High Court rejects constructive trust and proprietary estoppel claims in acrimonious estate dispute

On 18 June 2021, in Pickering v Hughes & Ors [2021] EWHC 1672 (Ch), the High Court rejected an adult son’s constructive trust and proprietary estoppel claims to the beneficial interest in his late mother’s property because it was “not satisfied that any agreement, arrangement or understanding was ever made”. This case highlights the importance of being able to establish an agreement or assurance in order to advance a constructive trust or proprietary estoppel claim.

The facts

The mother and father purchased a house and surrounding 25 acres of land in June 1984 and were the registered legal owners. One of their adult sons moved into the property with his wife once the property had been renovated. Following a family dispute in 2015, the mother executed her final Will in June 2016 removing her sons and husband as beneficiaries and leaving her entire estate to her adult daughter. The mother served notice on the father to sever the joint tenancy in October 2016 and served notice to terminate the son and his wife’s licence to occupy the property in June 2017. The mother died later that year.

The claims

Following the mother’s death, the daughter and the son (together with his wife) brought competing claims for a declaration as to their beneficial interest in the property:

• The daughter claimed that the mother’s 50% equitable share in the property devolved to her as personal representative under the mother’s Will (of which she was the sole beneficiary)
• The son and his wife claimed that they owned the entire beneficial interest in the property under a common intention constructive trust or by proprietary estoppel. They argued that an oral agreement or representation had been made with or by his parents in around 1983-4 that the property belonged to them and that they had acted in reliance on it to their detriment. Among other things, they argued that they had funded significant renovations to the property and they had allowed his parents to live at a property that his parents had gifted to them rent-free.

The court considered the legal principles applicable to common intention constructive trusts and proprietary estoppel claims and noted that the facts needed to establish them are “closely analogous”.

For a common intention constructive trust, the claimant must demonstrate:

1. A common intention with the legal owner that the claimant has a beneficial interest in the property, to be established by evidence of an express agreement or to be inferred from the parties’ conduct; and
2. That the claimant acted to their detriment on the basis of that common intention, such that it would be inequitable for the legal owner to deny the claimant’s interest.

The court considered the House of Lords judgment in Lloyds Bank plc v Rosset [1991] 1 AC 107 which held that: “The first and fundamental question which must always be resolved is whether…there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially”.

For proprietary estoppel the claimant must demonstrate:

1. A representation or assurance of sufficient clarity;
2. Reliance by the claimant; and
3. Detriment to the claimant in consequence of their reasonable reliance.

Judgment and reasons

The High Court found in favour of the daughter and rejected the son’s constructive trust and proprietary estoppel claims because it was not satisfied that any agreement or assurance had been made. The judge’s reasons included:

• The failure to record or assert the alleged agreement for over 30 years. “Given the significance of the alleged agreement, affecting as it did, the ownership of the most substantial asset held by Nora and Charles and the home of John and his family, it was to be expected that there would be a record of it, albeit an informal one. It is, in my judgment, simply not credible that John and Lorraine would have left the issue of documentation of their ownership rights in abeyance for over 30 years… Documenting the agreement would have been inexpensive and easy to do at any time”. “The fact that the alleged 1984 Agreement was not only undocumented but also not mentioned to anyone, casts further doubt on the defendants’ case”.
• The nature of the family’s business. The judge noted that the family were “business people who dealt with properties frequently” and differentiated their position from cohabiting partners in a romantic relationship, whose failure to record or assert beneficial ownership “may well not cast doubt on the fact that the agreement or representation was made”.
• Inconsistency with the Wills documentation. The alleged agreement was not mentioned or reflected in any of the parents’ sequence of Wills made over a 17-year period or in the Will file held by their solicitors. The judge opined that there was “no convincing explanation” as to the son’s failure to seek to ensure that his parents’ Wills reflected the alleged agreement and that his family’s interests were thereby protected.
• Inconsistency with other legal documents. The charges over the property, draft agricultural tenancy agreements and the mother’s notice of severance to the father were prepared on the basis that the parents were the legal and beneficial owners of the property.
• Distinction between occupation and beneficial ownership. The judge accepted that there must have been “some agreement or understanding” between the parents and the son together with his wife regarding their occupation of the property but “that did not entail any agreement or representation as to a transfer of the ownership”.

Upon finding that no agreement or assurance had been made, the judge rejected the son’s and his wife’s evidence of alleged detrimental reliance because the property was “far more impressive and commodious” than the “comparatively modest” property that had been gifted to them and occupying the property rent-free “amounted to a very significant benefit to them”.

Closing thoughts

This case demonstrates that witness evidence must be credible and consistent with background facts and contemporaneous documents in order to establish an oral agreement or assurance as to beneficial ownership of property.  Moreover, it provides a salutary warning that a failure to record or assert beneficial ownership of property over a substantial period of time may prove fatal to the outcome of a constructive trust or proprietary estoppel claim, particularly where any such claim directly conflicts with the express testamentary wishes of the legal owner set out in the Will.