Express yourself

The recent decision in Clarke v Meadus [2010] EWHC 3117 (Ch) has thrown further light on the acquisition of a beneficial share in the family home where the property is already held in joint names and there is an express trust declaring the parties' respective beneficial interests. Does the prior declaration of trust preclude the claimant from seeking an enlarged share based on subsequent promises and detrimental reliance?

The parties were mother and daughter. The daughter claimed she was entitled to the whole beneficial interest in a family home owned jointly by the parties. The mother had entered into a number of formal deeds (and a conveyance) in her daughter's favour to reduce inheritance tax by retrospectively severing the joint tenancy previously held by the mother and her late husband in relation to the home. The effect of these transactions was to allow her late husband's share to pass to the daughter and make her equal beneficial owner with her mother.

The daughter claimed she was entitled to the whole beneficial interest in the home by virtue of proprietary estoppel and/or a constructive trust. In particular, she argued that her mother had, on several occasions, promised to transfer her half share in the property to her upon death. In fact, contrary to this assurance, the mother later changed her will leaving the house to her other daughter.

The claimant argued that, in reliance upon her mother's promise, she had incurred detriment by, inter alia, selling her own home (at a substantial loss) and moving in with her mother looking after her (without payment) and cleaning/decorating the property, as well as carrying out other substantial improvements at her own expense. She also claimed that she had contributed to the mortgage payments and used her own money to buy adjoining land which enhanced the value of the existing property.

At first instance, Master Bragge dismissed the daughter's claims concluding that there could be no constructive trust because the issue of beneficial ownership had already been the subject of express trusts and these were conclusive in the absence of any vitiating factors. In his view, the proprietary estoppel claim also failed as the daughter had failed to substantiate her allegations of detriment. He felt the claimant had no prospect at trial of showing that her equity had not already been satisfied by her existing half share in the property.

Different routes, same result

In the High Court, Warren J concluded that the master was wrong to strike out the daughter's claim and allowed the case (based on estoppel) to proceed to trial. Essentially, the master had fallen into error in failing to consider whether a constructive trust might have arisen as a result of promises made by the mother after the execution of the express trusts so as to effectively displace those trusts. Warren J believed, relying on Stack v Dowden [2007] UKHL 17, the prior existence of an express trust did not preclude the establishment of a constructive trust provided the requisite pre-conditions for such a trust were established on the facts. Indeed, in cases of this kind, 'proprietary estoppel and remedial constructive trust are simply different routes to the same result'.

The evidence, therefore, which the daughter was likely to adduce at the trial in seeking to establish a proprietary estoppel was unlikely to be significantly different from that necessary to run a constructive trust argument. Moreover, as with a constructive trust, an estoppel was capable of overriding a prior express trust. Warren J explained: 'Express trusts'¦ are capable of being overridden by a proprietary estoppel'¦ as a result of promises and representations'¦ It cannot, in my judgment, sensibly be argued that once beneficial interests have been declared in a formal document, those interests become immutable and incapable of being affected by a proprietary estoppel.'

Here again, the daughter had an arguable claim to some interest in the property based on her assertion that her mother had made various promises in reliance upon which she had acted to her detriment. By the time it had become clear that that the mother was not going to leave the property to her daughter, the latter had potentially become entitled to an equity which might have entitled her to more than what she already owned. On this basis, therefore, it had been clearly wrong for the master to strike out the estoppel claim.

Formal variation

Where the parties go ahead and execute a trust expressly declaring their respective beneficial interests in the property, this will be generally conclusive of the parties' intentions in the absence of some vitiating factor (e.g. misrepresentation, mistake or undue influence). In most cases, therefore, this means that the size of the parties' respective shares will be determined according to the terms of their express trust regardless of their actual contributions to the purchase of the property.

Moreover, the orthodox view (despite the contrary suggestion expressed by Warren J in Clarke) is that an express declared trust precludes the possibility of a supervening constructive or resulting trust based on subsequent differential contributions until the declared trust is formally varied by subsequent agreement.

The point is specifically addressed by Slade LJ in Goodman v Gallant [1986] Fam 106: 'If the relevant conveyance contains an express declaration of trust which comprehensively declares the beneficial interests in the property or its proceeds of sale, there is no room for the application of the doctrine of resulting, implied or constructive trusts unless or until the conveyance is set aside or rectified.'

In that case, the conveyance declared that the parties (husband and wife) were to hold the equity upon trust for themselves as joint tenants. The husband later severed the legal joint tenancy and his wife argued that she was entitled to three quarters of the beneficial interest on the basis that she already owned a half share and that it was intended that the joint tenancy should only extend to the half share received from her husband. Slade LJ, giving the judgment of the Court of Appeal, held that the declaration was exhaustive and, consequently, the wife was only entitled to a half share of the beneficial interest.

The same conclusion was reached in the earlier case of Pink v Lawrence [1977] 36 P & CR 98 where Buckley LJ stated: 'Where there is an express declaration of trust, the doctrine of constructive trusts cannot be referred to to contradict the expressly declared trust. The doctrine of constructive trusts is one which applies in circumstances in which there is no declared trust'¦ Once a trust has been effectively declared, it can only be got rid of either by rescinding the document containing the declaration of trust on the ground of fraud or mistake, or rectifying it in the appropriate manner to vary or delete the declaration of trust.'

In reaching this conclusion, Buckley LJ referred to the well-known case of Pettit v Pettit [1970] AC 777, where Lord Upjohn observed: 'If [the conveyance] declares not merely in whom the legal title is to vest but in whom the beneficial title is to vest that necessarily concludes the question of title as between the [parties]'¦ for all time, and in the absence of fraud or mistake at the time of the transaction the parties cannot go behind it at any time thereafter'¦' (see also Wilson v Wilson [1963] 1 WLR 601; Bedson v Bedson [1965] 2 QB 666; Gissing v Gissing [1971] AC 886; and Leake v Bruzzi [1974] 1 WLR 1528).

These cases, however, do not seem to preclude the possibility of the parties varying their original beneficial entitlement (i.e. arising at the time of acquisition of the property) by subsequent agreement falling short of a formal deed of variation or rectification and notwithstanding the absence of any fraud, mistake or other vitiating factor.

Stacking up

Indeed, in Stack, the point is specifically addressed by Baroness Hale where she reiterates that an express declaration of trust is conclusive of the parties' beneficial ownership 'unless varied by subsequent agreement or affected by proprietary estoppel'. Similarly, Lord Neuberger acknowledges that a change in the parties' initial beneficial shares after acquisition of the property may be inferred from 'compelling evidence' involving subsequent 'discussions, statements or actions'.

Paradoxically, these are the same criteria required for the establishment of a constructive trust which on the earlier authorities have been emphatically held not to permit the displacement of a prior declaration of trust. Lord Neuberger's speech in Stack does not specifically refer to these earlier authorities and there is only a passing reference to Goodman in the speech of Baroness Hale. While acknowledging that an express declaration of trust may be varied by subsequent agreement or an estoppel, Baroness Hale proceeds to emphatically reaffirm the effect of a conveyance declaring a beneficial joint tenancy as being 'clear, irrespective of why the property was conveyed into joint names and of the parties' later dealings in relation to it' (emphasis added).

Where this all leaves us is far from clear. According to the judge in Clarke, it is now open to the court to consider whether either a constructive trust or a proprietary estoppel arises as a result of matters occurring after an express declaration of trust. According to Warren J, 'nothing in Stack v Dowden or Goodman v Gallant can be read as suggesting that this is not possible: it all depends on the facts'. Whether this is a true statement of the current law remains to be seen. If it is, it will no doubt have significant practical implications for those advising clients wishing to challenge the apparent conclusiveness of the parties' beneficial shares as declared under the terms of an express trust.