Englefield v Steinberg

A gratuitous assurance of lifelong occupation can give rise to a constructive trust where the claimant acts in reliance on it and it would be unconscionable for the promisor to withdraw the assurance. Reliance must be proved for a constructive trust, although proprietary estoppel may involve a presumption of reliance where a reasonable person would have relied.

Where the claimant abstains from preventing a transaction and enables the property to be used as security in reliance on the assurance, the constructive trust may confer a rent-free life interest binding on later equitable chargees. The court may nevertheless order a sale under the Trusts of Land and Appointment of Trustees Act 1996, protecting the life interest by actuarial valuation and payment from the proceeds.

The claimant solicitors sought possession and sale of 11 Avenue Close to enforce a charging order absolute securing sums owed by Jonathan Roger Steinberg. His mother, Sheila Steinberg, was added as a Part 20 claimant after asserting that she had a lifelong right to occupy the property rent-free.

The property had originally been occupied under an underlease granted to her husband, but the lease was surrendered when a company acquired the long leasehold interest. In 1981 the company transferred the property to Jonathan Steinberg. Sheila Steinberg remained in occupation and relied on his assurance that she could remain for life. The central issues were whether that arrangement created an enforceable property interest and, if so, whether the claimant’s charge could be realised by sale.

1. The court rejected any contention that Sheila Steinberg had a tenancy, statutory tenancy or contractual right to occupy. Her earlier underlease had been surrendered, and the 1981 arrangement lacked contractual consideration and could not be construed as a lease for life under section 149(6) of the Law of Property Act 1925.

2. A gratuitous promise can support a constructive trust where the promisee proves reliance and the promisor’s conscience is sufficiently affected that it would be unconscionable to withdraw the promise. This differs from proprietary estoppel, where reliance may be presumed if a reasonable person would have relied: Grant v Edwards [1986] Ch 638; Greasley v Cooke [1980] 1 WLR 1306.

3. On the evidence, Jonathan Steinberg had assured his mother that she could occupy the property for life. She relied on that assurance by abstaining from preventing the company’s transfer of the property and by signing consents enabling him to raise secured borrowing. He therefore became a constructive trustee, obliged to permit her to remain rent-free for life.

4. The resulting life interest was prior to and binding on the claimant’s later equitable charge. It also constituted an overriding interest under section 70(1)(g) of the Law of Property Act 1925.

5. The priority of the life interest did not prevent a sale. Exercising the powers under sections 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996, the court directed that Sheila Steinberg should have two months to find a purchaser willing to buy subject to her interest. If no contract was exchanged, the property was to be sold with vacant possession. Her life interest was to be valued actuarially and paid to her absolutely from the proceeds, after the sale costs and HSBC’s prior charge, followed by the claimant’s costs and charges and then service charge arrears.

First-instance decision. No appellate history was stated in the judgment.