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Common intention constructive trusts, Settlor; settlors, Trusts

Trust derived from expectation

The lesser known “common intention constructive trust” is a difficult construct to appreicate.  However, this form of trust although formally “institutional” rather than “remedial” can provide a solution where no other legal construct can.

Part one of the lesson – the constructive trust

Constructive trusts often had their genesis in relationship breakdowns where a legislative remedy is not available.  These trusts can be found where contribtions have been made to property and reasonable expectations of an interest in the property have been held but no delivered up: Gillies v Keogh, Lankow v Rose.

Part two – the legal tension

A common intention requires that, and the fact that the intention will normally be required to be expressed (although it may be implied by conduct) creates a tension between the Court’s recognition of the parties’ expressed intention to change the ownership arrangements and the statutory unenforceability, under s 25 Property Law Act 2007, of oral express trusts  (truts of land other than resulting, implied, or constructive trusts must be in writing).

Part three – the thinking

A common intention trust exists through the finding of subjective (real) intention.  However, some commentators are of the opinion  that the concept of a constructive trust arising through an express common intention is anomalous: G E Dal Pont, Equity and Trusts in Australia.

Perhaps surprisingly given the progress made with constructive trusts, unlike in overseas jurisdictions, such trusts have not been much a part of the New Zealand Trust landscape.

Professor Nicola Peart summarised the legal position as at 1989 as follows under the main heading “Contributions made on the Basis of an Express or Presumed Common Intention” and under the sub-heading “Express Common Intention”. Stating:

“There is consensus that where defendant facto spouses have acted in reliance on an express common intention to share the beneficial interest of the property in dispute, the court will override the legal rights of the titleholder by imposing a trust to give effect to the express intention of the parties. Such common intention may be evidenced by an oral agreement which in the absence of a written memorandum is not specifically enforceable. If the Court is satisfied that the parties applied their minds to the issue of ownership of the property and actually agreed that it was to be shared, a trust may be imposed to give effect to that agreement because equity will not allow a statute to be used as an instrument of fraud. On the other hand, equity will not assist a volunteer. So the plaintiff will have to satisfy the court that he or she proved consideration for the beneficial interest claimed. If, for example, the non-owning spouse, in reliance upon the agreement, has contributed to the purchase price or assisted indirectly in the acquisition of the property, for instance, by taking responsibility for the household.”

 In a relatively early decision of the New Zealand Court of Appeal (Gough v Fraser) in finding that each party had an equitable interest in two properties held in the name of the de facto wife, Cooke J referred to Gissing v Gissing:

“I think the case is one of the kind mentioned by Lord Diplock in Gissing v Gissing [1971] AC 886, 905; [1970] 2 All ER 780, 790: there is an express agreement between the parties as to their respective beneficial interests in land conveyed into the name of one of them, an agreement which itself discloses the common intention required to create a resulting, implied or constructive trust.”

Part four – the ingredients

To found a common intention constructive trust there must be:

  • a common intention
  • this common intention must be unequivocal
  • the common intention must usually, by not necessarily come into existence when the property is acquired.  However,“compelling evidence” would be required in order to show that there had been an intention to alter the beneficial interests after the acquisition of the property: Stack v Dowden

It is not clear that the beneficiary must have acted to his or her detriment.

A common intention constructive trust can arise outside of an intimate relationship.

Where a common intention constructive trust is found the appropriate remedy will be determined on a case by case basis. However, where a common intention constructive trust is proved, it will be within the range of discretion available to the Court to effect a legal transfer of the property.

While a common intention constructive trust is to some extent a windfall or a variant of a gift, it is a useful remedy to keep in one’s armoury to prevent what can be an injustice, not perhaps from a “genuine loss” but where the “settlor’s” intentions might otherwise be disregarded, or re-written.

References:

  • Harvey v Beveridge [2013] NZHC 1718
  • N S Peart, “A Comparative View of Property Rights in De Facto Relationships: Are we all driving in the same direction?” (1989) 7 OLR 100 at 103
  • Gough v Fraser [1977] 1 NZLR 279 
  • Gillies v Keogh [1989] 2 NZLR 327
  • Lankow v Rose [1995] 1 NZLR 277
  • GE Dal Pont, Equity and Trusts in Australia (5th ed, Lawbook Co, Sydney, 2011) at 38-210
  • Stack v Dowden  [2007] UKHL 17, [2007] 2 AC 432

 

 

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