This Court of Appeal judgment from 27 November 2020 underlines the importance of parties seeking to establish a common intention constructive trust to demonstrate detrimental reliance (and to do it clearly, and to an objective standard). The case involved a property which was held in the Defendant's sole name, but was alleged to be held on trust for the parties equally. Whilst the Claimant in this case was – eventually – found to have shown sufficient evidence of detrimental reliance to meet the requirements, the guidance from the Court of Appeal in this judgement makes clear that those bringing such claims need to be sure to identify and plead this key element (even where not challenged on this at first instance).
The Claimant had lived with the Defendant and their children in the property in question between 2000 – 2012, said property having been bought by the Claimant's father 1999. In 2008, the Claimant's father had transferred the legal interest in the property into the Defendant's sole name for no consideration. From the available evidence (and bearing in mind that the Defendant's evidence attracted quite severe judicial criticism), it appeared that it had originally been intended that the property be transferred into the parties’ joint names, but a mortgage offer had only been taken out in the Defendant's name, hence it had ended up in his sole name. In 2012, the Claimant had left the property, and the Defendant continued to live there. The Claimant’s case was that a common intention constructive trust was established in 2008.
History of the proceedings
- The Claimant commenced proceedings seeking a declaration that the Defendant held the beneficial interest in the property on trust for both of them in equal shares; at first instance she was successful, with the District Judge finding there to be a common intention constructive trust in her favour.
- The Defendant appealed, and on first appeal to His Honour Judge Pelling QC, the District Judge’s decision was overturned. It was held by Judge Pelling that detrimental reliance had neither been sufficiently pleaded by the Claimant, nor established as a finding of fact by the District Judge.
- The Claimant accordingly appealed to the Court of Appeal and was successful. The Court of Appeal held that whilst what the Claimant had pleaded was different to what the trial judge had found, it was nevertheless sufficient to establish detriment.
Court of Appeal Judgment
At [62-63], Henderson LJ confirmed that: "Had this pleaded case been accepted in full by the District Judge, it seems to me that there would have been a clear detriment to Ms O'Neill [the Claimant] when the transfer was made into the sole name of Mr Holland [the Defendant], instead of into her sole name (or joint names) as had originally been intended. Viewed objectively, Ms O'Neill would have exchanged a situation where the Property was in the sole beneficial ownership of her father, and she was able to occupy it rent-free as her family home for the foreseeable future, for a situation where the beneficial interest was presumptively vested in Mr Holland alone, as the sole legal owner, and she would have to assert and establish an interest under a common intention constructive trust if she wished to share in the value of the Property or have any say in its future use. On those assumed facts, the court would in my judgment have had no difficulty in concluding that sufficient detrimental reliance by Ms O'Neill was made out, if the necessary common intention were first established. "Detriment" in this context is a description, or characterisation, of an objective state of affairs which leaves the claimant in a substantially worse position than she would have been in but for the transfer into the sole name of the defendant. Although the facts which constitute the detriment need to be pleaded, their characterisation is ultimately a matter for the court, in the light of all the evidence adduced at trial.…Accordingly, I do not consider that Ms O'Neill's pleading was inherently defective... She had pleaded sufficient facts to support her claim, and the case would have had to go to trial in order to see whether her claim succeeded."
Henderson LJ referred to a subsequent judgment of the District Judge, which referred to that Judge concluding that ‘all of those matters identify a finding of unconscionability’. At , Henderson LJ clarified that: "I would add… that if it were not possible to establish detrimental reliance by Ms O'Neill from the findings of the District Judge which I have discussed, I do not think that the finding of unconscionability which she added on 31 July 2018 could save the day for Ms O'Neill… the District Judge nowhere discussed the question of detriment explicitly, nor did she identify the matters which in her view satisfied the requirement. In those circumstances, a bare finding of unconscionability, without further explanation, cannot repair the deficiency".
In conclusion, the following lessons can be learnt from O'Neill v Holland  EWCA Civ 1583:
- Where seeking to establish a common intention constructive trust, do not hope to rely on 'unconscionability' without demonstrating detrimental reliance;
- Identify carefully the grounds upon which the claimant can show they have acted to their detriment on the basis of the common intention, and set it out clearly in the pleadings; and
- Even if not challenged on the evidence of this requirement by the opposing parties, or indeed by the judge, try to ensure that the Court is alive to it enough to make a finding of fact in respect of it. It might just save everyone going through two further rounds of appeal.