Clarke v Harlowe

An express declaration of trust in a conveyance normally conclusively determines the beneficial interests, absent fraud or mistake. The parties may exceptionally agree to vary those interests after acquisition, but expenditure on improvements alone will not usually establish such an agreement.

Equitable accounting depends on breach or failure to perform an obligation owed between co-owners. In ordinary cohabitation, accounting generally begins on separation because the common arrangements supporting the trust then end. Pre-separation expenditure will not ordinarily be brought into account unless there is a clear breach of an agreement to contribute to specified outgoings or improvements.

The claimant and defendant had cohabited for approximately 25 years. They acquired Bank House in joint names under an express declaration that they held it as beneficial joint tenants. The defendant paid the mortgage and the cost of substantial improvements made while the relationship continued.

After separation, Bank House was sold and the net proceeds were held pending agreement. The defendant accepted that the express declaration governed the beneficial shares but sought credit for half the improvement expenditure through equitable accounting. The preliminary issue was whether equitable accounting could apply to improvements made before separation.

1. Express declaration of trust. The express declaration in the transfer was conclusive as to the parties’ beneficial interests, there being no allegation of fraud or mistake. The parties could exceptionally agree informally to vary their interests after acquisition, but expenditure of time or money on improvements would not normally justify that inference.
2. Nature of equitable accounting. Equitable accounting requires a breach of, or failure to comply with, an obligation owed by one co-owner to the other. The precise obligation may vary between cases, but some obligation is necessary.
3. Effect of separation. In ordinary cohabitation, the common purpose of the implied trust and the parties’ arrangements for outgoings ordinarily subsist during the relationship. Payments made in accordance with those arrangements therefore do not ordinarily give rise to equitable accounting. After separation, the common arrangements generally end and each party becomes responsible for a proportionate share of outgoings; an account may then include occupation rent and other appropriate adjustments.
4. Exception. Equitable accounting may arise before separation where it is clearly shown that a party breached an arrangement to pay for specified improvements or outgoings. The authorities concerned with post-separation accounting were consistent with that qualification.
5. Application and order. The improvements were made during the relationship, and it was understood that the defendant would pay for them. The claimant had no obligation to contribute and had breached no arrangement. There was therefore no basis for crediting the defendant with half the improvement costs. No equitable accounting was ordered in respect of those costs.

First-instance preliminary ruling in an application under the Trusts of Land and Appointment of Trustees Act 1996. No prior decision is stated in the judgment.