Hudson v Hathway

Real property – Constructive trust – Detrimental reliance – Unmarried parties purchasing house jointly – Appellant seeking order for sale of property and equal division of proceeds – County court holding respondent entitled to whole of proceeds of sale under constructive trust – High Court upholding decision – Appellant appealing – Whether disposition of equitable interest in property in writing signed by appellant – Whether respondent required to show acted to detriment in reliance on agreement – Whether respondent acted to detriment – Appeal dismissed The parties started a relationship in 1990. They did not marry but had two sons. In 2007, with a mortgage, they bought a property in joint names, with no declaration of trusts. Both worked. The appellant’s earnings soon overtook those of the respondent. In 2009, the appellant left the respondent who stayed at the property with the children. The mortgage was converted to an interest only basis. It was paid from the joint bank account into which both their salaries were paid. Over the years, the appellant substantially paid the mortgage; his contribution far exceeded the respondent’s contributions. In 2011, the house was blighted by an oil spill, making it difficult to sell. Over the following 20 months, the parties had sporadic email discussions about financial arrangements. In October 2019, the appellant issued a claim under CPR part 8 and the Trusts of Land and Appointment of Trustees Act 1996 seeking an order for the sale of the property, with equal division of the proceeds. The respondent agreed that the house should be sold but contended that she was entitled to the whole of the proceeds under a constructive trust, following a common intention and agreement, evidenced by an exchange of emails, in reliance on which she had acted to her detriment. The county court held that the respondent was entitled to the whole of the proceeds of sale under a constructive trust, following a common intention and agreement that she would have the entire equity in the property. The High Court upheld that decision: [2022] EWHC 631 (QB); [2022] PLSCS 53. The appellant appealed. Held: The appeal was dismissed. (1) This appeal was concerned with property rights in land. The creation and transfer of such rights had, as a general rule, to comply with statutory formalities which were necessary to ensure that property rights in land were certain. The most important of such formalities were laid down by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (contracts for the sale or creation of interests in land must be in signed writing) and section 53(1) of the Law of Property Act 1925 (declarations of trust of land or an interest in land to be manifested by signed writing; and dispositions of subsisting equitable interests to be made by signed writing). Section 2 applied to executory contracts for the disposition of interests in land, but not to instruments which effected an immediate disposition. Section 53(1), on the other hand, applied to instruments which effected an immediate disposition of an interest (Rollerteam Ltd v Riley [2016] EWCA Civ 1291, [2017] Ch 109 considered). (2) The appellant’s emails were sufficient in point of form to amount to a release of his equitable interest in the house. They evinced a clear intention to divest himself of that interest immediately, rather than a promise to do so in the future. The emails also amounted to a “disposition” for the purposes of section 53. But they also needed to satisfy the statutory formalities. There was no dispute that the emails were “writing” as defined by schedule 1 to the Interpretation Act 1978. There was no relevant statutory definition of “signed”. The touchstone for determining what was a signature was an intention to authenticate the document. Applying that principle, it had been held that a printed name might amount to a signature, as might the name on a telegram form or a rubber stamp. Electronic communications in the form of emails were not known to parliament in 1925. But it was a general principle of statutory interpretation that an Act of Parliament was regarded as “always speaking”. That meant that the words of the Act should generally be interpreted to cover new technological developments which the legislators might not have foreseen, if they conformed to the policy of the Act in question. (3) There was a substantial body of authority to the effect that deliberately subscribing one’s name to an email amounted to a signature: for example, Neocleous v Rees [2019] EWHC 2462 (Ch), [2020] 2 P & CR 4. Given that so much correspondence took place nowadays by email rather than by letters with a “wet ink” signature, it was entirely appropriate that the law should recognise that technological developments had extended what an ordinary person would understand by a signature. Therefore, the appellant’s emails were “signed” for the purposes of section 53(1)(a) and (c) of the 1925 Act. It followed that, by those emails, the appellant released his beneficial interest in the property to the respondent. (4) The statutory formalities did not affect the creation or operation of constructive trusts. The constructive trust was a creature of equity. In that respect, equity operated by settled principles. It was necessary to clearly differentiate between what was needed in order to establish a beneficial interest of some kind and the process of quantifying that interest once established. Even where there had been an express agreement, it was still necessary to find detrimental reliance which was critical to the establishment of a constructive trust. Where it was established that the claimant made contributions referable to the acquisition of the property, such expenditure would perform the twofold function of establishing the common intention and showing that the claimant had acted upon it. Detrimental reliance was necessary even if there was a bargain. There was no difference between an intention formed on acquisition and one formed after acquisition (Grant v Edwards [1986] Ch 638; Oxley v Hiscock [2004] EWCA Civ 546, [2005] Fam 211; Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432; and Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776 considered). Accordingly, a party claiming a subsequent increase in her equitable share as a result of a post-acquisition changed common intention had to show detrimental reliance on that changed common intention. The trial judge was right to decide on the facts that the respondent had met the requirement of detrimental reliance. Alexander Learmonth KC and Zoë Saunders (instructed by Veale Wasbrough Vizards, of Bristol) appeared for the appellant; Michael Horton KC and Guy Holland (instructed by Ashtons Legal, of Bury St Edmunds) appeared for the respondent. Eileen O’Grady, barrister Click here to read a transcript of Hudson v Hathway