Compare the English and Wales law on co-ownership on family home with the jurisdictions in Australia and Canada

Mystery is the remnant as to what will happen in the erratic future when couples set up home today. All they want is to live in the property together. This is a simple enough wish, but it can become a fraught with difficulties, if, for instance, the relationship between the couple breaks down. Fortunately, unlike cohabitants, married couples1 and civil partners2 have got statutory protection when it comes to divorce or dissolution. Much will depend upon whether they took the legal title to their house in joint names or in the name of one of them only.

In the latter case, their reasons for such a decision may prove crucial. Henceforth, the general principle of trust was established to resolve disputes which arise when there is the existence of concurrent interest in property, where the property is subject to co-ownership. Wherever there are two or more people have an interest in one property, in virtue of the Trusts of Land and Appointment of Trustees Act (TOLATA) 1996, a statutory trust will automatically be imposed even where they both have a legal title.

If a number of persons wish to own property jointly, in order to avoid possible upcoming disputes, they may do so by creating an express trust of land – in writing – in compliance with the formal requirements of s. 53(1)(b) Law of Property Act (LPA) 1925. An express declaration as to the intention of the parties over the beneficial interests in the property, prima facie, will be conclusive: Goodman v Gallant. 3 The terms of trust may declare not only the nature of the equitable beneficial interests, but also the quantum of the interests which each party is to own.

Such a declaration will cease to be decisive only if one of the parties can secure rectification of the document setting out the equitable interests as in Thames Guarantee Ltd. v Campbell;4 or if it has been procured by fraud or some other vitiating factor such as undue influence. However, there is an imperative exemption to the requirement of writing sheltered under s. 53(2) LPA 1925: a person who is not a party to any valid express declaration of trust may establish a beneficial interest in the property by proving a resulting or constructive trust.

The approach to be adopted in this area of law has been developed through a series of cases, beginning with the “twin peaks of Pettitt v Pettitt and Gissing v Gissing”5 where the decisions of House Lords laid the theoretical underpinning6; while the most significant in the recent past is the decision of House of Lords in Llyods Bank plc v Rosset. 7 In Rosset8, the House of Lords set out two bases on which a constructive trust could be found: on either basis, the trust arises from a combination of an agreement to share, coupled with reliance on that agreement by the party claiming a share.

But before the agreement to share gives rise to a constructive trust, the party asserting a claim to a beneficial interest against the party entitled to the legal estate must show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement. Significant contributions in money or money’s worth have to be shown in order to fulfill the requirement of detrimental reliance. It does not need to be direct, but common and ordinary activities which any wife would do, such as providing domestic services, would not suffice despite considerable long term relationship.

Such narrow requirement is deemed to be harsh as in Burns v Burns. 9 Conversely, a “back door” approach to imposing constructive trust was taken in Le Foe v Le Foe10 where ordinary indirect contribution were justified to be sufficient since the spouses were in agreement about their respective obligations towards the property. An excuse as to why the property has not been put into joint names may be treated as an expression of a common intention to share: Eves v Eves11 and Grant v Edwards. 2 However, although the fact that the property is placed in joint names will usually show that the parties intended to share the beneficial ownership, it is not necessarily conclusive as decided in Stack v Dowden. 13 Secondly, in the absence of any express common intention, the House of Lords suggested that a common intention could be inferred from the conduct of the parties, such as the direct contributions to the purchase price by a party who is not the legal owner. This requirement for constructive trust to arise is well enshrined in the case of Midland Bank v Cooke. 4 Nevertheless, it was said that it was “at least extremely doubtful whether anything less will do”15. The denial of any interest to the claimant who has made substantial indirect contributions is ruthless and not supported by authority. In Gissing,16 it was emphasized that contributions must be ‘referable’ to the costs of acquisition. Besides that, it should be noted that for a common intention to be inferred from the parties’ conduct, it must be communicated between the parties. Conduct by one party which was not known by the other, as in Lightfoot v Lightfoot-Brown17 cannot be evidence of their common intention.

If there is no common intention, either express or implied, to found a constructive trust, the court should consider whether there is a resulting trust. Asking question in this order makes good sense, because the parties’ agreement should be given priority;18 but if there is no agreement, one can fall back on the resulting trust: where one party contributes part of the purchase money, there is a presumption of a resulting trust in equity under which the other, the legal owner, holds the property on trust for them both to the extent of their respective contributions.

This presumption is rebuttable as long as the legal owner is able to manifest that the money given was by way of gift or loan. Ever since the case of Curley v Parkes19 was decided in the Court of Appeal, uncertainty crops up concerning the time of contribution by the non-legal owner. It was decided that resulting trust can arise only if payments are made at the time of the acquisition of the property, obviously, post-acquisition mortgage repayments are not of this character. Yet, cases before this have rather assumed that payment of mortgage installments would suffice: Carlton v Goodman20 and McKenzie v McKenzie. 1 On the other hand, Australia’s jurisdiction concerning the division of rights in the aspect of co-ownership in property seems to be different from the approach pertaining in England and Wales. In Australia, in domestic contexts, for example, the Family Law Act 1976 and amendments to various state Property Acts provide a separate regime to reallocate upon the disintegration a marriage or domestic relationship. 22 If a particular relationship falls within the provisions of the legislation then the general legal and equitable principles of property law will not apply.

However, where a de facto relationship dissolved prior to the introduction of the legislation, or concerns a same sex relationship, the legislation will not apply. Whilst in the concept of trust, financial contributions to the maintenance of the home or contributions assisting the mortgage to be paid are being taken into account by the courts. It was enunciated, in Parij v Parij,23 that the domestic activities of one party may be appropriately seen as contributing towards the acquisition of property by freeing the other party from domestic responsibilities so that he can work directly for financial reward.

Cases such as Rolfe v Rolfe,24 Muschinski v Dodds,25 Baumgartner v Baumgartner26 and Bryson v Bryant27 would be the concrete substantiation to exemplify this approach. However, the courts have been reluctant to recognize domestic contributions as being sufficient to give rise to a constructive trust where they were made purely for reasons of “love and affection” instead of having regard to whether or not those efforts would entitle one to any equitable share in the property. 8 Besides that, a new species of constructive trust is imposed, regardless of the parties’ intentions, on the basis of unconscionability: it would be unconscionable not to take account of each party’s post-purchase contributions, therefore allowing the legal owner to deny the beneficial interests of the non-legal owner. Its foundation lies in Allen v Snyder. 29 Mahoney’s J. A. reference to “contrary to justice and good conscience” is to be understood as “unconscionable”.

As illustrated in Baumgartner,30 it was unconscionable for the husband to retain sole ownership of the property which the spouses acquired through pooling of their incomes. The court arrived at the same decision in a later case: Bryson v Bryant. 31 The essential difference between unconscionability and resulting trusts is that the court is here looking not only to contributions at the time of purchase price, but contributions over time. Likewise, the difference between unconscionability and other trusts is that the court pays little heed to the parties’ actual intentions.

The Canadian law on property division falls under Family Relations Act (FRA)32 which applies only to married couples whereas unmarried couples can rely on the law of trusts or “unjust enrichment”. 33 The Supreme Court of Canada was unhappy with the direction taken in England and Wales, where a constructive trust is based upon the ‘common intention’ of the parties. Hence, in Rathwell v Rathwell34 and Pettkus v Becker35 the Canadian court turned to “unjust enrichment” as a substitute. Dickson J. et out three requirements for finding of an unjust enrichment: there must be enrichment36; a corresponding deprivation37; and the absence of any juristic reason for the enrichment38. In other words, when someone performs work for another, expecting reward, there might be an unjust enrichment if the recipient, who has taken advantage or feathered his nest with no lawful reason for it, fails to deliver an equitable recompense. 39 The claimant’s contribution may have taken the form of domestic services, from child care to unpaid work in the defendant’s business, as in Sorochan v Sorochan40 and Rawluk v Rawluk. 1 Later on, in Peter v Beblow,42 it does not only affirm that ordinary domestic work can ground a claim to unjust enrichment, it also gives rise to a constructive trust to be awarded as one of the remedies to unjust enrichment. In the view of the court, constructive trusts serve two functions: (i) to remedy unjust enrichment; and (ii) to hold parties to high standards of trust and probity so that they are not permitted to retain property which in “good conscience”43 they should not retain. 44

Deriving from both Australian and Canadian jurisdictions, the object of a constructive trust is to redress the position of “unconscionable” conduct and “unjust enrichment” respectively. An approach based on either unconscionable conduct or unjust enrichment may inevitably lead to the same outcome since neither approach necessarily calls for an accurate accounting of the contributions of the parties. 45 The notion of unjust enrichment is as much at ease with the authorities and is as capable of ready and certain application as is the notion of unconscionable conduct.

Both of these principles were not established in banana republics dealing in palm-tree justice. Each jurisdiction has developed remedies to resolve the problems presented by the break-up of unmarried couples. There is no discernible presumption of equality of asset allocation in their decisions, merely a generous willingness and flexibility to adjust property rights to reflect the parties’ respective contributions. Perhaps the English courts should now reconsider the parameters laid down in Burns46 owing to contemporary social changes. 7 The Law Commission recommended that the courts adopt a wider view of the type of ‘contributions’ that would be acceptable to found a common intention. 48 Indeed, indirect contribution to the mortgage has already received judicial approval in Le Foe49 albeit not at Court of Appeal level. The radical solution, conceivably, would be to tear up Burns, treat Rossett as being of historical interest only, and introduce a wider test for the triggering of a constructive trust.