Beneficial interests in property
A joint concern for couples
Nowadays, cohabitation is a popular choice for couples in preference to marriage and it is a trend which has increased dramatically in the last 40 years. It has been suggested that the number of cohabitants will outweigh married couples by 2021. It is a common misconception that a period of cohabitation gives couples the same rights and obligations in respect of property as have married couples. This is emphatically not the case at the moment.
Thus, the law has yet to catch up with what is undeniably a key social change and consequently there is a strong argument for reform. However, there are signs that the law is gradually evolving and this is evidenced by the recent case of Oxley v. Hiscock [2004] EWCA Civ 546.
The case re-examined the operation of trust law in deciding the proportion in which the beneficial interests of a property should be held where there is no express declaration of trust. O and H had bought a house together largely with H's money and had used the sale proceeds to buy a new house. The balance of the purchase price was made up by a mortgage of £30,000 and H's savings. The new house was transferred into H's sole name, purportedly to prevent O's ex-husband having any claim to it. Both H and O lived in the property with O's children until the relationship broke down. The house was then sold and the question arose as to how the sale proceeds were to be held.
There had been no express agreement on this question. Consequently, the judge at first instance applied a constructive trust approach and decided that an agreement could be inferred from the entire course of the parties' dealings and that O had acted to her detriment in reliance on that inferred agreement. The judge then had to decide what the nature of that agreement would have been had the parties discussed it. The judge was of the view that they would have decided to share the sale proceeds equally. This decision was deemed to be fair on the basis of parties' conduct but seemed an unfair outcome in light of H's substantial contribution to the purchase price.
As a result, H appealed and the Court of Appeal took the opportunity to clarify the legal thought processes required in such situations. The court agreed that the trial judge was right initially to consider whether there was evidence from which to infer a common intention. However, this should be inferred from such events as a discussion at the time of the purchase or from a financial contribution to the purchase price. In the event that there was no evidence of a common intention, the judge should not have attempted to infer what the nature of any agreement could have been. Indeed, this latter attempt was contrary to the principles of trust law by determining the value of a trust retrospectively.
Rather, she should have pursued a proprietary estoppel approach and should therefore have considered how the conduct by one party had led the other to believe that there was an agreement and how the other had acted to his detriment in reliance on that belief. This was preferable to attempting to infer an agreement. Rather than continue on to infer what any agreement could have been, it was sufficient to infer that the parties intended the issue of how the sale proceeds were to be held to be dealt with later. The issue should then have been decided by considering what was a fair share of the proceeds having regard to the whole course of dealing between the parties in relation to the property. This ties in with the proprietary estoppel approach which decides such issues by considering the expectations of the claimant.
Hence, it was artificial to attempt to infer what the parties would have agreed and was for the court to decide what was fair by considering what arrangements had actually been made between the parties with regard to mortgage contributions, council tax, utilities, repairs, insurance and housekeeping. As O had paid something towards the purchase price and had paid one-half of the mortgage, she was awarded 40% of the sale proceeds, while H received 60% as a reflection of his greater overall contribution. It was acceptable to make such retrospective decisions under the doctrine of proprietary estoppel.
There is no suggestion that this case offers a radical change to the law in this area, but it does clearly demonstrate a gradual shift away from the restrictive strait-jacket of trust law towards a more common sense approach. It shows the court's willingness to appreciate the overall circumstances in which a property is bought by an unmarried couple and to ensure that one party is not unjustly prejudiced by the strict principles of constructive trust law. It represents a move away from artificially deciding what the parties would have agreed (which can often lead to unfair decisions) and shifts the focus onto what concrete arrangements or actions were carried out as the starting point for resolving the issue of beneficial ownership.
It is therefore especially good news for unmarried women who find themselves in a situation where they are not registered proprietors of the property and where there has been no discussion of what will happen when the relationship breaks down, despite their having made some financial contribution to the home. Despite this positive move, it is still worth pointing out that the complex issues involved can be avoided by parties taking proper legal advice and addressing the issue of their intention with regard to beneficial ownership before buying a property.
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