The co-ownership rights. Co-ownership is a concept whereby two

The
given question provides several issues which need to be examined and analysed. The
main issue in the case is whether Una is entitled to be a co-owner of the
property Donal and Celia sold, or alternatively, if she is entitled to
half-share of the proceeds of sale of the property. Accordingly, the given
facts will be assessed below to determine the validity of Una’s co-ownership
rights.

 

Co-ownership
is a concept whereby two or more people are concurrently entitled to legal
and/or beneficial title to an estate in land and may arise from either a
freehold or leasehold estate as set out in the Land of Property Act1.
Moreover, co-ownership is held by trustees, who are considered the legal
owners.

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 The aforementioned property is registered
under  in Celia and Donal’s name,
therefore, making them the legal owners. Una, the beneficiary, paid Celia’s
share of the mortgage in response to Donal’s promise of making her a co-owner. However,
as Una’s payments were not made at the point of purchase, no changes were made
to the entry on the land register and Donal and Celia remained the legal
owners.

 

For
Una’s claim to succeed, an equitable interest must first be established. An
equitable interest can be defined as ‘An ownership right in property that
results from actions or ideas, fairness and justice rather than from a strict
legal ownership.’2
This may result from an express or implied trust. The facts of the case show
that Donal and Una did not have an express trust, therefore an implied trust
would apply to the situation. These trusts come in two forms, resulting and
constructive. A resulting trust will arise when one person pays all or part of
the purchase price of property, but it is conveyed into the name of the other.
However, since Una did not make any payments at the point of purchase, this
type of trust would not apply and therefore, a constructive trust would be
applicable. A constructive trust is often used today to replace the resulting
trust, a means of recognising a beneficial interest in the home in the absence
of an express or statutory trust.

 

To
begin with, an express declaration of trusts will be conclusive in deciding the
beneficial interests. However, since this element is absent, Una may be able to
claim a share of beneficial interest under the rules laid down in Lyods Bank v Rosset3.
In order to do so, Una would be required to present an express agreement and a
detriment suffered by her or a common intention. For an express agreement to
suffice, it must relate to sharing the ownership of the property and not simply
living together as demonstrated in the case of Otway v Gibbs4.
According to the fact of the case, when Donal said, “We’ll be co-ownerrs”, he
made a promise to Una that if she shared the mortgage repayments, property B
would be half hers. This could suffice to an express agreement.

 

 Once the agreement is established, there must
be evidence that Una suffered a detriment as a result of reliance on that
agreement. In the case of Grand v Edwards5,
it was held that Mrs Grant was entitled to half of the beneficial interest
under a constructive trust as she acted to her detriment by making substantial
contributions to the household expenses which she would not have done unless
she believed that she would have an interest in the house. Similarly, Una left
her secure tenancy, commenced payment of the mortgage instalments, in addition
to incurring house expenses in reliance on Donal’s promise to make her a
co-owner. Therefore, her contributions were substantial and she suffered a loss
as a result of the property being sold without her prior knowledge or without obtaining
half of the proceeds of sale.

 

Furthermore,
Una may also be able to depend on the fact that Donal and herself had a common
intention. This is often used when there is no evidence of an express
agreement. In such situation, the court may be able to infer a common intention
to share the ownership of the property. Originally, in Lloyds Bank v Rosset6,
the court stated that only the contribution of money to the purchase price
would show the necessary intention. However, this ruling was subsequently found
to be too narrow in the case of Stack v
Dowden7,
where Lady Hale stated that a common intention to share the ownership of the
property could be actual, inferred or imputed, based on significant
contributions to the acquisition of the property in cash or in kind. This was
later on reconfirmed in the case of Jones
v Kernott8.

 

Once
a common intention to share ownership has been established, the court will
decide the size of the parties shares according to what is fair, having regard
to the whole course of dealings between the parties in relation to the property
as was shown in the case of Oxley v
Hiscock9 , where
Hiscock paid more than Oxley and therefore, received a larger share of the
proceeds of sale.

 

Now
that we’ve established a constructive trust where Donal and Celia are the trustees
and Una is the beneficiary, this means that according to s.6(1) of The Trusts
of Land and Appointment of Trustees Act10,
the trustees have ‘all the powers of an absolute owner’. However, s.6(5)11
states that ‘trustees shall have regard to the rights of beneficiaries’. On top
of that, s.11(1)12
states that the trustee should consult the beneficiaries ‘so far as
practicable’. As Una did not leave the property before the sale, Donal and
Celia cannot argue that it was impracticable for them to consult her.
Therefore, it could be said that Donal and Celia were in breach of their duty
as trustee.

 

Moreover,
another issue arising from the case is whether Una has the right to remain in
the property. Since the property was sold to a third party, the most suitable
approach to be taken would be to prove that Una has an overriding interest. An
overriding interest is an interest found in registered lands that binds third
parties although they are not on the register. These interests are set out in
s.29(2)(a)(ii) of the Land Registration Act13.
Beneficiaries could defeat the interests of the purchaser provided a) they had
an interest in land b) they actually occupied the land and c) no enquiry had
been made to them. Furthermore, the interest must not be overreached.

 

Before
1980, equitable interests under a trust for sale could not give rise to an
overriding interest. However, the case of Williams & Glyn’s Bank v Boland14
changed that as interests under a trust for sale may now give rise to an
overriding interest. Applying it to the case in hand, we could say that it is
clear that Una has a beneficial interest under a constructive trust in the
property that her and Donal used to share, meaning, she has an interest in the land.

 

Prior
to 1971, the courts interpreted ‘actual occupation’ as a term of law. However,
the case of Hodgson v Marks15
established that actual occupation meant ‘mere physical presence’, which can be
established as the facts of the case demonstrate that Una lived in the property
and was in actual occupation at the time of the disposition. Additionally, it
is necessary to show manifest physical presence and a continuing intention to
occupy. It could be argued that it was quite obvious that Una showed both when
she refused to leave the property when Donal asked her to.

 

Furthermore,
another element to be satisfied when examining whether a client has an overriding
interest is whether enquiry was made. Since Balwinder and Rafi did their own
conveyancing, it is reasonable to assume that they checked the register and
related documents. However, if that enquiry was done, they would have
discovered the existence of the beneficiary, Una.

 

Moreover,
overreaching is a concept intended to facilitate safe and simpler conveyancing,
and takes place when the payment of the purchase or mortgage is made to two
trustees, its purpose is to protect purchasers and mortgagees when there are
equitable interests in which they are unaware, since they only deal with legal
owners. Additionally, overreaching also protects owners of beneficial interests
in order for them to at least get their share of value of the property, and if
they don’t, they can sue the legal owners for breach of trust in order to
obtain it, meaning, Una may be able to sue to get her share of the proceeds of
the sale. This was demonstrated in the case of State Bank of India v Sood16,
where overreaching took place irrespective of the payment of capital monies
under a conveyance.

 

Possible Outcomes
for Una:

 

Since
Una established an overriding interest, that would mean that Balwinder and Rafi
took the property regardless of her interest. However, since it was
overreached, her beneficial interests would be converted from propriety
interests into financial interests. Therefore, she will be requested to leave
the property and should be given her share of the value of property. If that is
not done, she may sue Donal and Celia, being the legal owners for breach of
trust in order to receive her share.

 

In
other terms, as Donal and Celia did not consult Una, it would be a breach of
s.11 of TOLATA. However, this will not necessary mean that they would be able
to sue for breach of trust as ‘the consultation rules are of little effect’17
according to Roger Smith.

 

With
regard to the dividends of the shares, where the terms of the express agreement
are clear, the court will not normally depart from them. However, since they
weren’t, given the facts of the case, it appears that Celia paid the mortgage
for seven years between from 2003-2010 with a total of £26,250, whereas Una
paid the mortgage from 2010-2017 with an equal total of £26,250 and Donal paid
double this amount as he paid the mortgage between from 2003 and 2017.
Therefore, it is possible for the court to quantify the shares to 25:25:50 to
Celia, Una and Donal respectively. However, it is worth noting that as Una paid
for household expenses, this will also be taken into account by the court as
shown in Midland Bank v Cooke and another18, whereby that both direct and indirect financial contributions were
considered.

 

Another
possible remedy for Una would be propriety estoppel. Propriety estoppel is an
equitable remedy which prevents a person who made a promise to someone on land,
upon which that person relied to their detriment. This remedy also binds third
parties and therefore, may bind Balwinder and Rafi in relation to the property.
In order for a propriety claim to be successful, three elements need to be
fulfilled; assurance, reliance and detriment. Donal promised Una that the
property would be half hers if she shared the mortgage repayments, meaning that
her interest in land should have been foreseen. On top of that, she relied on
that promise as she acted on the faith of expectation, which was set out in
s.116 of the LRA19,
by repaying the mortgage and finally, she suffered detriment as she left her
secure tenancy and suffered financial loss to repay Celia’s share of the
mortgage.

 

 

 

 

 

 

 

 

 

 

 

 

Bibliography:

 

1.     Smith, Roger. Property Law. 7th ed. Pearson,2013.

2.     McFarlane, B., Hopkins, N. and
Nield, S. Land Law. 1st
ed. Oxford University Press, 2017.

3.     The Law of Property Act 1925

4.     Land Registration Act 2002.

5.     Trusts of Land and Appointment of
Trustees Act 1996

6.     Lyoyds Bank v Rosset 1990 1 AII
ER 11 11

7.     Otway v Gibbs 2001 WTLR 467

8.     Grant v Edwards 1986 2 AII ER 426

9.    
Lyods
Bank v Rosset 1990 1 AII ER 1111

10.  Stack v Dowden 2007 UKHL 17

11.  Jones v Kernott 2011 UKSC 53

12.  Oxley v Hiscock 2005 Fam 211

13.  Williams & Glyn’s Bank v Boland
1981 AC 487

14.  Hodgson v Marks 1971 Ch 892

15.  State Bank of India v Sood 1997
Ch 276

16.  Midland Bank v Cooke and another
1995 4 AII ER 562

1 The
Law of Property Act 1925

2 www.translegal.com/legal-english-dictionary/equitable-interest

3
Lyoyds Bank v Rosset 1990 1 AII ER 11 11

4 Otway
v Gibbs 2001 WTLR 467

5 Grant
v Edwards 1986 2 AII ER 426

6
Lyods Bank v Rosset 1990 1 AII ER 1111

7
Stack v Dowden 2007 UKHL 17

8
Jones v Kernott 2011 UKSC 53

9 Oxley
v Hiscock 2005 Fam 211

10 The
Trusts of Land and Appointment of Trustees Act 1996.

11
The Trusts of Land and Appointment of Trustees Act 1996.

12
The Trusts of Land and Appointment of Trustees Act 1996.

13
The Land Registration Act 2002

14
Williams & Glyn’s Bank v Boland 1981 AC 487

15 Hodgson
v Marks 1971 Ch 892

16
State Bank of India v Sood 1997 Ch 276

17 Property
Law, 7th ed, p.325

18 Midland
Bank v Cooke and another 1995 4 AII ER 562

19 Land
Registration Act 2002