This case shows the difficulty of obtaining an interest in land under the doctrines of proprietary estoppel and constructive trust where the claimant is relying on having contributed manual labour and other assistance to the works on the property, but has not paid anything in support of the improvement works.
The Claimant brought a claim for a share in the proceeds of sale of the property known as Ballhill Farm, near Okehampton in Devon (‘the Farm’), based on the doctrines of constructive trust and/or proprietary estoppel.
The Claimant and Defendant (respectively ‘Jacqueline’ and ‘Matthew’) began a relationship in October 2004. By August 2006, the parties were living together in a rented property. In September 2006, they found the farm, and it was purchased in February 2007, in the sole name of Matthew and with the aid of a mortgage loan granted to Matthew alone. The relationship broke down in December 2011. Between those dates, various works of renovation and improvement were carried out to the Farm, first to the stables and other parts to be used as a livery business and later to the farmhouse itself.
Jacqueline moved out of the Farm in 2012. Matthew put the Farm on the market in 2012, but it did not sell. Thereafter, Matthew paid for certain works to be done to the Farm, notably rethatching the roof in 2016. He also made a planning application for change of use of a barn from agricultural to residential. He sold the Farm to a third party in 2017.
Jacqueline’s case was that, before the property was bought, there was an agreement between them as to their respective rights in relation to it, and that she relied to her detriment on that agreement by carrying out at least some of the works of renovation and improvement. Alternatively, an agreement to similar effect was, she argued, to be inferred from the course of dealing between them.
Matthew denied that there was any agreement, as alleged or at all, and also sought to minimise the extent to which Jacqueline carried out or contributed to the works of renovation.
The Judge (HHJ Matthews sitting as a Judge of the High Court) recited the law relating to common intention constructive trusts as follows:
- For a common intention constructive trust to arise, the parties must have had a common intention to share the property beneficially, upon the faith of which the claimant then acts in reliance to her detriment.
The common intention of the parties may either be expressed between them, as when they have a discussion and reach a conclusion, or it may be inferred from the whole course of conduct between them: Lloyds Bank v Rosset  1 AC 107, at 132. The court has no power to impute an agreement or common intention based on what it considers would have been fair or reasonable. When the court is considering what the parties actually intended, the court looks at the objective phenomena available for consideration, and not into their minds themselves.
- Once the common intention is established, the question is whether the conduct of the claimant in relying on the common intention to her detriment makes it unconscionable for the defendant to renege on that agreement (the Judge here quoted his own decision in Culliford v Thorpe  EWHC 426 (Ch), at ). Making physical improvements to the land which add significant value to the property can amount to such conduct (Stack v Dowden  2 AC 432 at , , ).
- If such detrimental reliance is established, then the next stage is the quantification of the claimant’s share. If that is established by the common intention itself, then there is no need for the court to attempt to quantify it. But in cases where it is clear that the parties intended that the claimant should have a share, but did not quantify it themselves, the court must do so. It does this by having regard to the whole course of conduct between the parties. But this time, because the parties have not reached an agreement, it is necessary for the court to consider what is fair (Jones v Kernott  1 AC 776, [51-52].
The Judge went on to set out the relevant principles in relation to the doctrine of proprietary estoppel as follows:
- The defendant landowner by his words or conduct makes an assurance to or creates an expectation in the claimant’s favour that the claimant will own an interest in property. It need not be the promise of a specific right or interest, as long as it is clear enough in all the circumstances: Thorner v Major  1 WLR 776, .
- Assuming that it is intended to be relied upon by the claimant, and it is relied upon, to her detriment, such that it becomes unconscionable for the defendant to resile from it, an equity is thereby raised against the defendant. The claimant is then entitled to an appropriate remedy to satisfy the equity. This may be an order for the defendant to perform the promise itself, or it may be something else, perhaps the payment of money by the defendant to the claimant.
In the present case, the primary claim made by the claimant was to a one-half share in the profit made on the sale of the Farm. Matthew had submitted that this was more likely to be satisfied through the doctrine of proprietary estoppel than through that of the common intention constructive trust. The court, however, was not sure that it made much difference given the common root from which both doctrines sprung. The court further held that a promise by a property owner to another of a share in the future profits of the sale of the property, if enforceable, amounts to the grant of an equitable interest in that property, even though it only crystallised on the sale of the property.
The court’s findings
The court found that sometime into 2006, the parties had decided to look for a property to live in together, either temporarily until a permanent property was found, or permanently, if they found the right property sooner.
Jacqueline had alleged that in September 2005, she and Matthew had spent a few days travelling around Devon and Cornwall looking at suitable areas and properties on the market. She alleged that one evening at the Rock Inn pub in Georgeham, Devon, they discussed their plans for purchasing a property, and agreed that they would be best-placed to take out a mortgage if the property and the mortgage were placed in Matthew’s sole name. They also agreed, according to Jacqueline, that they would purchase property requiring renovation work, which would be done or overseen by Jacqueline, and that upon the sale of the property they would split the profit or increase in value equally. Whilst these allegations were made in her Particulars of Claim, she added an allegation in her oral evidence that it was agreed between the parties at the pub that the property would belong to her in the event of Matthew’s death.
However, the Judge rejected Jacqueline’s account of the alleged conversation at the pub and held that there had been no such agreement.
The court held that Jacqueline did not contribute to the purchase and had no liability for the mortgage.
The survey for the mortgage indicated that there were significant works of repair that needed to be carried out, which were costed at at least £65,000. However, the report also said that the purchaser should prudently budget for £100,000 to be spent on the property. Matthew did this. He was also able to negotiate the price down by £20,000.
Although the Judge rejected Jacqueline’s evidence regarding the alleged conversation at the Rock Inn pub, Jacqueline argued that there was in any event a subsequent express understanding that the Farm would be their home for the rest of their lives and that it would provide for them in their retirement. She also said that Matthew told her that in the event of his death, the property would be hers. However, the court held that the decision to buy the Farm was not a joint decision and was Matthew’s decision alone. There was no agreement, as alleged by Jacqueline, that she was to contribute her business and building experience and her labour.
The court accepted that Jacqueline ultimately had some kind of expectation that she could remain at the Farm for as long as she wished, and that Matthew was aware of that expectation, although he considered that it was based on their remaining together, perhaps with children. However, this expectation did not spring from any assurance or other conduct of Matthew. Instead, it arose from Jacqueline’s belief that they were going to make a home out of the Farm and have children and live there happily ever after.
The court accepted that Jacqueline did significant work in order to make the livery yard at the Farm usable and indeed attractive to livery customers. In relation to a lot of this work, however, Jacqueline had professional assistance which was paid for by Matthew or his company. Jacqueline made a real contribution by her labour and supervision, but exaggerated the contribution she had made.
Jacqueline also later contributed labour to a holiday let the couple established in the annex to the farmhouse, and was also involved in improvements to the farmhouse itself. However, in relation to the annex, again a lot of the work was done by other professionals, and the costs were paid for by Matthew. As for the farmhouse, Jacqueline did move of the preparatory work in each of the rooms, involving removing wallpaper, damaged plaster or other rotten materials, drilling out concrete, stripping doorframes and filling holes. She was also heavily involved in the painting work which followed the renovations, which were carried out by professional building contractors paid for by Matthew. The court accepted overall that she made a significant contribution to the renovations.
Having found that there was no express agreement that the ownership of the Farm should be shared, and that Matthew did not make any assurance to Jacqueline that she would share in the ownership of the property, the court considered whether a common intention to share ownership could be inferred on the basis of the surrounding facts. It concluded that it could not, including for the following reasons:
• The property was purchased in Matthew’s sole name, with his own funds, with the aid of an interest-only loan to himself alone, with the interest rate fixed for five years and thereafter at a rate of 1.99% above the Bank of England repo rate. There was limited provision included for capital repayments. So at the end of the five year term, the loan rate would (probably) rise, and to avoid that the entire loan would either have to be refinanced, or the property would have to be sold so that the loan could be repaid.
• Jacqueline did not contribute to the purchase price.
• It was Matthew’s decision alone to purchase the property.
• Matthew renamed an existing company of which he was the sole director and in which he owned all the shares, and used it to carry on business activities at the Farm, including the livery stable. Jacqueline accepted that she had no beneficial ownership of the company.
• Matthew had set aside £100,000 for the renovations, and was not relying on Jacqueline’s abilities as a DIY enthusiast. He had seen her efforts at the house belonging to her parents which she had previously rented, and had not been impressed. He paid for everything.
• The court referred to James v Thomas  1 FLR 1598, , and Morris v Morris  EWCA Civ 287, in which it was held that the court should be cautious before finding that the activities of a wife or a cohabitant can only be explained on the footing that she believes that she was acquiring an interest in land.
The Judge further held that if he was wrong about his primary conclusion that no common intention/ assurance arose, in any event, Jacqueline had not relied to her detriment on any such common intention/ assurance. As James v Thomas and Morris v Morris showed, a person in the position of Jacqueline might well be expected to do the kind of things which she did because of the relationship which she enjoyed with Matthew, and the aspirations they had for the future, rather than in reliance on some alleged agreement between the parties.
Accordingly, the claim was dismissed.
(Author: William East)
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