Samad v Thompson & Anor

An oral agreement that legal owners will hold property for another’s benefit may give rise to a common-intention constructive trust despite the absence of writing, where there has been significant detrimental reliance. The court may enforce the agreed beneficial ownership of the whole property, rather than merely quantify contributions, where the agreement and the parties’ conduct justify that result. Mortgage payments made by the claimant do not, without more, make mortgage borrowing by others the claimant’s contribution for resulting-trust purposes where the claimant is not liable to the lender. Proprietary estoppel may provide an alternative analysis where the same agreement and detrimental reliance are established.

The claimant sought a declaration that the defendants held a leasehold flat on trust for him and should transfer it to him or his nominee. He alleged that the defendants had agreed orally to acquire the property in their names because he could not obtain mortgage finance, while he would provide the deposit, meet the transaction’s costs and mortgage payments, and receive the property after the mortgage was discharged.

The defendants denied the agreement. They contended that the claimant had paid the deposit as an incentive for them to buy the property for themselves and that later payments were rent. The central issues were the credibility of the competing evidence, the resulting-trust consequences of the parties’ respective contributions, and whether the oral agreement and the claimant’s reliance established a constructive trust or proprietary estoppel.

1. Judgment for the claimant. The court found that the defendants had agreed to acquire the property for the claimant’s benefit, that the agreement was known to and authorised by both defendants, and that the claimant had provided the deposit, met the mortgage and service-charge liabilities, improved and furnished the property, and conferred other substantial benefits on the defendants.
2. Section 53 of the Law of Property Act 1925 required the declaration of trust to be evidenced in writing, but section 53(2) preserved resulting and constructive trusts. The absence of writing therefore did not prevent equitable relief where the claimant’s significant detrimental reliance made it unconscionable for the legal owners to deny the agreed beneficial interest.
3. A resulting trust did not give the claimant the whole beneficial interest. His direct contribution to the acquisition cost was calculated as £33,117 out of £369,599, producing a beneficial share of 8.96%. The mortgage advance remained the defendants’ money for this purpose because they alone were liable to the lender. Carlton v Goodman [2002] EWCA Civ 545 concerned materially different facts.
4. A constructive trust by common intention did arise for the entire beneficial interest. The reasoning was consistent with Rochefoucauld v Bousted [1897] 1 Ch 196 and supported by Lloyd’s Bank plc v Rosset [1991] 1 AC 107 and Jennings v Rice [2002] EWCA Civ 159.
5. Proprietary estoppel would also have been established. The claimant’s reliance was not narrow or technical, and the court considered that there was no real distinction on these facts between the constructive-trust and proprietary-estoppel analyses, applying Gillett v Holt [2001] Ch 210 and Oxley v Hiscock [2005] Fam 211.
6. The defendants owed fiduciary duties not to deal with the property inconsistently with the claimant’s beneficial ownership. They were required to procure discharge of their mortgage and outstanding charges, and to compensate the claimant for additional costs caused by any inconsistent security or refusal to permit mortgage payments.