DEFINING DETRIMENT

01/06/2009

What detriment will suffice to give rise to an express common intention constructive trust? Luke Barnes considers that the courts' evolving approach.

(I) The agreement, arrangement or understanding - an objective test

In this article I am concerned only with constructive trusts based on the parties' express common intention. The circumstances in which such trusts arise were described by Lord Bridge in Lloyds Bank v Rosset [1991] A.C. 107, at (132 E-G):

The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the parties, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner holding the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

It is important to note that this category of trust is not limited to cases where the parties reach an express agreement. Indeed, in Rosset Lord Bridge referred to Eves v Eves [1975] 1WLR 1339 and Grant v Edwards [1986] Ch 638 (both "excuse" cases) as outstanding examples of cases in this category. What was actually agreed is less important than the substance of the discussion:

(133C) In both these cases ... the female partner had been led by the male partner to believe ... that the property would belong to them jointly. In Eves [M] told [F] that the only reason why the property was to be acquired in his name alone was because she was under 21 and that, but for her age, he would have had the house put into their joint names. ... Similarly in Grant [F] was told by [M] the only reason for not acquiring the property in joint names was because .... this might [prejudice] her divorce proceedings.

Lord Bridge went on to approve these dicta of Nourse LJ, who said in Grant v Edwards at 649A:

Just as in Eves v Eves ... these facts appear to me to raise a clear inference that there was an understanding between [the parties], or a common intention, that the plaintiff was to have some sort of proprietary interest in the house; otherwise no excuse for not putting her name onto the title would have been needed.

It is submitted that such an approach is clearly based on an objective assessment of intention, such as was described by Lord Diplock in Gissing v Gissing [1971] AC 886, at 906B-C:

the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.

That passage from Lord Diplock's speech was cited with approval recently in Fowler v Barron [2008] EWCA Civ 377, in respect of "the parties' shared intentions". It was said in Fowler (at [36]) that any secret intention of Mr Barron was not evidence of the parties' shared intention.

When the court has identified an agreement, arrangement or understanding, it will turn to consider whether the claimant has "acted to his or her detriment or significantly altered his or her position" in reliance on the common intention. Where the claimant so relies, what acts or omissions will be sufficient to give rise to a constructive trust ?

(II) Detriment or significant change of position - the wide approach

The judgements of Nourse LJ and Sir Nicolas Browne-Wilkinson V-C in Grant v Edwards (above) are important. Indeed, Grant v Edwards was at the forefront of counsel's arguments in Lloyds Bank v Rosset.

Per Nourse LJ, at 648G:

It must be conduct on which the [claimant] could not reasonably have been expected to embark unless she was to have an interest in the house.

His lordship ruled (at 648F) that, just as that criterion was satisfied by the claimant wielding a 14-lb sledge hammer in Eves v Eves [1975] 1 WLR 1338, in Grant v Edwards it was satisfied by the:

inevitable inference that the very substantial contribution which the [claimant] made out of her earnings after August 1972 to the housekeeping and to the feeding and to the bringing up of the children enabled the defendant to keep down the instalments payable under both mortgages out his own income and, moreover, that he could not have done that if he had had to bear the whole of the other expenses as well.

Per Sir Nicolas Browne-Wilkinson V-C, at 656F-H and 657A-B:

656 F-H: I suggest that in other cases of this kind, useful guidance may in the future be obtained from the principles underlying the law of proprietary estoppel which in my judgement are closely akin to those laid down in Gissing v Gissing [1971] AC 886. In both, the claimant must to the knowledge of the legal owner have acted in the belief that the claimant has or will obtain an interest in the property. In both, the claimant must have acted to his or her detriment in reliance on such belief. In both, equity acts on the conscience of the legal owner to prevent him from acting in an unconscionable manner by defeating the common intention. The two principles have been developed separately without cross-fertilisation between them: but they rest on the same foundations and have on all other matters reached the same conclusions.

657 A-B: In many cases of the present sort, it is impossible to say whether or not the claimant would have done the acts relied on as a detriment even if she thought she had no interest in the house. Setting up house together, having a baby, making payments to general housekeeping expenses (not strictly necessary to enable the mortgage to be paid) may all be referable to the mutual love and affection of the parties and not specifically referable to the claimant's belief that she has an interest in the house. As at present advised, once it has been shown that there was a common intention that the claimant should have an interest in the house, any act done by her to her detriment relating to the joint lives of the parties [emphasis added] is, in my judgment, sufficient detriment to qualify. The acts do not have to be inherently referable to the house.

Sir Nicolas Browne-Wilkinson decided the case on the basis of the claimant's indirect financial contributions. Nevertheless, it is submitted that recent authorities suggest that his promotion of a wide-ranging approach to the issue of detriment has proved more influential to the law's development than Nourse LJ's more restrictive one.

In Gillett v Holt [2001] Ch 210, CA, (a proprietary estoppel case) Robert Walker LJ considered the issue of detriment in the context of a claimant, who had spent his working life as farm manager for the defendant, encouraged by repeated promises and assurances over the years. In a famous passage at 232D he ruled (with the approval of his fellows):

The overwhelming weight of authority shows that detriment is required. But the authorities also show that it is not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad enquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.

In Chan Pui Chun v Leung Kam Ho [2002] EWCA Civ 1075, [2003] 1 FLR 47, the Court of Appeal unanimously upheld the judge's finding that a constructive trust had arisen in favour of the claimant over a property in which the parties resided together. The Court was referred inter alia to Grant v Edwards. On the one hand, the Court rejected (at [93]) the respondent claimant's submission that detriment is not a requirement of a constructive trust where, as in that case, there is an express (albeit oral) agreement between the parties that the beneficial interest would be shared.

On the other hand, the Court rejected the appellant's case that the acts carried out by Miss Chan did not amount to detriment. For example, she assisted Mr Leung with two business projects in Hong Kong (mainly during a 2 year period when he was in prison), which were complete by March 1995. She did not pursue her political career in Hong Kong. Having left her job in Hong Kong, in May 1995 Miss Chan came to England to look for a suitable house for the parties to live in. As the Court put it (at [87], per Jonathan Parker LJ):

It was essentially a matter for the judge to evaluate whether the acts in question amounted to an alteration of Miss Chan's position to her detriment in reliance on Mr Leung's promises.

The Court cited with approval the passage of Sir Nicolas Browne-Wilkinson V-C's speech in Grant v Edwards at 656F-H), (the first of two passages from his speech set out above) to the effect that useful guidance may in future be obtained from the principles underlying the law of proprietary estoppel, before continuing (at [96]):

There was a continuous and developing relationship between [the parties] from 1993 onwards, on both a personal and business level. The judge was ... entitled to have regard to the entirety of that relationship, and to the promises made by Mr Leung in the course of it, in determining whether Miss Chan had altered her position to her detriment in relation to the promise of an interest in the house in which they would live together.

In Lewin on Trusts, 18th Ed, 2008, paragraph 9-70, the authors consider the issue of detriment, in relation to a trust of land arising from a common intention. They write in part:

The detriment need not necessarily consist of expenditure of money or some other quantifiable financial detriment, and it suffices that the claimant has changed his position in some substantial way in reliance on the common intention so that repudiation of the common intention by the defendant would be unconscionable*.

*note reads: Compare Gillett v Holt [2001] Ch 210 (proprietary estoppel)

In Levi v Levi Ch D (Geoffrey Vos QC, LTL 3/4/2008), it was held that the detriment required for the establishment of a constructive trust did not need to be great where there was an express agreement. It was agreed (in September 1995) the sister would lend the brother about £10,000 to fund the deposit payable on the property, at interest of 5% pa, the loan to be repaid on sale. The sister would have a 50% interest in the net proceeds of sale, after repayment of mortgage and loan. The brother would pay for the property's maintenance, rates and utility bills. The property was purchased in October 1995 for £41,250 and sold for £385,000 in 2006.

The judge rejected the submission that a loan made at an uncommercially low rate of interest could not support such a constructive trust, finding it was obvious it could. He ruled that the question of detriment must turn on the facts of every case [emphasis added]. Ironically, he found that S had varied her entitlement in November 1995, by agreeing to give up her interest in return for immediate repayment. It made no difference that B did not repay her immediately – the bargain had been varied, after which time none of the requirements for a constructive trust in S's favour were made out.

In Parris v Williams [2008] EWCA Civ 1147, the Recorder found at first instance that there was an informal agreement between the parties that P would purchase two adjoining flats, on the basis that they would each have one flat in due course. There was no bargain defining the input to be provided by W.

In the event, W did not contribute financially to the purchase of either flat. P contributed something over £9,000 to the original purchases, £750 to construct a party wall, the cost of an electricity meter, (probably) his half share of a tradesman's bill for £1,118 and his share of maintenance charges. Mortgage instalments and other outgoings were paid from rental income (although the Court received an imprecise picture). W's contributions were two days' painting work, his share of the tradesman's bill and several payments to reimburse P in respect of maintenance charges. The total of W's financial contributions was over £2,000.

The Court of Appeal held firmly that in Lloyds Bank v Rosset (above) Lord Bridge made it plain that, where the evidence established an agreement, arrangement or understanding to share beneficially, it was not necessary to show that the arrangement / agreement involved something in the nature of a bargain, and that the claimant had performed his part of it. The question was whether the claimant had "acted to his or her detriment or significantly altered his or her position in reliance on the agreement ..." .

The Court recognised at [47]:

In any given case the claimed acts of reliance may be too trifling to enable the establishment of the claimed constructive trust: Rosset shows that. Whether in any particular case the claimed acts of detriment are or are not sufficient is essentially a matter of judgment for the judge concerned to hear the matter. That will involve a consideration of all the circumstances [emphasis added].

In Henriques v Advani CHY07464, heard by HHJ Bailey at Central London County Court on 8 – 15 September 2008, the unentitled claimant (for whom the author appeared) sought a declaration as to her beneficial ownership of the property in question, relying on an express common intention constructive trust and proprietary estoppel.

The parties began to cohabit in the property in 1973 or 1974. Their son was born in August 1974. In July 1984 H obtained a non-molestation injunction against A. They separated later in 1984, A leaving the property. In December 1984 H registered a caution on the Land Register asserting an interest in the property. In early 1985 the parties reconciled and A persuaded H to lift the injunction and withdraw the caution. In October 1986 the parties' daughter was born. In 1988 A left the property and the parties ceased to cohabit. H raised the children at the property, and was still living there at the date of trial.

The judge expressed himself to be entirely confident that H had an assurance and understanding that she was the joint owner of the property. She was led by A to believe that she had an equal beneficial interest. The assurance was given by A and the understanding reached by the time the parties were cohabiting and their son had been born. The assurance and understanding were repeated when the parties reconciled and the claimant was persuaded firstly to lift the injunction and then to withdraw the caution.

Basing her case on an express common intention constructive trust and / or proprietary estoppel, the Claimant asserted the following detrimental acts by her:

(a) Endured a violent and abusive relationship from 1976 – 1984 and 1985 - 1988, believing that at least she had an interest in the Property by way of safeguard
(b) Raised two children
(c) Did not pursue paid employment during the relationship and / or develop her career
(d) Did not pay National Insurance Contributions, leading to a reduction in her anticipated State pension
(e) Returned to live with the Defendant, although knowing him to be a violent man
(f) Had a second child with the Defendant
(g) Withdrew the caution from the Land Register protecting her interest in the Property
(h) Discharged the injunction forbidding the Defendant to assault or molest her
(i) Spent her entire inheritance [c. £13,000] on maintaining, repairing and improving the Property
(j) Performed domestic chores for the Defendant from 1988 until 2002.

The judge found inter alia that:
- A drank heavily and was violent to H during the cohabitation;
- did not want her to work (until 1986) and misled her that he would pay National Insurance contributions on her behalf;
- persuaded her to withdraw the injunction and the caution by his assurances regarding the property;
- H spent most if not all her inheritance on repair and maintenance to the property;
- her chores probably lasted only until 1989 or 1990.

The parties held equal beneficial interests in the property. The judge was fully satisfied that the requirement of detrimental reliance or change of position was made out both for the constructive trust claim and the proprietary estoppel claim.

He ruled that, in the context of that particular case:

(1) each of the 10 matters pleaded was capable of amounting to detriment or a change of position with the possible exception of the NI contributions for the period when H was in receipt of child benefit and, as A asserted, entitled to NI credits;

(2) each individual matter fell to be considered not just on its own but in conjunction with the other matters and the course of the whole history of the parties' relationship.

Conclusion - practice points

· An express common intention (as defined in Lloyds Bank v Rosset) is not limited to cases of express agreement

· In such cases, claimants are in a strong position to argue for a constructive trust based, at least in part, on wide, relationship-linked factors which may very well be capable of amounting to the necessary detriment / altered position

Luke Barnes

This article was first published on www.familylawweek.co.uk in April 2009.The views expressed above do not constitute legal advice to be applied to the facts of any individual case and the author does not accept such responsibility.