Kean v McDonald & Ors

A claimant may establish a beneficial interest under a common-intention constructive trust without a written contract. The claimant must prove an agreement, arrangement or understanding actually reached between the parties, together with reliance on it and detrimental action. Payment made pursuant to the arrangement may constitute detrimental reliance. Where those elements are established, the absence of written formalities does not defeat the claim.

The claimant claimed the beneficial ownership of a freehold property formerly owned by the first defendant. He alleged that, through the first defendant’s brother, the parties agreed in 1997 that he would acquire the property for £10,000, which was paid in cash on his behalf.

The Crown Prosecution Service disputed the alleged arrangement and payment and contended that other parties had acquired interests through a later transfer or other dealings. The court therefore had to determine whether the common-intention arrangement and detrimental reliance were proved, and whether any competing claimant had acquired a legal or beneficial interest.

1. Claim allowed. The claimant established that he and the first defendant had reached the pleaded arrangement in 1997. The court accepted their evidence despite the challenges based on inconsistencies, criminal records and the absence of reliable contemporaneous documentation.
2. The claimant also established detrimental reliance. The court accepted the evidence that £10,000 had been paid in cash to the first defendant on the claimant’s behalf and that property documentation had been handed over. The court was not prepared to reject that evidence merely because contemporaneous documentation was absent, or to find that the source of the funds was illegitimate.
3. The relevant common-intention constructive trust doctrine requires an agreement, arrangement or understanding actually reached between the parties, relied on and acted upon by the claimant. In such circumstances, the absence of a written contract is not fatal. The doctrine was considered by reference to Lloyds Bank PLC v Rosset [1991] 1 A.C. 107 and Yaxley v Gotts [2000] Ch 162.
4. The purported transfer to Stableclock Ltd was not genuine, so Stableclock acquired no rights. The evidence did not establish that the fourth defendant had ever acquired any legal or beneficial interest.
5. The claimant was accordingly declared the sole beneficial owner. The parties were invited to agree the appropriate form of order, with any difficulty to be addressed on the hearing of costs.