Shield v Shield & Anor

In determining whether shares were held on trust for an adult child, the court applied ordinary Chancery principles. A common intention constructive trust requires a common intention that the claimant should have a beneficial interest and detrimental reliance on that intention. Proprietary estoppel likewise requires an assurance, reliance and detriment, assessed in the round. An expectation that property will be left by will does not create a binding trust or estoppel where the parties deliberately agreed that the expectation should remain non-binding for tax reasons. Property remains available to its legal owner during life, including for dealings with creditors, and forms part of the estate unless previously disposed of.

The judgment concerned a preliminary issue in financial remedy proceedings following the separation of the applicant wife and respondent husband. Their son intervened, claiming that the husband’s controlling shareholding in R A Shield Holdings Limited was held on trust for him subject to the husband’s life interest. Alternatively, he claimed proprietary estoppel.

The son had moved to take over the family business and had received approximately half of its shares during a restructuring. The parties had expected that the parents’ remaining shares would later pass to him by will, but tax advice required that this remain an intention rather than a binding agreement. The central issue was whether that arrangement created an enforceable beneficial interest.

1. Preliminary issue dismissed. The husband’s shares remained his property. They were not held on trust for the intervenor and were available as a resource of the husband in the financial remedy proceedings.
2. The court applied the same principles as would apply in the Chancery Division. A common intention constructive trust requires a common intention that the non-owner should have a beneficial interest and conduct in detrimental reliance on that intention, following Drake v Whipp [1996] 1 FLR 826. The parties had agreed that the son would take over the running of the company and receive half its value, but had not made a binding agreement that the husband’s remaining shares would pass to him on death.
3. The tax arrangements were decisive. The parties had expressly agreed not to create a binding agreement concerning the testamentary transfer of the shares. The husband therefore remained free to sell, charge or otherwise deal with them during his lifetime. The shares would also have been available to creditors and, unless previously disposed of, would form part of his estate.
4. The proprietary estoppel claim failed for the same reason. The parties could not both maintain that the arrangement was deliberately non-binding for tax purposes and assert an enforceable promise concerning the shares. In any event, the son had not established the necessary detriment. He received half the company’s value immediately, together with employment and other substantial benefits.
5. The court noted that the parties’ wills were consistent with a non-binding expectation but did not prove a binding agreement, since wills could be changed at any time. The evidence concerning later wills and codicils was of marginal relevance to the issue.