In Stack v Dowden, the House of Lords suggested that different approaches might be used to determine how land is owned according to whether the context is ‘domestic’ (for example involving a family home), or ‘non-domestic/commercial’ (such as where a property is purchased as an investment).  Doubt was cast on this apparent dichotomy by the Privy Council in Marr v Collie. This post considers two recent cases concerning the ownership of land: Tahir v Faizi and Kahrmann v Harrison-Morgan.  They are interesting because neither case is easy to classify as ‘domestic’ or ‘commercial’, neither cites Marr, yet both are in some respects consistent with it because of their emphasis on the common intention of the parties irrespective of ‘context’. Both, however, will provoke debate about the state of the law.

Public domain image; obtained from here

Where there is no express declaration of trust evidenced by signed writing (which will generally be conclusive as between the parties to it), the two main ways of establishing the existence and size of beneficial interests in land are a resulting trust and an approach based on the common intention constructive trust.  In some cases, only one party to a relationship will be a legal owner of the family home and her partner will have to use this law of non-express trusts to show that he has any entitlement to a share. This is particularly important for informally cohabiting couples and others who are unable to access the statutory redistribution of property available to married couples and civil partners at the end of a relationship. 

The resulting trust takes a simple but narrow approach, presumptively recognising a share in the property based on the proportion of the purchase price contributed by the claimant, albeit sometimes including mortgage liability or payments. This presumption can be rebutted through evidence of contrary intention. In both Stack v Dowden and Jones v Kernott it was said that the resulting trust is inappropriate in a domestic context. Instead, the constructive trust-oriented approach was more appropriate. The starting point then is that beneficial ownership matches the legal ownership (‘equity follows the law’) but this can, apparently exceptionally, be rebutted according to the common intention of the parties determined according to the parties’ whole course of dealing in relation to the property, detrimentally relied on by the claimant.

Whether a case should be characterised as a ‘domestic’ or ‘commercial’ context therefore apparently determined whether the starting point should be that of the resulting trust or of equity following the law. While such categorisation according to ‘context’ was not necessarily straightforward and there was room for debate over the strength and true nature of any ‘presumption’, the principle did provide a measure of clarity.

In 2017, however, the Privy Council decided Marr v Collie. While not straightforwardly binding in England, it should in principle be highly persuasive, not least because the Supreme Court Justices deciding it were all involved in Stack, Jones or both. In Marr, Lord Kerr declared it ‘simplistic’ to say that the starting point was the resulting trust presumption in a ‘commercial’ case and the presumption that equity follows the law in a ‘domestic’ case. Instead, the starting point was itself to be determined by the common intention of the parties. For Juanita Roche, this was orthodox because, whatever the details of the starting point and the subsequent route followed, the outcome relates to the common intention of the parties. Martin George and I, however, argued that Lord Kerr’s approach was potentially problematic because common intention was apparently to determine both the starting point and how any presumption might be rebutted. Whatever the difficulties with categorising cases, we felt that starting points based on the ‘context’ of a case were helpful in potentially avoiding litigation involving a very detailed and somewhat artificial inquiry into common intention.

Informal trusts are particularly important for separating cohabitants unable to access all the statutory remedies available to divorcing spouses

Picture obtained from Wikimedia & shared under the CC BY-SA 3.0 licence

In the two recent cases, the courts have grappled with the issue of which starting point to apply without reference to Marr. In Tahir v Faizi, the claimant was advised that he would be unable to obtain a mortgage to purchase a home for his family due to his immigration status. The defendant, a casual acquaintance, therefore agreed to become the legal owner of the property and transfer the legal title to the claimant at a later date, with the claimant agreeing to pay the necessary mortgage instalments. The judge recognised that this was neither a straightforward ‘domestic’ case involving a shared home nor a fully-fledged ‘commercial venture’. But it is not at all clear which approach he applied: for example, he referred to the claimant’s detrimental reliance, traditionally associated with a constructive trust, despite counsel’s apparent agreement (potentially ‘simplistic’ in itself following Marr) that only a resulting trust was possible. Based on the agreement, the judge found that the claimant had the entire beneficial interest (subject to repaying the defendant’s expenses) despite not actually paying all the mortgage instalments, which causes complications for the resulting trust. On appeal, Murray J held that although the judge had not used the term ’resulting trust’ in his conclusion, his findings were compatible with one. Murray J’s willingness to uphold the decision is understandable, given that the judge found a clear agreement despite omitting to engage with the legal niceties of how it should be given effect.   But it does little for the clarity of the law.

Kahrmann v Harrison-Morgan involved somewhat complex arrangements between business partners for the transfer of beneficial interests in two properties to enable them to be enfranchised, so that the resulting freeholds (with enhanced value) could be sold. The Court of Appeal recognised the case as essentially ‘commercial’, but potentially ‘intermediate’ because one of the properties was the family home of one of the partners and they were also neighbours. The judge had found an agreement between the partners as to how the profits from the sale would be split. The Court of Appeal, building on this understanding, found common intention constructive trusts of the properties. Henderson LJ did not refer to Marr v Collie, or any ‘presumption’. He variously supported and undermined the dichotomy apparent following Stack and, conversely, the Privy Council’s approach in Marr. For example, Henderson LJ’s contention that ‘[i]t is well established that the principles which the courts have developed in domestic contexts of [the Stack and Jones] kind should not normally be applied to cases where property is jointly purchased as an investment’ is not necessarily easy to square with the Privy Council’s specific rejection of the proposition that ‘the principle in Stack v Dowden…applies only in “the domestic consumer context”’, despite the difference between ‘only’ and ‘not normally’. At the same time, Henderson LJ’s application of a constructive trust-based analysis to a ‘commercial’ or ‘intermediate’ case is potentially consistent with Marr. It is, however, significant that the alternative resulting trust approach was not raised on the facts.

Further confusion stems from the suggestion in Kahrmann that the applicable ‘version’ of the common intention constructive trust was not the Stack-inspired one based on the ‘whole course of dealing’ between the parties, but a narrower version expounded in the older case of Lloyds Bank v Rosset and founded on the express discussions between the partners.  It may be that the correct conclusion was reached on the basis of a sufficiently clear understanding between the partners, but commentators and practitioners will be left in some doubt as to the true state of the law. As Kahrmann concerned whether a legal non-owner had an interest at all (rather than the size of the interest), the reliance on Rosset might be orthodox but the Court of Appeal’s reasoning appears to have been based on the context of the case. Henderson LJ’s assertion that his finding of an ‘express agreement’ between the protagonists in Kahrmann is ‘very different from the inference or imputation of a common intention retrospectively ascertained by examination of the whole course of conduct between co-habiting parties over many years, of the kind now routinely undertaken by the courts in a domestic context’ is likely to prompt much future discussion.

Perhaps counsel and/or the judiciary in these recent cases have taken advantage of Marr v Collie’s lack of fully binding status by quietly ignoring its potential implications while sometimes advocating/applying analyses consistent with some aspects of it and not others.  A possible alternative explanation, however, is simple oversight, which would be understandable given the sheer number of difficult and contradictory cases in this area.  In any event, the outcome in both cases is defensible because the intentions of the parties could apparently be readily found. Whatever presumptions or starting points might have been considered appropriate, perhaps they were not truly needed, even if in Kahrmann it took the appellate court to find the full common intention. But both Tahir and Kahrmann arguably create their own problems, and a further Supreme Court decision (possible in Kahrmann itself) may be necessary to bring a measure of certainty to this difficult area of the law.

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How to cite this blog post (Harvard style) 

Sloan, B. (2019). Informal Trusts of Land: W(h)ither different approaches for domestic and commercial contexts? Available at: https://www.law.ox.ac.uk/research-and-subject-groups/property-law/blog/2019/12/informal-trusts-land-whither-different (Accessed [date])