Hussey v Palmer

A non-gratuitous contribution towards building an extension to another person's home may create an equitable proprietary interest where the legal owner would otherwise retain the benefit contrary to justice and good conscience. The court may impose a resulting or constructive trust, or grant an equitable charge, even though there was no express agreement for repayment and no express declaration of trust.

The appropriate relief depends on the circumstances. Where the contributor has left the home and the owner retains the improvement, the contributor may have an interest proportionate to the contribution and may obtain repayment or, if necessary, an order for sale.

The claimant, an elderly mother-in-law, paid £607 directly to a builder to construct a bedroom extension to her son-in-law's house. The extension was intended for her occupation while she lived with her daughter and son-in-law. After family relations broke down, she left the house and sought recovery of the money.

An earlier claim for money lent ended in a non-suit before the registrar. In the fresh County Court action, pleaded solely as a resulting-trust claim, the judge found on the claimant's evidence that the payment was a loan and dismissed the claim. The claimant appealed.

The central issue was whether her contribution to the extension gave her an equitable interest in the house despite the absence of agreed repayment terms.

1. Appeal allowed by a majority. Lord Denning MR and Phillimore LJ held that the claimant had an equitable interest in the house proportionate to her £607 contribution. A declaration of resulting trust was made in her favour.

2. Lord Denning MR held that the transaction was not an ordinary loan repayable on demand. The family arrangement contemplated the claimant's use of the new bedroom, and no intention to require repayment while she received that benefit could be inferred. Although pleaded as a resulting trust, the more accurate description was a constructive trust; the labels substantially overlapped on the facts.

3. A trust may be imposed whenever justice and good conscience require the legal owner to recognise another's interest. Contributions to the purchase, improvement or construction of a home can found that equity even without an agreement, declaration of trust, or intention to create one. The court must decide how the equity is to be satisfied in the particular circumstances.

4. It would be contrary to conscience for the defendant, after the claimant had left, to retain the house and the benefit of the extension without recognising her contribution. He could satisfy the equity by repaying £607. Failing repayment, she could seek an order for sale so that the sum could be paid to her.

5. Phillimore LJ agreed that the payment was not a gift and considered that, in the absence of clear repayment arrangements, a resulting trust was the more appropriate characterisation.

6. Cairns LJ dissented. He considered that the claimant's evidence established a loan, which was inconsistent with a resulting trust, though he would have considered allowing an amendment and retrial had his view been decisive.

• Court of Appeal: Allowed the claimant's appeal and declared a resulting trust in her favour.
• Reading County Court: His Honour Judge Duveen dismissed the resulting-trust claim after finding that the payment was a loan. Citation not stated in the judgment.