Kleinhentz v Harrison & Anor

A common intention constructive trust requires proof of an actual common intention that the claimant should have a beneficial interest, together with detrimental reliance linked to that intention. Shared occupation, domestic arrangements and payments towards household expenses do not, without more, establish such an interest. An express agreement may be assessed in the light of subsequent evidence when deciding which account of the alleged agreement is reliable. A contractual promise conditional on receiving a future gift or inheritance is not triggered by sale proceeds derived from earlier gifts. A proprietary estoppel claim also requires an assurance, reliance and detriment; a contractual right to payment does not necessarily create an equitable interest in particular proceeds.

The claimant had lived with the first defendant for many years in properties purchased and legally owned solely by the first defendant. After being asked to leave, the claimant signed an agreement relinquishing any claim to the property in return for a conditional promise of at least £250,000 and an obligation to make a will in his favour.

The property was later sold, and the proceeds helped fund a property acquired in the second defendant’s name. The claimant alleged that he had beneficial interests in the properties, that the sale proceeds triggered or varied the payment obligation, and that he could trace the proceeds into the second defendant’s property.

1. Beneficial ownership. The claimant failed to displace the presumption that sole legal ownership reflected sole beneficial ownership. Applying the common intention constructive trust principles summarised in Lewin on Trusts, the evidence did not establish an express agreement that the properties were to be beneficially shared. The fact that the properties were intended to be a home for both parties was distinct from an agreement to share beneficial ownership.
2. The court applied the distinction in Lloyds Bank Plc v Rosset [1991] 1 AC 107 between an express agreement and an intention inferred from conduct. Subsequent conduct could be considered when testing the reliability of competing accounts, but the evidence did not support the claimant’s account. Regular payments were contributions to household expenses rather than detrimental capital contributions. The court also noted, obiter, that refraining from acquiring another property could in principle amount to detriment if causally linked to the asserted common intention, although such cases would be rare.
3. 2011 Agreement. Construing the agreement in its factual context, the promise to pay at least £250,000 was conditional on the first defendant receiving a future unrestricted gift from his father or an inheritance. Sale proceeds from the property did not satisfy that condition because they derived from earlier gifts. The separate obligation to make a will in favour of the claimant was unconditional.
4. There was no subsequent variation requiring payment from the sale proceeds. The court nevertheless observed that relinquishing a doubtful claim could logically constitute consideration for a variation, although it was unnecessary to decide the issue.
5. Proprietary estoppel and tracing. The claim could not succeed because no relevant assurance had been made. The court also expressed the tentative view that a contractual right to payment, without an obligation to pay from identified proceeds, would not necessarily give rise to an equitable interest in those proceeds.
6. The claims against both defendants were dismissed in their entirety.