Introduction
“There has been a significant increase in the number of couples cohabiting outside marriage in the past thirty years in Great Britain. Cohabitation is no longer a minority experience, but has become the norm for a significant proportion of the population, including those with children.”[1]
This quote above concerns with the issues raised by the report produced by Cardiff University and the University of Bristol on cohabitation couples or co-owners in Great Britain.
It is a very important issue and practical issue in United Kingdom (hereinafter known as UK). About four million unmarried people in England and Wales co-owned land. Large of them have children. Some of them would make an express agreement as to their respective rights, but most co-ownership has been created informally.
The Law of Property Act 1925 (LPA 1925) was not designed to deal with the current situation. The gap had been filled by case law with varying degree of success. In many cases, purchasers of the land will be financed partly by the mortgage, so the rights of co-owners who have to be balanced to against those lenders.
Since co-ownership uses the mechanism of the trust, and all trust of land part of their property are now trust of land, Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) has framework all co-own land or trusts of land.[2]
As the given task is divided into two parts, firstly on what changes did Stack v Dowden[3] bring to the law of trust and co-ownership. Secondly, analyse the factors promting the changes brought by this case and evaluate the ramifications of the decision. Therefore, in order to answer these two tasks, this essay will be divided into eight parts. Part I explains background to settlements. Part II explores overview of trusts for sale. Part III explores trust of land. Part IV explores methods of creation of co-ownership. Part V explores the distinction between joint tenancy and tenancy in common, the effect of unequal shares, the history and the current law. Part VI explores the reforms relating to co-ownership. And, Part VII is a conclusion.
Part I: Background to settlements
Beneficial interests in land created in for a succession of people. Definition of strict settlement can be found under section 1(1) Settled Land Act 1925.[4] It shows successive interests in land were created whenever a strict settlement arose.
Concurrent interest defines as ownership of land by two or more persons at the same time such as joint tenancy and tenancy in common. Successive (consecutive) interest defines as where interests under a trust succeed each other on the occurence of specified events such as A for his lifetime, then to B until he reaches the age of 25, then to C absolutely.[5]
It is vital to know the timeline where strict settlement were largely replaced by SLA 1925 by trust for sale. Trust for sale were then replaced by TOLATA 1996 by trust of land. Since TOLATA, all settlements must be trust of land. It is very important to differentiate between a ‘settlement of land’ with successive interests in land and ‘co-ownership of land’ with concurrent interests. Both are now governed by TOLATA trusts of land. We will now look at concurrent interests in co-ownership’s part.
Part II: Overview of trusts for sale
Between 1926 and 1997, trust for sale mechanism was under section 30 LPA 1925[6] was the method of avoidance of strict settlement. From this provision the trustees of the land had a power to postpone the sale and a duty to sell the land. However, in order to sale, a consent of named person could be required.
The reason why people have beneficial interests in land is to enjoy using or occupy it and not to sell it. Again, it was not until the intervention by Lord Denning in 1950 that was recognised that beneficiary of trust for sale should have a right to occupy the land.
Part III Trust of land
The definition of trust of land can be seen clearly in ‘trust of land’ under section 1 TOLATA 1996[7]. After 1996, all trusts for sale of land are changed into ‘trust of land’ and this leads to for trustees for land to have greater powers than enjoyed by trustees for sale previously under LPA sections 28, 29 and TOLATA sections 6 to 9.[8]
Under TOLATA, sections 4 and 5 state that there are no duty to sell the land. In section 3 where the doctrine of conversion is abolished but in sections 12 and 13 where overreaching machinery i.e is still retained as far as the payment of the purchase money to two trustees or a trust of corporation on the beneficiary’s interest. And, beneficiary still have the right to occupy the trust land.
Part IV Methods of creation of co-ownership
Co-ownership may be created formally (by express agreement) where parties sat down and their respective interests in the land. This is by far the simplest situation.
Co-ownership is also may be created informally i.e by some form financial contribution that triggers resulting trust, constructive trust or (rarely) proprietary estoppel. Informally created co-ownership gives rise greater difficulties since the courts would have to establish the co-ownership exist and to quantify the interests of each owner.
Resulting trust arises when by a person C has made a direct contribution to the purchased price at the time of purchases of the land but does not have his name on the legal title. Resulting trust is also not a rule of law.
Constructive trust may arise when whether there is a common intention between the parties that will C should have an interest in the land and the C has made direct or indirect contribution such as payment after the land was purchased.
There are two modern forms which co-ownership may take which are joint tenancy and tenancy in common. We need to look on creation of each of these on the differences between them and how equitable joint tenancy may be converted into equitable tenancy in common. For examples, if land is conveyed to A + B, in law they will take it as joint tenant. If B has paid two-thirds of the purchase price and A one-third, then in equity A+B will be tenants in common.
Part V: The distinction between joint tenancy and tenancy in common, the effect of unequal shares, the history and the current law
In joint tenancy, all co-owners are entitled whole of the property and nobody has a ‘share’ in it. All co-owners must register with all owners names. There is no partition of the land. But, a right of ownership of the whole land enjoyed simultaneously with all the other owners. This really is ‘co-ownership’.[9]
In tenancy in common, each co-owner has what is called ‘undivided share’ in the land. He cannot claim whom the co-owned house as his, but he can leave beneficial share to someone in his will for example.[10]
In order to distinguish between joint tenancy and tenancy in common, we must be familiar with these ‘four (4) unities’. Firstly, unity of possession is only required for tenancy in common. Each co-owner must be justly and titled to possess the land as any other co-owners.[11] Secondly, unity of interest where all joint tenant must have the same interest in the land such as freehold. Thirdly, unity of title where all joint tenant must derive their interests from the same title or act. And fourthly, unity of time where the interest of all joint tenant must vest at the same time. Therefore, before a joint tenant can exist, the ‘four unities’ must be present.
A) The effect of unequal shares
The ‘four unities’ are necessary but not sufficient for the existence of joint tenancy. Once its shown all ‘unities’ are present on the facts, we should check severance is not occurred. The conveyance for the co-owner might use word of severance such as referring to equal shares for the parties.[12]
One of the key situations, firstly, when tenancy in common might be presumed is where the parties have made unequal contribution to the purchased price of the property. Secondly, they do not make any express declaration about their respective right with the land being conveyed into the name of one of them. In this case, the parties might be tenancy in common behind constructive trust or resulting trust. Thirdly, many problems have arisen when the land is purchased under one name of a person (X), but (Y) claims a beneficial interest in the land under a resulting or constructive trust. If Y has made a direct contribution, three possibilites exist where the money could have been intended as a gift to X or as a loan to X or to give Y a beneficial interest in the land. Further problems arise when Y relies on indirect contributions to the purchase of the land.
In Stack v Dowden[13], the House via common intention has recreated the rules on how a constructive trust can be established, set aside the narrow approach of previous cases such as Lloyds Bank v Rosset[14].Three ways can be used to prove a common intention to exist as shown in Stack now:
a) Where the defendant (D) has promised that the claimant (C) will have an interest (as held in Rosset)
b) Where the C has made direct payments to the purchase of the property or land (as held in Rosset)
c) Where one can be implied from all the circumstances
Some understanding of the history would be helpful in appreciating the need for and significance of the change.
B) The history
In previous landmark case as in Lloyds Bank plc v Rosset[15], the House of Lords held that by relying on evidence or express discussion that would help to find an agreement that the property was to be shared beneficially. So, resulting trust is usually known when no evidence found and this makes the court to infer a common intention for a person who has made direct contribution.[16]
As in the case of Oxley v Hiscock[17], as held by Court of Appeal that in the absence of any finding of an agreement as to shares at the outset, any division had to reflect to substantially greater proportion of original capital contributed by the man.[18]
This case regards with one legal owner. Lord Justice Chadwick attempted to transpose his influential analysis in this case to the joint ownership situation. It could be argued that Chadwick LJ made a logical error which led to a conclusion on the relevant issue similar to the criticism in Stack where Chadwick LJ emphasized heavily on the issue of quantification obscured the simple point that a basis for imposing a common intention constructive trust must exist before one can move on to consider the issue of quantifying the shares under such a trust.
This error led to House of Lords in Stack to correct Chadwick LJ’s statement of the applicable principle. Lady Hale considered Oxley’s case and found the court should not avoid to look for what the parties intended for the court considers “fair”. It needs to be emphasised well therefore be placed on what the parties had intended their respective shares to be as far as this can be discovered.
C) The current law
There has been plenty of development in this field in the last few years. Further cases applied and clarified the principles in Oxley[19], then House of Lords gave an important judgment in Stack v Dowden[20]. Significant of Stack’s case at least in two respects:
a) House of Lords for the first time decided this case on TOLATA 1996.
b) The House has stated principles for distribution of the property when cohabitees relationship failed.
The House of Lords in Stack held that where there is join tenant ownership at law, equity follows the law. The mantra is equity follows the law is presumption in domestic context. So, it can be said that there is also joint tenant ownership in equity.
However, that presumption could be rebutted in unusual cases and Stack itself was just such an unusual case. Hense, unequal contribution by the parties and derives by the factors indicated that they had intended the beneficial interest would be different than legal interest.[21]
Lady Hale’s famous paragraph [61] where she cites the quantification test from Oxley where the parties have agreed that both should have a beneficial interest but there is no evidence that they ever even discussed the size of their shares.[22] At paragraph [60] where a property is held in joint names, the quantum of the parties’ shares is determined by their relevant “common intention”.[23] At paragraph [62 and 70], it is clear that an original “common intention” can be replaced by a later one to different effect.[24]
She also confirmed that the court can impute an intention between the parties. It has also been made clear that imputation is the final option available to the court to find an intention between the parties that is to be only used if an express or inferred intention cannot be found.
In addition, she felt that in practice is not such a clear demarcation of a difference conceptually between inferring and imputing. She also indicated that a resulting trust had no longer any part to play in joint ownership domestic cases. Therefore, the courts are now taking a better approach that shown in Rosset.
Stack v Dowden[25] was also followed in Abbott v Abbott[26] and interestingly Lady Hale also presided in this case. She reiterated that the approach by Lord Bridge in Rosset was outdated.[27] The constructive trust is the appropriate tool of analysis in most matrominial cases.[28] At paragraph [515], applying Stack that if there was a direct or indirect or no evidence of actual agreement, the court viewed that common intention could be inferred.[29]
The Stack’s case was also applied in recent Supreme Court despite after five years, questions remain as to the precise changes this case made to the law. This can be seen clearly in Jones v Kernott[30] where joint judgment by Lady Hale SCJ and Lord Walker SCJ laid down five principles applicable in a case where a matrimonial home is bought in the joint names of cohabitees couple who are both responsible for any mortgage, but without any express agreement of their beneficial interests.[31] In addition, both Stack and Kernott demonstrate that the courts will go beyond the TR1 form.