RE PRYCE

When a number of parties choose to create multiple contracts across two generations, there will always be problems trying to control the flow of assets when the moment requires it.

In this matter, the sheer volume of trusts, contracts, covenants, wills and gifts left the trustees to one marriage agreement, confused as to exactly what they were under duty to do, and to whom any decided benefit belonged.

In 1887, a married couple entered into an agreement requiring that any property left by the husband upon death, was to be held in trust for their children, and would be thus managed by two appointed trustees.

The husband also contracted with his wife that any funds left for him in his father’s will, would then be held in the same trust and managed by the trustees.

In the terms of his father’s will, the husband was legally entitled to a one-third share of two large sums of money, which had been expressed by action of a family deed in 1849; while in a deed of gift in 1904, the husband then conferred that certain other properties would now be held upon trust for his wife’s enjoyment in a separate trust.

When his father died in 1891, the husband was duly paid his one-third share of the first of the two sums, although his wife and the trustees of the 1887 marriage contract had no knowledge of this, despite his prior acquiescence to the terms of his gift.

The husband later died in 1907, leaving them no children to benefit from the 1887 marriage trust; after which, the specific properties and his other one-third share of money came into his possession through the death of his mother in 1913.

These assets were subsequently held by the appointed trustees of his parents own 1889 agreement and the family deed created in 1849.

By this time, the residue of the 1887 marriage trust was now held in trust by the trustees, while the property and monies from his parents wills and 1849 deed, were now held on absolute trust, despite his passing.

At this point, the 1887 marriage agreement trustees sought to claim the property and monies held in absolute trust, in order that they now became part of the 1887 trust, while asking whether by virtue of the fact that no children were created during the lifetime of their marriage, the 1849 deed funds were now held upon trust for the benefit of the widow’s next of kin upon her death.

When considered by the court, the equitable maxim ‘equity will not assist a volunteer’ was put to good effect when explaining that despite any suggestion of default to the widow’s relatives, it did not fall to the judges, or the appointed trustees, to attempt enforcement of the 1887 agreement, when the widow was legally entitled to benefit from the funds and property now held upon trust by the parent’s trustees.

It was also noted that despite not having children of their own, no evidence of a declaration of trust could be manufactured between the respondent and her next of kin, so there could be no argument of a breach to the contrary, while the court reminded the parties that:

“[V]olunteers have no right whatever to obtain specific performance of a mere covenant which has remained as a covenant and has never been performed.”

STACK v DOWDEN

When a long-term relationship founded upon fierce independence to the exclusion of marriage reaches breaking point, the effects of separation are altered through the sale of the family home.

Where domestic legislation lends assistance to the courts under the Married Women’s Property Act 1882 and Matrimonial Causes Act 1973, there was, at the point of this hearing, no legal framework within which the division of proprietary rights could be easily established where no declaration of trust had been officiated.

Having met as a young couple before sharing a home together, the title of the first property was held for the respondent, after a sole purchase made with a considerable cash investment and the remainder by way of mortgage.

During the next decade, the two parties created a family and began raising four children out of wedlock, while maintaining to all effects, separate financial accounts.

Through the course of their time in residence, there were a number of improvements made to the property, and while the appellant laid claim to the majority of the work, it was proven undeterminable, and thus assumed as equally contributed to. 

When the time came to sell the home, there had been a significant profit made in favour of the respondent, which was immediately reinvested in their second home; whereupon the couple entered into a joint purchase under secured borrowing for the remaining balance, before registering the new house under equal ownership.

In the absence of any declaration of trust, the couple opted to include a survivorship declaration that provided for absolute ownership under the death of either party.

During this period, the financial contributions were again favourable by some margin, to the respondent, although there was increased investment on the part of the appellant.

Less than ten years later, the couple decided to separate, and it was agreed that the appellant would leave the home and seek residence elsewhere, for the sake of the children and domestic stability.

As part of this agreement, the two parties underwent civil proceedings, where it was settled that in consideration for his leaving, the respondent would make specified monthly payments to help subsidise the appellant’s living costs under the terms of the Trusts of Land and Appointment of Trustees Act 1996, until such time as the sale of the house was complete.

It was after the failed renewal of the monthly payments, that the appellant sought claim for equal division of the sale proceeds, upon grounds that they had entered into the purchase of the second home as joint owners, and so under the principle of common intention and the legality of the conveyance, he was entitled to half the value of the sale, despite any claim to the contrary.

In the original hearing, the judge assessed the arguments through the essence of a working partnership, and chose to place greater weight upon the perceived intentions displayed when raising a family and managing their financial obligations; thereby ignoring the division of equitable wealth and awarding a fifty-fifty distribution of the sale funds to both parties.

Upon appeal, the Court took a wholly different view, and took pains to calculate the proportion of investment shown by the couple during their time in the home; ultimately arriving at a sixty-five to thirty-five percent division, along with the cessation of compensatory payments, in lieu of his premature departure and relocation of residence.

When bought before the House of Lords, the discussion revolved around the complexities of unmarried couples, and the often misleading nature of common intention when needing further detailed evidence as to the minds of those in contention.

It was also agreed that while the appellant had enjoyed the security of monthly payments, his removal from the home was agreed under the terms of the Family Law Act 1996; and so, any claim brought against his non-payment was fatal to observance of the applied statute.

With regard to the readjusted percentages, the House held that at best, the figure might be recalculated within a minor percentage; however, the strength of the respondent’s evidence as to her financial investment, remained as convincing as it was in the appeal.

And so, aside from any idea that a resulting trust could have been argued for in respect of beneficial interest, the outcome required no further interference, while

“[I]n a case of sole legal ownership the onus is on the party who wishes to show that he has any beneficial interest at all, and if so what that interest is. In a case of joint legal ownership it is on the party who wishes to show that the beneficial interests are divided other than equally.”

GREY v IRC

The creation of trusts run closely to dispositions of interest unless properly worded and executed in accordance with English law.

In this matter, the settlor elected to draft and duly sign a declaration of trust, while orally providing the exact nature of the trusts to his trustees; and so, it was this indiscretion that caused the Inland Revenue to seek proportionate stamp duty on grounds that the gesture amounted to a disposition of property and nothing less.

Having chosen to leave consideration for his grandchildren, the settlor created six trusts on two separate occasions, each leaving 3,000 company shares per beneficiary, along with particular instructions as to their use.

When looking to officialise his request, he brought together his trustees, before instructing them as how best to manage the trusts; and so, having finalised six declarations of trust, he signed and sealed them in witness of his solicitor.

A key part of his participation was that as of the date the deeds were completed, the settlor had agreed to renounce his continued beneficial, equitable (and therefore legal) interest in the trust property, and that the trustees were now holding them on trust for the benefit of his grandchildren.

Unfortunately, section 53 (1) of the Law of Property Act 1925 reads that:

“Subject to the provisions hereinafter contained with respect to the creation of  interest in land by parol, . . . (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.”

The question then raised, was whether by virtue of their release, the actions of the settlor and the construction of the declarations of trust, were tantamount to voluntary dispositions, that under the terms of statute, attracted stamp duty (or ad valorem duty as referred to at the time), or that by lack of written instructions as to their use, the trusts were ineffective and thus exempt from taxation?

When first heard, the judge awarded in favour of the trustees, and cited that no duty was applicable because no ‘disposition’ had been intended nor indicated, except for the choice of words used by the settlor.

Upon appeal, the Court reversed the decision and took the opposing view that despite the intentions of the settlor, the manner in which the trusts were created altered the nature of the relationship between executor and trustee; inasmuch as the settlor had granted beneficial and equitable ownership to the trustees, and could no longer see himself as a trustee of the property, until such time as the grandchildren took title upon his death.

Presented again before the House of Lords, much greater focus was placed upon the consolidation of the Law of Property Act 1924 and The Statute of Frauds, which under section 9 explained:

“[A]ll grants and assignments of any trust or confidence shall likewise be in writing, signed by the party granting or assigning the same, or by such last will or devise, or else shall likewise be utterly void and of none effect…”

Statute of Frauds

The appellants relied this time upon the terms ‘grants and assignments’ to circumvent the requirements of the Law of Property Act 1925; on grounds that because the terms of the trust had failed to take written form, the trusts were both invalid and therefore exempt from duty, and that reliance upon the term ‘disposition‘ was an overextension of the facts and a misdirection of law. 

Upon generous consideration, it was unanimously agreed that despite the intimation that the actions of the settlor were misconstrued, it was relatively easy to interpret that the renunciation of interest was equatable to a disposition, and that under those circumstances, the relevant statutory duty was owed, while the House reminded the parties that:

“[A] direction to a trustee by the equitable owner of the property prescribing new trusts upon which it is to be held is a declaration of trust but not a grant or assignment.”

GISSING v GISSING

The imputation of beneficial rights to property based upon the conduct of the contending parties, has been a delicate issue for the courts for many years.

On this occasion, the lines of demarcation were drawn by the House of Lords, in order to prevent further abuses of equity and its associated maxims.

After marrying at a young age in 1935, the respondent in this appeal joined her husband in the purchase of their first home in 1951 for a sum of £2,695. The mortgage was held in sole title by her appellant husband, who contributed £500 by way of a loan, and £45 from his own savings; while the respondent paid £220 for a new lawn, household appliances and furniture.

During the time of their marriage, the mortgage was paid by the appellant, who also provided the respondent with regular weekly payments for housekeeping costs, while repaying the loan furnished him by his employer.

Prior to the purchase, the appellant had served time in the military, and after finding himself discharged following the war, the respondent secured him a position with a printing firm that she herself worked at.

While the respondent’s earnings remained at a stable £500 p.a, the appellant was successful in his endeavours, and soon established himself as director of the firm, with earnings  of around £3,000 p.a.

After twenty-five years of marriage and the raising of their son, the appellant committed adultery with a younger woman, before leaving the home and beginning a life with her.

This led to their divorce; during which, the appellant continued to pay the mortgage, loan and outgoings on their marital home, until the loss of his job and subsequent financial troubles.

Around this time, the respondent issued a summons declaring absolute ownership of the home, based upon the oral promise by the appellant that she could keep the house.

Under section 53(1) of the Law of Property Act 1925, any declaration of trust with regard to beneficial interest in property must be written; however, the courts can find the existence of such an agreement by equitable principles of resulting, implied and constructive trusts where sufficient evidence allows.

In order to establish this, the court would seek to infer through the conduct of the parties, reasonable proof that when engaging in the purchase of the home there had either been agreement as to how to apportionment of interest was to be divided, or the financial contributions made by each party for the duration of the marriage or occupancy.

In the first hearing, the court awarded that the appellant was, by extension of his financial payments and obvious legal title, the sole owner of the property, and allowed for repossession under law.

In the Court of Appeal, the decision was reversed by a majority, who held that the respondent was entitled to a fifty percent share of the home, while presented to the House of Lords, the recent outcome of Pettitt v Pettitt was taken under consideration, along with the principles of cestuis que trusts.

In Pettitt, the former wife pursued proprietary interest of the sole legal title held by her ex-husband under section 17 of the Married Woman’s Property Act 1882, on a home still subject to an outstanding mortgage.

Her contention was that having occupied the home for ten years, she was entitled to a beneficial interest due to her substantial contributions to both the deposit and subsequent repayments during the time of their marriage; whereupon the husband countered that his individual improvements to the house afforded him an equal share of the property. 

While on that occasion the judgment fell in favour of the wife, there was little with which to compare it to this case; and so, the equitable nature of trusts were explored through the conduct of the respondent.

Here it was held by majority, that while an oral declaration by the appellant suggested otherwise, there was absolutely no evidence that the respondent did, at any time, intend to contribute to the purchase of the home, or the upkeep of mortgage repayments, even when the appellant had suffered financial setbacks.

And so it was for those reasons, that suggestions of trusts of any kind were simply obiter dictum, and that for the purposes of natural justice, the appeal was upheld with costs, while the House reminded the parties that:

“Any claim to a beneficial interest in land by a person, whether spouse or stranger, in whom the legal estate in the land is not vested must be based upon the proposition that the person in whom the legal estate is vested holds it as trustee upon trust to give effect to the beneficial interest of the claimant as cestui que trust.”