On 14 December 2022, the Court of Appeal overturned March's High Court decision that detrimental reliance is not a necessary element of a claim based on the doctrine of common-intention constructive trust (while also showing that there was no need to rely on the doctrine in the first place).
Hudson v. Hathaway  EWCA Civ 1648,  EWHC 631 (QB)
THE FACTUAL BACKGROUND
In 1990 Mr Hudson and Ms Hathaway started a relationship. He moved into her house and it was put into joint names. They had 2 sons. They moved to another house, again in joint names. In 2007 they moved to a third house, Picnic House, which was purchased with the assistance of a mortgage, and again placed into joint names. Ms Hathaway had given up working while caring for their children but had subsequently gone back to work in the charity sector. Mr Hudson had continued to work lucratively in the insurance industry. His contributions to the mortgage significantly outstripped hers over time.
In 2009 Mr Hudson left. The mortgage was converted into an interest-only mortgage and continued to be serviced out of a joint account into which both salaries were paid. In 2011 Picnic House suffered a significant oil-spill from neighbouring land which led to a protracted insurance claim and difficulties in selling it.
Mr Hudson and Ms Hathaway corresponded by email about tidying up their financial affairs in the aftermath of their relationship. At the end of 2011 she emailed him to say that, in her view, certain shares owned by him, which he had asserted to be worthless, formed (like his pension fund) part of their "collective assets" in that their relationship together had allowed his personal career to advance. Mr Hudson replied to the effect that things which had accrued during their relationship was something that they should reach an agreement on.
In mid-2013 Mr Hudson asserted that he should retain what had accrued from his "personal graft" but that Ms Hathaway could have "the liquid cash ...savings in the bank ... physical property, the contents of the house". He went on to say "Which leaves the house, a bad asset which is preventing all of us [from] ... moving on with our lives .... You know what, I want none of the proceeds of that either. Take it. Buy yourself somewhere you can afford to live.... What I want is an end to it. So have everything that's available now and when the house is sold."
She asked him to confirm that he meant that he should get "sole ownership of your shares and pension" and she should have "the equity from the house, the house contents, savings and income from endowments". She said if she had understood correctly, then she would do what she could to get the house sold as soon as the oil spill had been dealt with. He wrote "Yes, that's right. ... Under this arrangement, I've no interest whatsoever in the house, so whilst I will continue to contribute, I won't do so forever."
In early 2015 Mr Hudson ceased making contributions to the mortgage. Ms Hathaway took over payments, that being cheaper than renting.
In October 2019, Mr Hudson issued a CPR 8 claim under the Trusts of Land and Appointment of Trustees Act 1996 claim seeking an order for sale and ... an equal division of the net proceeds of sale. Ms Hathaway argued that the agreement reached in mid-2013 that she should have the net proceeds of sale (which was not in dispute) was enforceable as a common-intention constructive trust, she having relied to her detriment in (1) making all interest payments since early 2015 and managing her lifestyle so as to be able to afford to, (2) making no claim in respect of Mr Hathaway's shares and pension, (3) making no claim for financial support for their sons, (4) dealing with the house and its various issues alone since 2014. The necessity for asserting a constructive trust arose because it was not in dispute that the 'deal' reached in the email correspondence summarised above did not satisfy the requirements of either s. 2 of the Law of Property (Miscellaneous) Provisions 1989 or s. 53(1) of the Law of Property Act ('LPA')1925.
The trial judge, His Honour Judge Ralton, found in favour of Ms Hudson. He considered that only the failure to make a claim in respect of Mr Hathaway's shares and pension amounted to relevant detriment, notwithstanding that their not being married meant that she in fact had no matrimonial claim: the learned judge thought that there might have been a (weak) constructive trust civil claim to the shares. Consequently, it was not necessary for Ms Hathaway to succeed on the argument advanced by her counsel – which the trial judge rejected – that detrimental reliance was not in fact required to establish a common-intention constructive trust in a domestic consumer context.
The first appeal(s)
Mr Hudson appealed against the judge's finding that there was detriment. Ms Hathaway appealed against his decision that she could not win absent detrimental reliance and against his rejection of the non pension/shares issues as detriment.
Kerr J., held on the cross-appeal that detrimental reliance was no longer a necessary element in establishing a common-intention constructive trust. The introductory paragraph to that part of his judgment began 'Although 39 authorities were cited to me, I propose to cite only a few of them, in the hope that clarity will not be lost among the detail.' In summary, he accepted the submission that detrimental reliance was no longer a necessary element of a common-intention constructive trust because otherwise it would have been mentioned in the majority decisions in Stack v. Dowden and Jones v. Kernott. That meant Ms Hathaway's appeal succeeded regardless of Kerr J's approach to HHJ Ralton's approach to detriment (with which, he would have declined to interfere).
The second appeal(s)
Mr Hudson again appealed in relation to both the requirement for detriment and its existence. Lewison L.J. (with whom Andrews L.J. and Nugee L.J. agreed) held in a detailed judgment that while Kerr J. was right not to interfere with the decision as to whether detriment had been established in this case he was wrong on the issue of whether detriment was a necessary element of a common-intention constructive trust, regardless of the context. He cited 29 cases before, after and including Stack v. Dowden and Jones v. Kernott, stretching from Gissing v. Gissing in 1971 to Guest v. Guest in 2022 as showing a long line of clear and consistent authority for such a proposition, supported by all the main text books.
However, while the Court of Appeal was at pains to make absolutely clear that detrimental reliance remains very much at the heart of the doctrine of the common-intention constructive trust, this was not, in fact, the reason why the appeal was unsuccessful. At the Court of Appeal's prompting Ms Hathaway took the point (not taken before HHJ Ralton or Kerr J.) that the email correspondence between the parties in 2013 (materially set out above) complied with the statutory formality required by s. 53(1)(c) LPA 1925 for the disposition of an equitable interest (in land), namely that it be "in writing signed by the person disposing of the same ...".
The Court of Appeal held that the emails from Mr Hathaway were sufficient to amount to dispositions of his unsecured joint interest in Picnic House within the meaning of s. 36 LPA 1925 and that there was a substantial body of authority to support the proposition that, because he had concluded them"Lee" or "Lee Hudson" they also satisfied the requirement in s. 53(1)(c) LPA 1925of being signed, notwithstanding that parliament would not have known what an email was in 1925. Lewison L.J. expressed the view that it was difficult to see why the point had not been taken before.
So, at the end of the day, Ms Hathaway succeeded in establishing that her interest in Picnic House had increased from 50% to 100% in the light of her email communications in 2013. In doing so, she had succeeded on three occasions in establishing detriment while failing on two of them to establishing that such detriment was not in fact required: not exactly a walk in the park. However, given that neither of those points turned out to be necessary to decide the case, it seems that you don't need a long walk in the park to benefit from a Picnic.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.