Day v Day

Where one person provides purchase money for property acquired in another’s name, a resulting trust may arise in proportion to the parties’ contributions unless clear evidence establishes a gift or a different common intention. A common intention constructive trust requires a sufficiently firm intention or agreement communicated between the parties. A later will cannot, without more, alter an existing beneficial interest. Any disposition of that interest must comply with Law of Property Act 1925, section 53(1)(c), unless a fresh constructive trust arises through detrimental reliance. A change-of-position defence may give full credit for payments made under a mistaken belief of sole entitlement where the payments were irrevocable and there is no evidence they would otherwise have been reduced.

The claimant, the widow of John Day, claimed a beneficial share in the proceeds of sale of a property acquired by John’s mother, Elsie, under the right-to-buy scheme. John had provided the cash purchase price, while the property was conveyed into Elsie’s sole name. Elsie first made a will leaving the property to John, but later made a will leaving it to the defendant, her grandson, who received the sale proceeds after her death.

The claimant relied principally on a common intention constructive trust, alternatively on a resulting trust. The defendant contended that John’s contribution was a gift, alternatively that any beneficial interests should reflect the parties’ contributions. The central issues were the parties’ intention at acquisition, the effect of the later will, and the defendant’s change-of-position defence.

1. Resulting trust. The action succeeded on the claimant’s secondary case. The property was held for Elsie and John in undivided shares of 60 per cent and 40 per cent respectively, reflecting the agreed treatment of Elsie’s right-to-buy discount and John’s cash contribution. The evidence did not establish either a gift or a different beneficial arrangement.
2. Constructive trust. The evidence that the property was intended to provide a future retirement home or nest egg did not establish a firm agreement that Elsie would hold only for life with a remainder to John. That evidence was equally consistent with Elsie owning a beneficial share which she could leave to John by will. A common intention must be communicated; property rights cannot be based on telepathy. The alternative two-stage approach discussed in Oxley v Hiscock would not have produced a different result on the evidence.
3. Gift and later will. It was inherently improbable that John intended to give his mother the whole of the money he had borrowed to fund the purchase without acquiring any interest. Elsie’s 1989 will could operate only on her own beneficial interest. It did not transfer John’s existing 40 per cent interest. Any such disposition would have required writing under section 53(1)(c) of the Law of Property Act 1925, unless a fresh constructive trust could be established. No detrimental reliance by Elsie supported such a trust.
4. Change of position. The defendant was entitled to full credit for payments made to family members and for the net funds introduced into the estate. He had made the payments in the mistaken belief that he alone was beneficially entitled and had parted with the money irrevocably. There was no evidence that he would have made smaller or no payments had he known of John’s 40 per cent interest.
5. The claimant’s proposed late secret-trust case was refused. It would have radically altered the pleaded case and unfairly required the defendant to meet a claim based largely on surmise and hearsay. The objection to the documentary bundle was abandoned; privilege had been waived.