Requirements for a Constructive Trust And Formalities for Property Disposition

15 January 2023 5:15 am

Will claim Solicitors, specialist no win no fee will dispute and will contest Solicitors, discuss the Court of Appeal decision in Hudson v Hathway

Hudson v Hathway [2022] EWCA Civ 1648

The recent Court of Appeal decision in Hudson v Hathway has clarified the requirements for a common intention constructive trust and the requirements for property disposition in the modern age.

Here is the link: Hudson v Hathway [2022] EWCA Civ 1648 (14 December 2022) (bailii.org)

Our earlier blog explored the differences between a constructive trust and the equitable concept of Proprietary Estoppel – Exploring the Differences Between Constructive Trust and Proprietary Estoppel – Will Claim Solicitors

Summary of the decision

The parties in this case had cohabited for almost 20 years but were unmarried. At some point she gave up work to bring up their children. He strayed and met someone else. On separation they agreed she would get their mortgaged home outright and she lived there with their children whilst he continued to pay the mortgage. Unfortunately an oil spill from a neighbouring property delayed the sale and he stopped paying the mortgage which she then paid as well as all of the property outgoings. Six years after their original agreement, he issued a claim under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 – Trusts of Land and Appointment of Trustees Act 1996 (legislation.gov.uk)

He sought an order for sale and a declaration that in fact there should be an equal division of the sale proceeds contrary to the agreement between them many years before. The prior agreement had been formulated within a series of emails.

Outcome and extracts from the Judgment

The primary outcome was that the Court of Appeal held that the original agreement was binding. However the Court of Appeal went on to clarify that a common intention constructive trust could only arise where there was evidence of detrimental reliance. The following are samples from the lead Judgment by Lewison LJ:

Paragraph 107

I do not, therefore, detect in either Stack v Dowden or Jones v Kernott any intention on the part of the court to abrogate the long-standing principle that what makes an unenforceable agreement or promise enforceable in equity is detrimental reliance. The principle of detrimental reliance was not challenged in either case, and that it why it was unnecessary for the court to deal with it. As Professor Dixon put it (Non-problems, future problems and fairy dust [2022] Conv 119):

“… detrimental reliance was not in issue in either Stack nor Jones, not least because its existence was blindingly obvious on the facts. It was not pleaded as an issue, and was not argued as an issue. To infer therefore that the silence about detrimental reliance in those cases means that it is not required is imaginative. I may not specifically mention that you may not steal my laptop, but I am not authorising you to take it.”

Paragraph 128

I adhere, therefore, to the view that I expressed in Curran v Collins, namely that in the absence of signed writing, detrimental reliance remains a key component in establishing a common intention constructive trust.

In relation to the question whether the exchange of emails by which the original agreement was made, was sufficient to firmly establish it. Section 53(1) of the Law of Property Act 1925, provides as follows:

Instruments required to be in writing.

(1)Subject to the provision hereinafter contained with respect to the creation of interests in land by parol—

(a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law;

(b)a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;

(2)This section does not affect the creation or operation of resulting, implied or constructive trusts.

The Court found that an email (which included the name of the person writing it – which it considered amounted to a signature!) or series of emails, was sufficient to comply with this section. Paragraphs 67 and 68 of the Judgment confirm as follows:

The Court found that an email (which included the name of the person writing it – which it considered amounted to a signature!) or series of emails, was sufficient to comply with this section. Paragraphs 67 and 68 of the Judgment confirm as follows:

68. It follows, therefore, that by those emails Mr Hudson released his beneficial interest in Picnic House to Ms Hathway.

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