Lloyds Bank Plc v Rosset

The House of Lords allowed the bank's appeal and held that the trial judge's finding that Mrs Rosset acquired a beneficial interest by way of constructive trust before completion could not be supported on the facts. The court emphasised the fundamental distinction between (a) an express agreement, arrangement or common intention that beneficial ownership should be shared (which, if found, can be enforced if followed by detrimental reliance) and (b) an inference of a common intention drawn solely from the parties' conduct while occupying and improving a home. The court held that, in the absence of an express agreement, the relatively modest and domestic contributions made by Mrs Rosset to renovation work before completion were insufficient to justify inferring a constructive trust.

Background and parties:

The dispute concerned Vincent Farmhouse, purchased by Mr Rosset in his sole name on 17 December 1982 and charged to Lloyds Bank to secure an overdraft. Mrs Rosset, who had lived at the property as matrimonial home and later counterclaimed, alleged that she had a beneficial interest under a constructive trust arising from a common intention and her contributions in renovating the house, and that this equitable interest was an overriding interest by reason of her actual occupation under section 70(1)(g) of the Land Registration Act 1925.

Procedural history:

• Trial: Judge Scarlett found Mrs Rosset had a beneficial interest arising by constructive trust and gave judgment as to the existence of that interest (quantum to be determined later);
• Court of Appeal (13 May 1988): majority found Mrs Rosset was in actual occupation on the relevant date and affirmed on that issue but were split on factual findings;
• House of Lords (29 March 1990): heard the bank's appeal and allowed it, setting aside the Court of Appeal order and restoring the trial judge's order as between the bank and Mrs Rosset.

Nature of the claim and issues:

• Mrs Rosset sought recognition of a beneficial interest in the property (constructive trust or proprietary estoppel) arising from an alleged common intention and her work on renovations;
• Key issues framed: (i) whether there had been an agreement, arrangement or common intention before acquisition that Mrs Rosset should have a beneficial share; (ii) if not, whether her conduct alone supported an inference of a common intention giving rise to a constructive trust; and (iii) (incidentally) whether any equitable interest would constitute an overriding interest under section 70(1)(g) of the Land Registration Act 1925.

Court's reasoning:

• The court stressed the primary question is whether, independently of later conduct, there was any express agreement or common intention to share beneficial ownership; such a finding requires evidence of express discussions or representations;
• In the absence of such an express agreement, the court may rely on contributions and conduct to infer a common intention, but the authorities indicate that direct financial contributions to purchase or mortgage payments readily justify such an inference while modest domestic contributions are, at least, much less likely to do so;
• Applying these principles, the House of Lords concluded that the conversations and the pre-completion renovation work by Mrs Rosset were insufficient to support an inference of a common intention to share the beneficial ownership or to found a constructive trust; accordingly her asserted equitable interest failed.

Appeal allowed. The House of Lords held that the trial judge's finding that Mrs Rosset acquired a beneficial interest by constructive trust prior to completion was unsustainable on the facts. The court reasoned that, absent an express agreement or clear common intention before acquisition, the modest domestic contributions relied on could not justify inferring a constructive trust.

Trial before Judge Scarlett (judgment dated 22 May 1987); Court of Appeal decision (order dated 13 May 1988, as amended 15 June 1988) in favour of Mrs Rosset on the majority view; appeal to the House of Lords ([1990] UKHL 14), which allowed the bank's appeal, set aside the Court of Appeal order (save as to costs) and restored the trial judge's order as between the bank and Mrs Rosset. The cause was remitted to the Queen's Bench Division for further directions consistent with the House of Lords' judgment.