controlling most shares.

However, they started paying the mortgage of £100,000 until the time when Petra left employment to take care of the children. The intention would have been that Denver would pay for her part as she takes care of children. Equal sharing of the burden to settle the mortgage shows an intention to create equality in financing the debt. Nevertheless, unless it is stated otherwise, this action did not indicate any intention to create equal ownership of shares. To rebut the notion of equal ownership, Denver can emphasize the contribution of each member to the purchase as the first ground to claim more shares than Petra. The registration of Swettenham Cottage in Denver and Petra's joint names is a clear indication of the existence of beneficial 14 15

Stack v Dowden [2007] UKHL 17.

Stack and Kernot -v- Jones [2012] 1 AC 776,

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interests. Co-ownership gives each party an entitlement to benefit from the sale of the property because there is a clear ground on which either party can claim interests. The legal title to a property is vested Denver and Petra, who holds the property on trust for themselves.

Later Intention The intentions of Denver and Petra changed a bit when the latter was required to leave her job to take care of the child. Her new family roles made it hard to contribute to settling the mortgage, a position that is presumed to have been understood by Denver when he advised her to focus on childcare. As a result, she performed unpaid work of childcare, which can be considered contributing to the mortgage payment because the sacrifice allowed Denver to concentrate on his job without distractions.16 Denver would take over the duty to repay the mortgage, including what she would have contributed to repayment. The law of equity requires that Petra be compensated for her sacrifice to take care of children at the expense of her job.17 In James v Thomas, the Court of appeal established that a cohabitant performed unpaid manual work in the partner's business, thereby effectively contributing mortgage payment.18 The same rule can be invoked in this case to infer that Petra contributed to the payment of the mortgage during the time she had taken a break from work to take care of the children. In their quasi-matrimonial relationship, Petra performed house chores to the detriment of her employment, a development that should be taken into account when determining the benefits each can get from the sale of the property. It is presumed that she contributed to the generation of family wealth by performing family roles as the two lived together.

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James v Thomas [2007] EWCA Civ 1212; Adekunle v Ritchie [2007] 2 P & CR DG 20.

Stack v Dowden [2007] UKHL. James v Thomas [2007] EWCA Civ 1212; Adekunle v Ritchie [2007] 2 P & CR DG 20

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In Stack v Dowden, the couples had lived together for several years. The case was determined based on the contribution of each party to the purchase of the property.19 The same would apply to the case of Denver and Petra shares in Swettenham Cottage. The two did not define how the property was owned in terms of shares. However, there is clear documentation of their contribution to the purchase and improvement of the property as it was in Stack v Dowden, which can help the Court determine how much Denver can get from the sale of the property.20 On the grounds of fairness, when deciding the case, the Court would look at the following factors: a) Presence of underage children and their needs The duo has children between them, who need priority when the issue about their quasimatrimonial property is determined. It is important to note that the property in question served as a family house the family. The two lived in it as they cohabited, discharging their parental responsibilities. Unlike in Stack v Dowden, where the cohabiters lived in separate houses and maintained different financial accounts, there is an element of sharing the house and finances in this case.21 Petra takes care of children on behalf of the cohabitees and performs other house chores. The Court would be invited to look into the earning of Denver and Petra and their duties during the marriage or civil partnership and in the future. Petra was relegated to home chores when the two decided to cohabit. Her earning dwindled because of family responsibilities. The standard of living during the marriage would also be factored in benefits one is entitled to in property sharing. The factor would be strong in the case where it is considered part of the influencer of the quality of life Petra lives with her children.

19 20 21

Stack v Dowden [2007] UKHL 17 Stack v Dowden [2007] UKHL 17 Ibid.

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b) The value of the property Petra also paid for the decoration of the children's bedroom, underpinning her interests in the property. The decoration added some value to the property that should be taken into account when sharing the proceeds from the sale. Any improvement to the property should be considered a value-addition exercise.22 Constructive trust The ownership of the property can also be subjected to consideration of constructive trust. This kind of trust arises through the operation of law where it would be unconscionable for a person who holds an asset to deny the beneficial interest of another person in the asset.23 In this case, a constructive trust would arise if Petra curtails Denver's access to and enjoyment of his interests in the property. Therefore, he should be allowed full access to his rightful share.

However, in the case, this is not the problem. Denver and Petra co-own it without any qualms.

Nevertheless, the lack of clear documentation of the shares each has in the property would create challenges that may threaten his rightful shares.

Resulting trusts Results trusts arise where there are no constructive trusts, mainly to fulfil the implied intentions of the parties who claim interests in a particular property.24 It is based on the presumption of intention to create a trust. In this case, the resulting trust would have arisen if either party provided funds to purchase the property and had it registered in another party's name.25 However, as it is indicated in the case, the property is registered under joint ownership, eliminating the possibility of resulting trust. Denver and Petra were clear on ownership of the 22 23 24 25

Stack v Dowden [2007] UKHL 17.

Archibald v Alexander [2020] EWHC 1621 (Ch).

Westdeutsche Landesbank Girozentrale v Islington LBC [1996] UKHL 12.

Lloyds Bank plc v Rosset [1991] 1 AC 107 at 133.

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property, save for the issue of distribution of shares, which is the bone of contention. The two have agreed to sell the property as they part ways. The question is whether Petra is trying to curtail Denver from accessing his shares, which are not clearly defined.

The fact that Denver and Petra initially paid an equal amount for the mortgage and outgoings indicates that they intended to be equal partners in settling the mortgage and paying for other expenses. The position would have been maintained if Petra did not leave her employment. On these grounds, it can be assumed that Petra contributed £ 150,000 and Denver £250,000 for the purchase. The figure is before redecoration of children's bedroom is considered.

Basically, given these facts, it would be hard for the Court to agree to Denver getting as twice as Petra’s shares. The quantification of the value of Petra's redecoration of the children's bedrooms ought to be done to determine its contribution to improving the current value of the property.26 Their joint ownership agreement is premised on their joint ownership agreement to sell the property for £600,000 and use part of the proceeds to settle the outstanding and outstanding mortgage. The distribution of the amount remaining will be informed by more factors than the initial amount each contributed for the purchase.27 In this respect, Denver’s view that he is entitled to twice the amount of the sale proceeds as Petra because he contributed twice as much initially does not hold ground.

In Re Densham [1975] 1 WLR 1519, the Court determined a dispute about matrimonial property ownership between a husband and wife. The property had been registered in the husband's sole name, but the wife had contributed funds for its purchase out of the agreement that was jointly shared.28 The agreement did not stipulate the percentage each would own in the 26 27 28

Stack v Dowden [2007] UKHL 17.

Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776 Re Densham [1975] 1 WLR 1519

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house. Subsequently, the Court decided that the agreement gave prima facia evidence of equal shares in the house. Nevertheless, since the husband was not working and the law anticipates fairness, the wife would not be given 50% shares.29 Petra can explore the case study to ask for a fair sharing of proceeds from the sale of the house, particularly considering that she is not in a better economic position than Denver because of family responsibilities that affected her employment.

Additionally, through her direct financial contribution to the purchase of the house and its renovation, Petra is entitled to more than half of Denver's shares. The resulting trust created through her financial contributions to the property would play a vital role in influencing the court decision on how much each party is entitled to.30 In this respect, resulting trust would not be appropriate for Denver because it does not offer a better opportunity for him to receive the biggest share attainable within the law.

Conclusion When Denver and Watson jointly purchased a property on 53 Cross Street, the common intention was to enjoy the shared benefit in it, subject to proof of his contribution to purchase and quantification of the impact of the repairs he performed on the property's value. Denver would not have contributed to its purchase and subsequent renovations and settlement of utility bills if this intention did not exist. The question about the number of shares he would be entitled to would be solved by looking at the contribution to purchase and funding of the renovation works, which should be quantified. Common intention constructive trusts can be pursued to attain this end. Resulting trust can also be invoked because Denver acted to his detriment based on the belief that he had shares in the property when he funded the renovations and paid utility bills. By 29 30

Ibid.

Re Densham [1975] 1 WLR 1519,

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virtue of this, he has an interest in the property, which he can claim through legal systems.

Petra's contribution to improving the value of the Swettenham Cottage and taking care of children would be factored in determining if the shares each gets will be based on the initial contribution to the purchase of the house. It is evident that Denver may not be entitled to as much as twice Petra’s share because of her direct and indirect contribution to the property and family. The repayment of the mortgage was initially made on equal terms before Petra agreed to leave employment to take care of children.

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Bibliography Primary Sources Statutes Trustee Act 1925.

Case Laws Adekunle v Ritchie [2007] 2 P & CR DG 20.

James v Thomas [2007] EWCA Civ 1212.

Lloyds Bank plc v Rosset [1991] 1 AC 107.

Smith v Bottomley [2013] EWCA Civ 953.

Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776.

Densham [1975] 1 WLR 1519.

Westdeutsche Landesbank Girozentrale v Islington LBC [1996] UKHL 12.

Archibald v Alexander [2020] EWHC 1621.

Stack v Dowden [2007] UKHL 17.

Secondary sources Atkins S, Equity and Trusts (1st edn, Routledge 2015).

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