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Modern Land Law

follows the law’ by using the broad constructive trust to establish a share larger than 50 per cent. Although Baroness Hale in Stack says this can occur only in exceptional cases, the wide range of factors listed in paragraph 69 of her judgment effectively give courts the discretion as to whether to apply the presumption or quantify the parties’ interests differently. Thus in Fowler and Ritchie (a mother and son case161), the equitable shares differed from the legal title, but in Segal v. Pasram, the court was happy to follow the ‘normal’ rule.

The significance of this issue is clear enough. In many cases where land is conveyed to two or more people as joint tenants at law, there is a failure to declare the equitable interest. We would expect ‘equity to follow the law’, with the result that the parties are joint tenants in equity, or 50/50 tenants in common after severance. If it is now possible for one party to claim a greater share on the basis of an expanded constructive trust doctrine – albeit in ‘exceptional’ cases – then there is considerable uncertainty for the parties themselves and any third party (such as a mortgagee) dealing with them.162

4.10.9Resulting trusts, constructive trusts and proprietary estoppel

Although much academic effort has been expended in seeking to differentiate between the concepts of resulting trust, constructive trust and proprietary estoppel (see Chapter 9), this has not been a real problem in the courts – it has been largely ignored until recently. All three concepts have in common the fact that they are a way for a person to obtain a proprietary interest in another’s land without the normally required written instrument – they are concerned with the informal creation of property rights. In addition, recent case law with regard to quantification of share reveals a potential difference between pure resulting trusts and constructive trusts, as discussed above. However, given that contributions to the purchase price of property can generate an interest under either a resulting trust (quantified proportionately) or a constructive trust (quantified fairly on the basis of the parties’ entire course of dealings) it is probable that most cases will fall under the rubric of the latter. The exception will be, of course, where the claimant has paid the greater part of the purchase price and is using the resulting trust to

161See also the pre-Stack case, Abbey National v. Stringer, where the mother was awarded 100 per cent of the equity, despite being a legal co-owner with her son. The reasoning in this case is almost non-existent.

162In Stringer, Abbey National’s mortgage was effectively destroyed by the finding of 100 per cent equity for Mrs Stringer – a fact they simply could never have discovered before lending money. They relied – perfectly properly – on the jointly held legal title and were hijacked by the court’s decision.

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establish a large share of the equity in direct proportion to such payments – as in Carlton v Goodman where the person making the payments obtained 100 per cent of the equity. It may therefore come to pass that, save for the odd exceptional case concerning non-residential property, resulting trusts cease to have an effect in the law of co-ownership but return instead to their more limited role in relation to the non-fulfilment of express trusts and similar scenarios. Oxley v. Hiscock and Stack v. Dowden certainly push the law that way, despite the resistance in Laskar v. Laskar.

Oxley v. Hiscock also brought to a head a similar question: how do constructive trusts and proprietary estoppel fit together? The latter is also rooted in unconscionable conduct consequent on an assurance, reliance and detriment and even Lord Bridge in Lloyds Bank v. Rosset recognised the overlap between the concepts.163 In Oxley, Chadwick LJ is even more robust, saying that ‘the time has come to accept that there is no difference in outcome, in cases of this nature, whether the true analysis lies in constructive trust or in proprietary estoppel’. It is important to realise, however, that he was not saying that the concepts are the same; rather that the outcome could be the same whichever concept is used. This is a small point, but worth making as many would argue that the concepts are not the same. In fact, in Stack v. Dowden, Lord Walker acknowledged that the concepts were different. After noting that he had thought previously that the concepts could be assimilated,164 he continued, ‘I have to say that I am now rather less enthusiastic about the notion that proprietary estoppel and “common interest” constructive trusts can or should be completely assimilated.’165 This is a view shared by many. A brief assessment of the potential differences between constructive trusts and proprietary estoppel is given at the end of Chapter 9.

4.10.10 Statutory powers

In those cases where the claimant is unable to prove a constructive trust, resulting trust or estoppel, there will be no interest unless he or she can rely a statutory jurisdiction. If the couple are married or in civil partnership, and then divorce or separate, a ‘property adjustment order’ can be made in the

163Per Lord Bridge: ‘Once a finding [of common intention] is made it will only be necessary for the partner asserting the claim to a beneficial interest against the partner entitled to the legal estate to show that he or she acted to his or her detriment or altered his or her position in reliance on the agreement in order to give rise to the constructive trust or proprietary estoppel’.

164Indeed, he has a good claim to be the architect of that view – see Yaxley v. Gotts (2000).

165Stack, judgment paragraph 37.

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family court under the Matrimonial Causes Act 1973 and the Civil Partnership Act 2004, but there is no equivalent power if the disputants are unmarried, not civil partners or are just friends or in some other family relationship. Finally, we should also note that the court has a power under section 37 of the Matrimonial Proceedings and Property Act 1970 to award a beneficial interest consequent upon spousal improvements to property. This is a fairly limited power, restricted by definition to married couples and civil partners. It appears that the value of the interest awarded must be commensurate with (i.e. restricted to) the value added to the property by way of the improvement.

The apparently limited circumstances in which a non-owner could claim a proprietary (ownership) interest in another’s property under Rosset gave rise to much criticism. It seemed unfair that, say, a long-term emotional partner should be unable to claim a share in the family home simply because she could not prove the existence of an express promise or a payment towards the purchase price. Similarly, it appeared as if the law was penalising the stable couple who made a certain kind of life choice. These criticisms have now disappeared as a result of the widening of the reach of constructive trusts in Stack v. Dowden. In their place, we now have another set of criticisms. After Stack, is the law too uncertain? When will a claimant be successful and what factors may count towards proving the common intention? How can third parties such as lenders discover who owns the equitable interest, especially if they cannot even rely on the certainty of a jointly held legal title? Finally, is it really appropriate for judges to be inventing a discretionarybased jurisdiction to do what is fair when, perhaps, these types of judgments about society and families should be left to Parliament?

Above all, however, whether we favour the narrow view of Rosset or the new broad approach of Stack, there is a need to keep things in perspective. First, as mentioned above, if the couple are married or in civil partnership, the court already has a discretion to readjust property rights on divorce or judicial separation.166 There is no need to rely at all on the rules of implied trusts. Second, there are relatively few reported cases where a claimant in a normal domestic context actually failed to secure an interest under the Rosset rules (Rosset was one) and this is irrespective of whether the couple were married or unmarried, heterosexual or homosexual. The courts were adept at finding some kind of payment to the purchase price and even keener to identify some kind of express agreement about ownership. In this sense, it is not

166We should also recognise that joint ownership of the legal and equitable title is now much more common and is the usual default position when a couple buy a property as their home.

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clear whether Stack v. Dowden really will result in more claimants being successful, rather than the same number of claimants being successful for a different reason. Third, it is now standard practice for persons buying land jointly to indicate the nature and extent of their equitable interest in the property on the Land Registry Transfer Form. This amounts to an express declaration of beneficial entitlement and forestalls any claim of resulting or constructive trust. Fourth, the Law Commission have completed a thorough analysis of the rights of cohabiting couples and their report – Cohabitation: The Financial Consequences of Relationship Breakdown167 – recommends the creation of a statutory, structured discretion whereby courts would have the power to alter the property rights of certain types of unmarried couples who had lived together as a couple. Not all unmarried couples would qualify and there would be safeguards to ensure that the scheme did not catch merely casual relationships. At present, the government has indicated that they do not wish to pursue this proposal, but the recommendations remain the focus of reform in this area. Fifth, while it is true that the courts take a tougher line with property acquired for business purposes – for example, by relying more on a resulting trust – we might argue that this is as it should be. After all, the business partners could have deliberately conveyed the land into joint names. Only rarely might there be the kind of emotional pressures and concerns that require a more generous intervention in the context of family property. Finally, we should always remember that ownership of family property is often of great concern to third parties – banks, lending institutions, creditors, and so on. As we have seen in cases like William and Glyn’s Bank v. Boland (1981) and cases following it, a simple way to keep a mortgagee out of possession of the family home after non-payment of the mortgage is to prove that the non-legal owner has acquired an equitable interest before the mortgage which then overrides the bank’s interest. Sometimes, some cases feel as if the alleged co-owners have manufactured an interest in favour of the non-legal owner precisely (as it turned out) to defeat the claims of a creditor. As Fox LJ said in Midland Bank v. Dobson (1985), ‘Assertions made by a husband and wife as to a common intention formed 30 years ago regarding joint ownership, of which there is no contemporary evidence and which happens to accommodate their current need to defeat the claims of a creditor, must be received by the courts with caution’.

4.11 Severance

As we saw at the outset of this chapter, co-ownership of the equitable interest in property may be either as a joint tenancy or a tenancy in common.

167 Report No. 307 of 31 July 2007.

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A tenancy in common is clearly an ‘undivided share’ in land, with each co-owner being able to identify their portion of ownership (e.g. one-quarter, one-fifth, etc.), even though there is unity of possession of the whole. Conversely, with a joint tenancy, no co-owner has a defined share, but each is the owner of the whole and is subject to the right of survivorship. In practical terms, this means that a joint tenant has no individual share in the equitable interest in the land which he can sell, give away or leave by will. For some, this may be perfectly acceptable (e.g. married couples), but for others it means that they or their families are denied the opportunity to liquidate the capital value of the land (e.g. business partners). In order to meet these difficulties, any joint tenant may ‘sever’ their equitable joint tenancy, and, thereby, turn it into a tenancy in common. Of course, because of the 1925 reforms, it is only possible to sever an equitable joint tenancy (not that of the legal title), because tenancies in common may exist only in equity. That said, there are several methods by which a joint tenant may sever their interest, and thereby constitute themselves a tenant in common in equity. One is statutory, and three arise under common law, as codified in Williams v. Hensman (1861).168 After severance has occurred, if there were only two joint tenants, necessarily, both are now tenants in common, but if there were three or more joint tenants, the others can remain as joint tenants between themselves. So, if land is held by A, B, C and D as legal and equitable joint tenants, and then C and D carry out an act of severance, legal title remains held by A, B, C and D as joint tenants (it is not severable), but the equitable title now exists as a joint tenancy between A and B, with C and D as tenants in common.

4.11.1Statutory notice: section 36(2) of the Law of Property Act 1925

Under section 36(2) of the LPA 1925, any equitable joint tenant may give notice in writing to the other joint tenants of his intention to sever the joint tenancy. The giving of such notice results in a severance of that co-owner’s interest, and they become a tenant in common.169 The severance is entirely unilateral and does not require the agreement or consent of the other joint tenants. Indeed, so long as there is evidence that the written notice was sent (e.g. by registered post), it seems that it does not have to be received by the other joint tenants to be effective to sever.170 So, in Kinch v. Bullard (1998),

168 Severance may also result from an unlawful killing of one equitable joint-tenant by the other. In such cases, it is a matter of policy that the killer cannot claim the right of survivorship when he is the reason for the death of his co-owner.

169 Burgess v Rawnsley (1975).

170 Re 88 Berkeley Road (1971).

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a notice was sent by one joint tenant to the other and arrived at the receiver’s address. He never saw it, having suffered a heart attack, and the notice was destroyed by the sender in the hope that she benefit from the right of survivorship under the alleged joint tenancy she had sought to end. Not surprisingly, the court held that the written notice was served effectively by delivery171 – even if it had not been seen – and that, of course, it could not be withdrawn after service. Severance had occurred and the wife did not succeed to the entire interest under survivorship. Moreover, it is also clear that the notice may take many forms. For example, in Re Draper’s Conveyance (1969), a summons claiming sale of the co-owned property was held to constitute written notice of severance under section 36(2). Unusually, however, it also seems true that a mere oral agreement not to sever can prevent any later act of severance by written notice taking effect (although whether this applies also to the William v. Hensman methods is uncertain). In White v. White (2001), the property had been conveyed expressly to three people as equitable joint tenants and there had been an oral agreement not to sever. In such circumstances, a clear attempted severance by written notice under section 36(2) was held ineffective on the ground that the oral agreement supported the original declaration of the owners as joint tenants. Of course, the whole point of severance is that it can destroy an expressly declared equitable joint tenancy, so perhaps the case is best explained on the basis that the person wishing to sever was estopped from so doing by their conduct (the oral agreement) because it would have been unconscionable in the circumstances to permit that severance.

There is one possible limitation to statutory severance, and this emerges from the words of section 36(2) itself. The section talks of severance by written notice where land ‘is vested in joint tenants beneficially’. This seems to encompass only those situations where the legal and equitable joint tenants are the same people, and not where, for example, A and B hold on trust for A, B, C and D as joint tenants. Fortunately, this limited interpretation of section 36(2) has not been adopted, and statutory severance is presumed to be available for all joint tenants, whether they are also legal owners or not.172

4.11.2 An act operating on his own share

In addition to statutory severance, the common law recognises three other ways in which it is possible to sever the joint tenancy. These were explained

171Section 196(4) of the LPA provides that service is effective if sent by registered post. This letter was sent by ordinary first class post, but the same result was achieved by analogy.

172Burgess v. Rawnsley (1975).

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in the case of Williams v. Hensman (1861), and this case is now regarded as authority for the ‘methods’ outlined here and below. These three methods may still be used, although it will be appreciated that statutory severance by service of a written notice is by far the most reliable and easily proved.

The first Williams v. Hensman (1861) method of severance is ‘by an act operating on one’s own share’. This occurs when one equitable co-owner seeks to deal with ‘their share’ of the land, so manifesting an intention no longer to be part of the joint tenancy. The very action of dealing with one’s own share thereby severs that share. Typical examples are where the equitable owner sells their share to a third party, mortgages it in favour of a bank, or becomes bankrupt, so that their property becomes vested in the ‘trustee in bankruptcy’.173 Likewise, attempting to deal with the legal title by forging the consent of the other legal owners to some purported dealing with that title in fact operates to transfer any equitable interest that that person might have, so also effecting a severance. So, an attempted mortgage by one of two legal owners, who forges the signature of the other legal owner, cannot actually effect a mortgage of the legal title, but it can effect a mortgage of the fraudster’s equitable interest, thereby also severing any joint tenancy.174 Importantly, however, leaving one’s ‘share’ in a subsisting joint tenancy by will can never constitute severance because the right of survivorship operates immediately on death and takes precedence over testamentary dispositions.175

Finally, for this method of severance to be effective, the ‘act’ operating on the joint tenant’s share must be valid and enforceable, unlike the case of ‘mutual agreement’ considered below. This means that the ‘act’ which effects the severance must be one that is valid under the general law according to the formality rules for that type of disposition of an interest in land. Therefore, given that nearly all dispositions of an interest in land must be in writing (section 2 of the Law of Property (Miscellaneous Provisions) Act 1989), the ‘act of severance’ by way of mortgage, sale or lease (if over three years) must be in writing and otherwise enforceable if it is to sever. In other words, this method requires a legally enforceable ‘act’ operating on one’s own share, not an unenforceable intention to sever. The result of such a severance is, of course, that the ‘share’ of the person severing passes to the person with whom he has validly contracted; for example, to the mortgagee or purchaser of the share. Necessarily, this must cause a tenancy in common with the remaining co-owners.

173For example, Re Dennis (1992).

174Section 63 of the LPA 1925 and Banker’s Trust v. Namdar (1997).

175Gould v. Kemp (1834).

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4.11.3 Where joint tenants agree to sever by ‘mutual agreement’

The second Williams v. Hensman (1861) method is that, if two or more joint tenants agree among themselves to terminate the joint tenancy, those agreeing are taken to have severed the joint tenancy and constituted themselves as tenants in common. Most importantly, this agreement need not take any specific form, and it need not be in writing. It need not be enforceable under the general law and may be inferred from the surrounding circumstances. The point is simply that the fact of agreement severs the joint tenancy because it indicates an intention to destroy the joint tenancy there is no need for the agreement to be acted on to effect a severance.176 For example, severance by this method may occur when the co-owners agree on the precise distribution of property on the breakdown of their relationship.177 However, the agreement must contemplate an intention to sever the joint tenancy (i.e. the ownership), and not merely amount to an agreement as to the use of the property.178 It must be an agreement about ownership, not about use.

4.11.4 By mutual conduct

Mutual conduct is a flexible and shifting category that is intended to express the idea that severance may occur because the joint tenants, by their conduct in relation to each other, have demonstrated that the joint tenancy is terminated (Williams v. Hensman (1861)). Although very similar to mutual agreement, the point here is that the parties have not agreed to sever – formally or informally – but have so acted that it is clear that the continuance of a joint tenancy would be inconsistent with their intentions. There are many possible examples of mutual conduct, but the most common include physical partition of the land so that each co-owner is barred from the other’s portion, the writing of mutual wills and negotiations between the joint tenants as to disposal of the property. The last of these is somewhat controversial, for it is difficult to see why a failed severance under mutual agreement (e.g. because the co-owners disagree about the value of the land) can nevertheless amount to a successful severance under mutual conduct because of severance negotiations. This, however, is the clear inference of Lord Denning’s judgment in Burgess v Rawnsley. Essentially, the matter will turn on the facts of each case and whether the court is prepared, as a matter of policy, to extend the circumstances in which severance is possible. The degree of hardship caused by the operation of the right of survivorship might well be relevant in that calculation, as the courts favour severance if this preserves the ‘share’ of a deceased co-owner for their family.

176Hunter v. Babbage [1994] EGCS 8.

177Re McKee (1975).

178Nielson-Jones v. Fedden (1975).

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SUMMARY OF CHAPTER 4

CO-OWNERSHIP

The nature and types of concurrent co-ownership

‘Concurrent co-ownership’ of property describes the simultaneous enjoyment of land by two or more persons. Since 1 January 1926, co-ownership of property will either be by way of a joint tenancy or a tenancy in common. In a joint tenancy, each co-owner is treated as being entitled to the whole of the land and there are no distinct ‘shares’. It is characterised by the right of survivorship and the four unities (unity of possession, interest, title and time (PITT)). A tenancy in common exists when two or more people own an ‘undivided share in land’, giving unity of possession but where no other unities are necessary and where there is no right of survivorship.

The effect of the Law of Property Act 1925 and the Trusts of Land and Appointment of Trustees Act 1996

Before 1926, it was possible for a joint tenancy and a tenancy in common to exist in both the legal and equitable estate in the land. However, after 1925, it is now impossible to create a tenancy in common at law. The legal owners of co-owned property must be joint tenants of the legal estate. They will hold the land as ‘trustees of land’ for the persons entitled in equity (sections 34 and 36 of the LPA 1925; sections 4 and 5 of TOLATA 1996). Co-ownership of the equitable interest may be by way of either a joint tenancy or a tenancy in common.

The equitable interest: joint tenancy or tenancy in common?

First, if the unities of interest, title or time are absent, a joint tenancy in equity cannot exist. Second, if the original conveyance to the co-owners stipulates that they are ‘joint tenants’ or ‘tenants in common’ of the beneficial or equitable interest, this is normally conclusive as to the nature of their co-ownership in equity. Third, if ‘words of severance’ are used, then a tenancy in common will exist in equity. Fourth, failing any of the above, ‘equity follows the law’ and there will be a joint tenancy of the equitable interest (as there must be of the legal) unless the co-owners are business partners, co-mortgagees or where they as purchasers have provided the purchase money in unequal shares.

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