No Trust Created Where Intentions Not Clear

When a couple’s conduct over a period of time is consistent with co-ownership of a property, it might be thought that the property would come to belong to them both, no matter what the legal form of ownership may be. Such assumptions are often tested in divorce cases when a property is owned by one or other of the divorcing couple.

Recently, a case came before the Court of Appeal dealing with just such an issue. It involved a dispute over the financial settlement decided by the lower court.

The divorced couple lived in the family farm, which was originally owned by the mother of the husband. Latterly, the husband and his mother had created a partnership to run the farm and the farmhouse was then owned by the two of them as joint tenants.

Early in the couple’s relationship, the wife had helped out with the farming business and took part in business decisions regarding the farm. She received no payment for this. She also bought additional land, which added value to the property, and subsequently operated a successful riding school on the farm. This was initially financed by an interest-free loan from a company owned by her husband. She later incorporated her business.

Following the break-up of their marriage, the wife moved out of the farmhouse and claimed a share in the farm in the divorce settlement. Neither her ex-husband nor his mother had ever raised the question of the wife’s ownership specifically and nor had she. However, she claimed that her right to a share arose because her ex-husband and his mother had conducted themselves in a manner which supported the view that there was a common intention to hold the farm jointly – in legal parlance that a ‘constructive trust’ had arisen in her favour. The judge awarded her a quarter share in the value of the farm. Her ex-husband and mother-in-law appealed.

In the Court of Appeal, the judge took a different view, holding that the conduct of the parties did not necessarily prove the fact that the ex-wife was intended to have a beneficial interest in the farm. In the absence of any legal agreement regarding the ex-wife’s ownership of the farm, he could not see how encouragement of the horse-riding business or her minor role in the farming business could be interpreted as constituting sufficient evidence that a constructive trust had been created. In any event, her claim would be counterbalanced by the support she was given when setting up her business.

Says Rupinder Bains “In truth, claims of this nature can be a bit of a lottery and much will depend on the availability of contemporary evidence of the intentions of the parties involved. The simplest way to avoid an appearance in court is to make sure that the intentions of the parties are properly evidenced in the first instance so that, in the event of a later dispute, the position can be readily resolved. We can assist you in making sure that your assets are legally held as you wish them to be and can also advise you on planning to minimise capital taxes.

Partner Note

Morris v Morris and others CA, 22 Feb 2008
See The Solicitors Journal, 4 March 2008.

This publication contains information which is intended for general guidance only. The information is provided in a concise form and is not substitute for obtaining legal advice. If you would like advice specific to your circumstances, please contact us.