Solving on implied co-ownership

In 2004, after Louis, a plumber, met Karen, a trainee architect, they started a relationship.
A year later they decided to live together. In 2005 Louis purchased a house for them to live
in. Karen was still training, so Louis paid the deposit and raised the balance of the
purchase price from the Ubend Bank by way of a mortgage secured on the house. The
house was conveyed into Louis’s name and he became the sole registered owner.

In 2006 Karen qualified. She immediately found a job in a firm of architects in London.
The couple opened a joint bank account into which they each paid £1,500 from their
monthly earnings. They used the joint bank account to meet all of their household and
other living expenses, including the monthly mortgage payments to the Ubend Bank.

In May 2007 Karen gave birth to Eliott. She immediately decided to give up her job as an
architect in London so that she could stay at home to look after her family. Louis and
Karen therefore closed the joint bank account. After that Louis paid the monthly mortgage
payments and other household bills from his own bank account. In 2009 they had a second
child, Fiona. By this time Louis was working long hours and winning plumbing contracts
that took him overseas to work for weeks at a time. Karen was doing all the household
tasks, and looking after Elliot and Fiona. She did all the decorating and minor repairs
around the house.
In 2012, Louis finished a lucrative plumbing contract in Saudi Arabia that allowed him to
repay the outstanding balance of the mortgage loan. Later that year Karen inherited
£15,000 when her father died. She used the money to build a loft extension that she
designed herself.
A week ago, Louis told Karen that he has met somebody else with whom he wants to set up
home abroad. Louis therefore wants the house to be sold.
Advise Karen about what, if any, interest she may be able to claim in the house by way of
trust law principles.

Answer: This is a problem question on co-ownership. Here, Karen needs to be advised about
her possible claim of interest in the house.

Co-ownership arises when two or more people are, together, entitled with an interest and
possession of the same property. Co-ownership can either be express or implied. Interest can
either be legal or equitable and the absolute owner is the person who is registered in the deed
as the paper owner having both the interests. This is in compliance with S. 53(1) of Law of
Property Act 1925 satisfying the formalities requirement. Here, Karen's ownership is not
evidenced in writing and the house was conveyed solely into Louis's name. Thus, Karen can
claim under implied co-ownership. She can claim with either resulting trust or constructive trust
under the exception provided in S. 53(2) of LPA 1925 supported by S. 2(5) of LP(MP)A 1989.
A direct contribution to the acquisition of the property including mortgage payments will give
rise to a resulting trust with the size of the shares being proportionate to the parties’
contribution. As per Laskar v Laskar, respective beneficial shares should reflect the size of their
contributions to the purchase price. Thus, though Karen may have a claim from the resulting
trust, claiming under it will not be suitable as that will only constitute a small share for her as
the contribution was tiny compared to the house.

Thus, it may be ideal for her to claim under constructive trust. Three conditions must be
satisfied in order for constructive trust to arise: firstly, evidence of common intention that the
claimant is to share the beneficial interest; secondly, claimant has acted to his detriment on the
basis of the common intention; thirdly, there must be equitable fraud on the part of the legal
owner.

As per Oxley v Hiscock there must be an agreement between the parties that the payer should
have a beneficial interest in the land. There was no such agreement between Karen and Louis.
In Lloyds Bank v Rosset, the House of Lords stressed that there must be evidence of express
discussions between the parties that they are going to share the beneficial interest. There was
also no such discussion between Karen and Louis. Therefore, the court would only infer
common intention in the absence of such intention where a person has made direct
contributions to the purchase price. Karen’s direct contributions were tiny to the purchase
price. She might get a minimal share for these contributions. In Stack v Dowden, the court took
indirect contributions into account and a common intention can now be based on the parties'
entire relationship with each other. Here, the common intention may be established as Karen
indirectly contributed by taking care of children, making a loft and taking care of household
chores.

Reliance is necessary for the benefit or promise to be equitable. As per Greasley v Cooke,
reliance can be proved if there is evidence of detriment. As per Eves v Eves, it might be said that
there was a detriment because Karen left her job to take care of the family and look after the
household.

Thus, it can be said that Karen may claim her share by establishing constructive trust. As there
were no consensus and no common intention between Karen and Louis, the court may adopt
the broad-brush approach. As per Oxley v Hiscock, this may happen as there was no agreement
about the quantification of shares. All circumstances and contributions made by Karen may
thus be taken into account and she may get her benefit accordingly.