Huntingford v Hobbs

Joint venture — Purchase of house by two parties as joint venture — Joint names — One party providing cash contribution — Joint and several liability to building society for repayment of mortgage loan for balance — Beneficial ownership in property — Amount of interest — Declaration in transfer that survivor of transferees could give a valid receipt for capital money arising on a disposition — Whether declaration constituted declaration of trust — First instance decision that no declaration of trust effected — Appeal allowedMr Huntingford and Mrs Hobbs together purchased a house known as 3 Carters Lane Cottages, Old Woking, Surrey, at a purchase price of £63,250. Mrs Hobbs provided £38,860 in cash while £25,000 was provided by way of an advance on mortgage from the Woolwich Equitable Building Society supported by an endowment policy effected with the Scottish Amicable Life Assurance Society. The mortgage was executed by each of the borrowers so that both undertook liability to the building society. Mr Huntingford was to pay the interest on the mortgage and all premiums on the endowment policy, which would, if it ran full term, suffice to cover the repayment of the mortgage debt. The property was transferred into the joint names of Mr Huntingford and Mrs Hobbs and their title as joint proprietors was registered on March 7 1986. The transfer contained no express declaration as to the equitable interest in the property. Mr Huntingford also paid for the erection of a conservatory and spent money on the garden, paid for jobs around the house and paid household bills. In August 1988, Mr Huntingford left the property and subsequently issued an originating application asking the court to order that the property be sold under section 30 of the Law of Property Act 1925. The value of the unencumbered freehold interest in the property was £95,000 and the liability under the mortgage was £25,000. The Guildford County Court ordered the property to be sold and the net proceeds of sale divided as to £3,500 to Mr Huntingford and the balance to Mrs Hobbs, provided that the order for sale be not enforced for three months and be discharged if within that time Mrs Hobbs should pay the sum of £3,500 to Mr Huntingford upon his transferring to her his interest in the property and his interest in the endowment policy. Mr Huntingford appealed against that order. He claimed that the transfer of the property to the parties contained a declaration of trust by which the parties declared themselves as holding the legal title to the property in trust for themselves as joint tenants beneficially. The transfer was in the short printed Land Registry Form 19(JP). On the second page it was stated: “The transferees declare that the survivor can give a valid receipt for capital money arising on a disposition of the land”. Held The appeal was allowed. 1. The question for the court was simply whether the declaration in the transfer that the survivor of the trustees could give a valid receipt for capital money arising on a disposition of the land constituted a declaration of trust. For the purpose of answering that question, the meaning of the words used was alone material. According to their fair meaning they either did or did not constitute a declaration of trust. The words used in the transfer in the present case did not constitute a declaration of trust: see Harwood v Harwood [1991] 2 FLR 274. 2. Nevertheless, it was plain that the parties intended that Mr Huntingford should have some beneficial interest in the property. The difficulty lay in determining the amount of that beneficial interest having regard to the proper inferences to be drawn from what the parties said and did. 3. In the absence of any declaration of trust, the parties’ respective beneficial interests in the property fell to be determined not by reference to any broad concepts of justice but by reference to the principles governing the creation or operation of resulting, implied or constructive trusts, which by section 52(2) of the Law of Property Act 1925 were exempted from the general requirements of writing imposed by section 53(1). 4. Drawing the most likely inference from the conduct of the parties in the present case the proper common intention to impute to the parties was that, as at the date of purchase, Mrs Hobbs should be treated as having contributed the whole of the sum borrowed on mortgage and that the property should be owned by the two of them in shares proportionate to such contributions: see Cowcher v Cowcher [1972] 1 WLR 425 at p 431E; In re Gorman [1990] 1 WLR 616. 5. On the basis of the parties’ respective contributions and as at the date of original completion of the purchase: (a) Mrs Hobbs was beneficially entitled to 38,860/63,250 (say 61%) of the property or its proceeds of sale; (b) Mr Huntingford was beneficially entitled to 25,000/63,250 (say 39%) of the property or its proceeds of sale. Those were the basic proportions which should govern the calculations of the sums which the parties were to receive out of the proceeds of sale of the property or the price which Mrs Hobbs was to pay on the purchase of Mr Huntingford’s interest. After payment of all sums due under the mortgage, the net proceeds of sale of the property should be paid as to £25,000 to Mrs Hobbs (the amount still outstanding under the mortgage which had not been discharged) and £2,000 to Mr Huntingford (for the erection of the conservatory) and the balance should be apportioned in the share 39% to Mr Huntingford and 61% to Mrs Hobbs. 6. Per Dillon LJ: There was no express declara-on the transfer that the transferees were entitled to the land for their own benefit but they were so entitled. There was no conceivable basis, in the matrix of facts against which the transfer was executed, on which anyone else could have had a beneficial interest whatsoever. If that were correct it necessarily followed that the declaration in the transfer that the survivor of the parties could give a valid receipt for capital money arising on disposition of the land had the same effect as In re Gorman and indicated the transferees’ intention to be beneficial joint tenants of the property. Otherwise the declaration in the transfer was inappropriate and the other alternative in the form of transfer should have been adopted, ie that the survivor could not give a valid receipt for capital money. The Harwood case was distinguishable and of no assistance in this case. Nicholas Price (instructed by G Raymond Burn & Co, of York) appeared for the appellant; and Suzanne Shenton (instructed by Turner Foster & Kyle, of Woking) appeared for the respondent.