Analysis
The parties had started a relationship in 1990. Mr Hudson had moved into Ms Hathway’s home and become joint owner. They did not marry and had two sons. The home was sold and another bought in joint names. In 2007 they purchased Picnic House with a mortgage. It was again purchased in joint names with no declaration of trusts. They separated in 2009, with Ms Hathway staying at Picnic House. The mortgage was converted to an interest-only mortgage. It continued to be paid from a joint account into which both of their salaries had been paid.
In July and August 2013 there was an exchange of emails between the parties. It was agreed that Mr Hudson would keep his shares (of unknown value) and pension and Ms Hathway would keep the house, contents and savings. An oil spill had occurred at the house and Ms Hathway agreed to get the house ready for sale as soon as possible. Following slow progress on the sale of Picnic House Mr Hudson stopped contributing to the mortgage from January 2015. Ms Hathway took over responsibility for making the payments.
In October 2019 Mr Hudson issued a Part 8 claim. He sought an order for the sale of Picnic House and equal division of the proceeds. Ms Hathway agreed with the sale but contended that she was entitled to the whole of the sale proceeds under a constructive trust. The constructive trust was said to arise from a common intention and agreement, in reliance on which she acted to her detriment. The detriment relied on was:
- paying all interest payments on the joint mortgage from January 2015;
- desisting from claiming against assets in Mr Hudson’s sole name acquired during their relationship;
- not claiming financial support for the benefit of the children under the Children Act 1989;
- accepting sole responsibility for the oil spill and insurance claim;
- at her own expense, maintaining and redecorating the property from January 2015;
- relying from 2014 on the understanding that she was sole beneficial owner, in conducting her finances and lifestyle; and
- living frugally to afford the upkeep and mortgage.
At trial the judge found that there was a clear agreement on the terms set out in the emails. As a matter of fact the judge rejected all the suggested detriments apart from desisting from making claims against assets in the sole name of Mr Hudson. He noted that matrimonial remedies were not available. However, there could be some sort of civil claim in the form of constructive trust. It may have been a weak claim but was not a non-claim.
He found that there must be a change of position or detrimental reliance in a joint names case. Otherwise equity would be assisting a pure volunteer. The degree of change of position or detrimental reliance would depend on the nature of the case. Where there was no agreement about the respective shares in equity, in a joint names case the hurdle was said to be lower: the change in position does not have to match the value of that which was promised. Giving up claims which both parties perceived Ms Hathway may have against Mr Hudson’s assets was sufficient to establish detrimental reliance. The judge dismissed the claim and declared Ms Hathway the sole equitable owner of Picnic House.
The sole ground of appeal was whether the judge was wrong to decide that sufficient detrimental reliance or change of position was made out. By a respondent’s notice Ms Hathway submitted that it was unnecessary to show detriment at all where property was bought in joint names in ‘the domestic consumer context’ and without an express declaration of trust.
Held:
- (1) Neither detriment nor an irrevocable change to the beneficiary’s legal position needed to be shown in a case such as this. It was striking that no mention was made of detriment in the statement of the principles that apply in these cases in Jones v Kernott [2011], nor elsewhere in that case or in Stack v Dowden [2007]. It was the more striking because Jones revisited the same territory with the objective of clarifying and settling the law.
- (2) By not dealing with the issue of detriment in Jones, the Supreme Court either omitted mentioning for completeness that it did not need to be proved in the case before them, or omitted to mention a crucial element of the relevant principles to be applied. The latter was less likely than the former. Detriment was not an essential element of establishing a constructive trust.
- (3) The conclusion was not invalidated by judicial observations to the effect that the analysis was essentially the same in joint names and sole name cases. It did not follow that the manner in which a constructive trust might be established, and the kind of evidence required, would be the same in a sole name and a joint names case. That was consistent with the principle that a constructive trust would be established by whatever evidence was necessary to show that it would be unconscionable for the party denying the equitable interest to do so. The issue was always ultimately one of unconscionability. There was no contradiction to the requirement for writing in s53(1)(b) of the Law of Property Act 1925. The question was how existence of the constructive trust was shown to bring the matter with s53(2).
- (4) In the domestic consumer context, an express agreement as to beneficial shares, provided it was not a unilateral oral declaration of trust making the putative beneficiary a mere volunteer, could itself supply the necessary detriment or, consistent with the formulation in Jones, satisfy the requirement of unconscionability without the need to establish separately that the beneficiary had acted in detrimental reliance or changed her position in reliance on the promise.
- (5) Although unnecessary in light of the finding on the need for detriment, the court considered whether Ms Hathway had sufficiently acted to her detriment and/or changed her position in reliance on the agreement. The factual findings criticised by both parties were soundly based and the appellate court would not be justified in interfering with any of them.
Continue reading "Hudson v Hathway [2022] WTLR 973"