Insol Funding Company Ltd v Cowlam & Ors

Where a domestic property is bought in joint names without a valid signed declaration of trust, equity presumes beneficial joint tenancy unless a different common intention is proved. That intention may change over time. A constructive trust reflecting the changed intention requires reliance which makes it inequitable to deny the claimed interest.

An equity of exoneration depends on the parties’ express, implied or presumed intentions. A person who voluntarily promises to pay another co-owner’s secured debt does not thereby become a guarantor or surety. Equitable subrogation remains a flexible but principled remedy and is unavailable where its grant would defeat the parties’ contractual allocation of rights or operate unjustly.

The Part 20 Claim concerned the beneficial ownership of a jointly registered family home and the parties’ respective rights against the proceeds of sale. Ms Cowlam claimed an 80% beneficial interest, relying on a later agreement, constructive trust principles and, alternatively, proprietary estoppel. She also claimed priority over Insol Funding Company Limited’s equitable charge over Mr Cowey’s share through an equity of exoneration or equitable subrogation.

Insol disputed those claims and asserted standing to participate because it held an equitable charge over Mr Cowey’s interest. Mr Cowey did not participate. The central issues were the effect of the unsigned TR1, whether the parties’ common intention had changed, and whether payment under the settlement agreement gave Ms Cowlam proprietary rights over Mr Cowey’s residual share.

1. Standing and settlement agreement. Insol remained entitled to be heard on the extent of Mr Cowey’s share and to enforce its equitable charge against the proceeds of sale. The settlement agreement exhausted Insol’s practical ability to enforce the charge by requiring a sale once the settlement payment had been made, but it preserved Insol’s right to pursue Mr Cowey for the balance secured by his share. Insol was not estopped from adducing evidence or making submissions about that share.
2. Beneficial ownership. The unsigned TR1 did not satisfy Law of Property Act 1925, section 53(1)(b), and therefore did not create an express beneficial joint tenancy. The presumption that equity follows the law on a joint purchase of a family home applied, consistently with Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2011] UKSC 53. That presumption was displaced by the parties’ 2001 agreement that Ms Cowlam should have 80% and Mr Cowey 20%, together with their subsequent conduct.
3. The altered common intention was supported by Ms Cowlam’s reliance. From 2001, and particularly after 2004, she assumed responsibility for the mortgage and property expenses and acted as the effective 80% owner. It would therefore be inequitable to deny effect to the agreement. A constructive trust arose under which Ms Cowlam held 80% and Mr Cowey 20% as tenants in common.
4. Exoneration. Although an equity of exoneration may create a proprietary right against a co-owner’s interest, it arises from the parties’ relevant intentions. Ms Cowlam entered the settlement agreement voluntarily, in her own right and without Mr Cowey’s involvement. She was not acting as his guarantor or surety, so no equity of exoneration arose.
5. Subrogation. The authorities, including Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 and Menelaou v Bank of Cyprus UK Ltd [2016] AC 176, established flexibility within principled limits. Ms Cowlam’s payment was neither a guaranteed debt payment nor an advance made in expectation of security. Extending subrogation to these facts would diminish Insol’s expressly preserved contractual right to recover from Mr Cowey’s share and would be unjust to Insol. No equitable subrogation was available.
6. The beneficial interest was declared to be held on constructive trust as tenants in common, 80% for Ms Cowlam and 20% for Mr Cowey. Ms Cowlam had no further rights over Mr Cowey’s share by way of exoneration or subrogation.

The judgment records earlier County Court and Court of Appeal proceedings concerning the original loan and charge, including the Court of Appeal decision at [2010] EWCA Civ 711. Those proceedings are part of the background to the present Part 20 Claim. The present judgment was a first-instance determination in the High Court and was not itself an appeal.