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This months case summary comes from Lexis PSL.

Hudson v Hathaway [2022] EWCA Civ 1648

https://www.bailii.org/cgibin/format.cgi?doc=/ew/cases/EWCA/Civ/2022/1648.html&query=(2022)+AND+(EWCA)+AND+(Civ)+AND+(1648)  

Background

The claimant and defendant, who were in a long-term relationship but unmarried, purchased a family home in joint names, initially with equal ownership rights. The parties later separated. The claimant issued a claim under CPR 8 and the Trusts of Land and Appointment of Trustees Act 199 seeking an order for the sale of the family home with equal division of the proceeds. The defendant agreed that the house should be sold, but contended that she was entitled to the whole of the proceeds under a constructive trust following a common intention and agreement, in reliance on which she had acted to her detriment. The trial judge held that in order to enforce the agreement it was necessary for the defendant to show that she had changed her position or otherwise relied on the agreement to her detriment. He held that on the facts, the defendant was entitled to the whole of the beneficial interest in the house. On appeal, Kerr J disagreed with the trial judge on the question of whether it was necessary for the defendant to show that she had changed her position or had acted to her detriment. He held that any such requirement had been abrogated. If he was wrong about that, he went on to hold that the quality of the asserted change of position or detriment was a matter of evaluative judgment for the trial judge; and that the trial judge was entitled to come to the conclusion that he had. The claimant appealed.

Issues and decisions

(1) Whether s 53 (1) (c) of the Law of Property Act 1925 (LPA 1925) was satisfied.

The case was concerned with property rights in land, not with discretionary adjustments to property rights. The creation and transfer of property rights in land had to, as a general rule, comply with statutory formalities. Such formalities were necessary in order that property rights in land should be certain. The most important of such formalities were those laid down by LPA 1925 s 53(1) and applied to instruments which effected an immediate disposition of an interest (see [32] of the judgment).

For reasons which were difficult to understand, whether LPA 1925 s 53(1) was satisfied had not been argued either at trial or on the first appeal. The respondent’s notice would be accordingly amended to make the point of whether the claimant’s emails complied with the statutory formalities (see [33] of the judgment).

The emails were sufficient in point of form to amount to a release of the claimant’s equitable interest in the house. They evinced a clear intention to divest himself of that interest immediately, rather than a promise to do so in the future. The emails amounted to a ‘disposition’ for the purposes of s 53. But they also needed to satisfy the statutory formalities.

There was a substantial body of authority to the effect that deliberately subscribing one’s name to an email amounted to a signature. Therefore, the emails were signed for the purpose of s 53 LPA 1925. It followed, therefore, that by those emails, the claimant had released his beneficial interest in the property to the defendant (see [50], [54], [67], [68] of the judgment).

Strictly speaking, the conclusion on LPA 1925 s 53 was enough to dispose of the appeal. However, the main reason what the judge gave permission for the second appeal was to decide the point of principle: namely whether a constructive trust could arise simply as a matter of common intention without the need to show any detrimental reliance on that intention (see [69] of the judgment).

Rollerteam Ltd and another v Riley [2016] EWCA Civ 1291, [2017] Ch 109, [2017] 2 WLR 870, [2016] All ER (D) 94 (Dec) considered Notting Hill Finance Ltd v Sheikh [2019] EWCA Civ 1337, [2019] All ER (D) 158 (Jul), [2019] 4 WLR 146 considered New Zealand Meat Board v Paramount Export Ltd (in liquidation) 148 Sol Jo LB 971, [2004] All ER (D) 461 (Jul), [2004] UKPC 45 considered Grey v IRC [1960] AC 1, [1959] 3 All ER 603, 103 Sol Jo 896, [1959] TR 311, 38 ATC 313, [1959] 3 WLR 759 considered Newlon Housing Trust v Alsulaimen [1999] 1 AC 313, [1998] 4 All ER 1, [1998] 3 WLR 451, [1998] All ER (D) 383 considered R (on the application of Quintavalle) v Secretary of State for Health [2003] UKHL 13, [2003] 2 AC 687, [2003] 2 WLR 692, [2003] All ER (D) 178 (Mar) considered J Pereira Fernandes SA v Mehta [2006] 2 All ER 891, [2006] EWHC 813 (Ch), [2006] All ER (D) 264 (Apr), [2006] 1 All ER (Comm) 885 considered Neocleous and another v Rees [2019] EWHC 2462 (Ch), [2019] PLSCS 189, [2019] EGLR 49, [2020] 1 P & CR D19, [2019] All ER (D) 25 (Oct) considered

(2) Whether a party claiming a subsequent increase in her equitable share necessarily had to have acted to her detriment, or did a common intention alone suffice to alter the beneficial shares.

The statutory formalities did not affect the creation or operation of constructive trusts. The constructive trust was a creature of equity. In that respect, equity operated by settled principle. Equity acted where the application of the common law would produce an unconscionable result. What made it unconscionable to resile from a promise or agreement unenforceable at common law was detrimental reliance on that agreement or promise. Accordingly, even where there had been an express agreement, it was still necessary to find detrimental reliance (see [70], [72], [73], [76] of the judgment).

Kerr J had been wrong to have held that detrimental reliance was no longer required. The overwhelming weight of authority both before and after Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53 was to the contrary. Moreover, to hold that an oral agreement, disposition or declaration of trust was binding without more would directly contradict two statutory provisions. Equity could not repeal the statute (see [152], [153] of the judgment).

Decision of Mr Justice Kerr [2022] EWHC 631 (QB) Reversed.

Digest prepared by Tara Psaila, Barrister, for Lexis PSL

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