Analysis
After Jayne Hathaway (JH) and Lee Hudson (LH) started a relationship in 1990, JH moved into LH’s home and became a joint owner. They had two sons together but did not marry. After selling their home, they bought another in joint names. In 2007 they sold that home and, with a mortgage, bought Picnic House in joint names. The mortgage payments were made from a joint bank account, into which the salaries of them both were paid. LH’s contributions towards the mortgage payments far exceeded those of JH.
In 2009, LH left JH and moved in with another woman, whom he later married. JH continued to live at Picnic House with their two sons. In 2011, an oil spill affected the property and made it difficult to sell; an environmental clean-up was required and the insurance claim lasted years.
From the end of November 2011, JH and LH began to negotiate, by email, the division of the collective assets that they had both accrued during the period in which they had been together. Those assets included Picnic House and its contents, cash and bank savings, shares and LH’s pension. In 2013, agreement was reached between them.
- (a) LH emailed JH on 31 July 2013, subscribing it ‘Lee’:
‘… the house, a bad asset which is preventing all of us [from]… moving on with our lives… You know what, I want none of the proceeds of that… Take it. Buy yourself somewhere you can afford to live…’
- (b) JH emailed LH on 12 August 2013:
‘So that we can move forward and get to a point of completely severing our financial connections, your suggestion, as I understand it, is you get sole ownership of your shares and pension, I get the equity from the house, the house contents, savings and income from endowments. Is that right? If so, then I will accept this and will do everything I can to get the house ready for sale as soon as the situation with the oil spill is resolved.’
- (c) LH emailed JH on 9 September 2013, subscribing it ‘Lee’:
‘Yes, that’s right…
Under this arrangement, I’ve no interest whatsoever in the house, so whilst I will continue to contribute, I won’t do so forever.’
In January 2015, LH stopped contributing to the mortgage and JH took over the payments. In October 2019, LH issued a Part 8 claim seeking an order under the Trusts of Land and Appointment of Trustees Act 1996 for the sale of Picnic House with equal division of the proceeds. JH agreed to the sale but claimed to be entitled to the whole of the proceeds, under a constructive trust based on a common intention and agreement, in reliance on which she had acted to her detriment.
At the trial, the judge found that the parties had reached an agreement, but it was accepted that the formalities for transferring legal title or an equitable interest, or for a declaration of trust, had not been complied with. He held that the enforcement of the agreement required that JH show that she had changed her position or otherwise relied on the agreement to her detriment. He perceived that she had given up potential claims against LH’s shares and pension and held that this did amount to relevant detrimental reliance.
On appeal ([2022] WTLR 973 QBD), Kerr J held that there was no requirement for JH to show that she had changed her position or acted to her detriment, following the decisions of the House of Lords in Stack v Dowden [2007], and the Supreme Court in Jones v Kernott [2011]. He went on to hold that, if he was wrong about that, the trial judge had been entitled to come to the conclusion that he had, it being a matter of evaluative judgement for him. LH appealed to the Court of Appeal.
Held:
LH’s appeal against the decision of Kerr J was dismissed.
(1) New point on appeal
One of the most important formalities that needed to be complied with in the creation and transfer of property rights in land was s53(1)(c) of the Law of Property Act 1925 (the ‘1925 Act’), which required dispositions of subsisting equitable interests to be made by signed writing. The application of s53(1)(c) had not been argued below and LH applied to amend the respondent’s notice to take the point on the appeal.
There was a spectrum of cases in which a new point might be taken. At one end there were cases in which there had been a full trial involving live evidence and cross-examination in the lower court and, had the new point been taken at the trial, it might have changed the course of the evidence given or required further factual inquiry. At the other end there were cases where the point sought to be taken on appeal was a pure point of law which could be run on the basis of the facts as found by the judge in the lower court. It was held that this case fell at the latter end, and the balance of justice came down in favour of allowing the new point to be taken.
Dicta of Haddon Cave LJ in Singh v Dass [2019], at paras 16 to 18, and of Snowden J in Notting Hill Finance Ltd v Sheikh [2019], applied.
(2) Signed writing
It was common ground that Picnic House was acquired by JH and LH as joint tenants at law and in equity. Although it was technically not possible for one joint tenant to assign their beneficial interest to another joint tenant, s36(2) of the 1925 Act preserved the right of a joint tenant to release their interest to the other. It was held that, by the emails of 31 July and 9 September 2013, LH had released his beneficial interest in Picnic House to JH:
- (a) The emails were sufficient in point of form, evincing a clear intention by LH immediately to divest himself of his interest in the property, by releasing it to JH.
- (b) The emails constituted a ‘disposition’ within s53(1)(c) of the 1925 Act and needed to satisfy the statutory formalities to be effective as a release of LH’s interest.
- (c) The emails were ‘writing’, as defined by Sch 1 to the Interpretation Act 1978.
- (d) The emails were signed for the purposes of s53(1)(c) of the 1925 Act:
- (i) the touchstone for determining what was a signature was an intention to authenticate the document;
- (ii) it was a general principle of statutory interpretation that the words of an Act of Parliament were to be interpreted so as to cover new technological developments consistent with the policy of the Act; the Act was to be regarded as ‘always speaking’; and
- (iii) where someone deliberately subscribed their name to an email, there was a substantial body of authority to the effect that that amounted to a signature.
This determination was sufficient to dispose of the appeal in JH’s favour. As the question of the need for detrimental reliance in the case of a common intention constructive trust had been fully argued, however, the court went on to discuss the issues involved.
(3) Detrimental reliance
The constructive trust was the creature of equity, which acted according to settled principles, where the application of the common law would produce an unconscionable result. Following a comprehensive review of the relevant authorities and textbooks, it was held that a party claiming a subsequent increase in their equitable share in property, as a result of a post-acquisition changed common intention, must show detrimental reliance on that changed common intention. To hold otherwise would directly contradict the requirements of s53(1)(c) of the 1925 Act, and equity could not repeal the statute. Stack v Dowden [2007] and Jones v Kernott [2011] explained.
The trial judge found as a fact that desistance from making claims that she had against LH’s assets was a sufficient detrimental reliance by JH on the changed common intention that LH’s interest in Picnic House be released to her. He found that JH might have had some sort of civil claim in the form of a constructive trust against LH’s shares, and that both LH and JH perceived that she might have had such a claim. There were no grounds upon which the court could interfere with such findings of fact. The trial judge had asked himself the correct question and his decision could not be said to have been perverse.
JUDGMENT LORD JUSTICE LEWISON: Introduction and issues [1] Kerr J, from whom this appeal is brought, framed the original issues accurately and concisely on the first appeal from HHJ Ralton: ‘This is an appeal in a case about equitable ownership of a family home purchased in joint names, initially with equal ownership rights, where the …Continue reading "Hudson v Hathway [2023] WTLR 207"