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Common intention constructive trusts, constructive trusts, Express Trust

Common intention constructive trust deconstructed

The common intention constructive trust is a rare beast.  Its remedial potential had a brief moment of sun until the Court of Appeal delivered its decision in Harvey v Beveridge.

The facts of Harvey v Beveridge can be summarised as follows:

  • Mr Beveridge was befriended by Dr Byrd who provided him with a home in a residential unit
  • No significant contributions were made by Mr Beveridge, who appears to have been encouraged by Dr Byrd to treat the unit has his own
  • Although Dr Byrd expressed his intentions that the unit should belong to Mr Beveridge (and there is no evidence this ever changed), no legal transfer was made and no will could be located that provided for this
  • When the executor of Dr Byrd’s estate issued proceedings to evict Mr Beveridge, Mr Beveridge issued a separate proceeding claiming a declaration that Dr Byrd’s executor holds the unit on constructive trust for him and seeking an order that she transfer the unit to him
  • The executor’s application for summary judgment was dismissed on the ground that she had failed to establish that Mr Beveridge had no defence to the claim -“[t]he Associate Judge reaching this conclusion because, on a review of the elements of a “common intention” constructive trust, he did not find any element which Mr Beveridge must establish “to be indisputably missing on the evidence available at summary judgment.””

Common intention constructive trust

The elements of a common intention constructive trust as expressed in the High court decision in Harvey v Beveridge can be summarised as follows:

  • there must be an intention common to the claimant and the legal owner that is  unequivocally expressed by words or conduct
  • the common intention must have been an actual, subjective, intention albeit found “objectively” by the Court to exist on the evidence
  • the common intention is usually required to have existed at the time of acquisition of the property in question (unlike in the case of Harvey v Beveridge).  However, in rare cases this intention can come into existence after the acquisition of the property
  • the settled legal position in England and Australia is that the claimant must have acted in reliance upon the common intention or must have significantly altered his or her position in reliance upon the common intention.  The law in New Zealand is less clear on this point
  • a constructive trust based on expectations can be distinguished from one based on common intention in the context of the remedy afforded.  In the case of a constructive trust the remedy is strictly proportionate to reasonable expectations based upon contribution.  However, in the case of a common intention constructive trust the Court fulfils the common intention of the parties notwithstanding that the remedy afforded may be disproportionate to contribution
  • common intention constructive trusts are generally limited to de facto relationships

The law

The fine detail becomes very important at this point.  Such arguments are not made from the ether.  And this is where Mr Beveridge’s case fell apart.  His position was that Dr Byrd’s expressed intention was to give him the unit – but not to hold it on trust.  This might seem hair-splitting, but ultimately it proved fatal, the court finding that an intention to make a gift is not the same thing as an intention to create a trust, even where the end result would be the same. 

Having reached the conclusion it did the Court of Appeal found it unnecessary to decide whether a common intention constructive trust can be recognised outside a de facto relationship, in the absence of detriment or reliance.  This being the case as it was accepted that regardless of whether these factors were relevant it was first necessary to establish an element of unconsionability, which the Court of Appeal found lacking.

While it may be difficult to reconcile the view of the court that no question of unconsionability arose as:

“[32] No question of conscience enters into the matter, for there is no consideration and there is nothing dishonest on the part of an intending donor who chooses to change his or her mind at any time before the gift is complete.”

The fact that Dr Byrd never up-dated his will was not a factor in the outcome, even though Dr Byrd’s will pre-dated his friendship with Mr Beveridge.

The question left, to my mind at least, is whether it is correct when the court noted at [41] that “The absence of any provision in Dr Byrd’s will relating to the Unit or Mr Beveridge is therefore fatal to Mr Beveridge’s defence because it establishes that Dr Byrd had no intention of making any testamentary disposition in favour of Mr Beveridge. By his will, Dr Byrd resiled from any intention he may have had to transfer ultimate legal ownership of the Unit to Mr Beveridge.”

Is it possible to disprove intention simply through failing to up-date a will that pre-dated the agreed intention?  And is the failure to do so an act of resiling from any intention, or is it an oversight?

The other aspect of the decision that is troubling are the flood gate arguments in support of the decision where the Court of Appeal noted that if it found for Mr  Beveridge this might enable claimants in similar circumstances to circumvent the requirements of writing contained in s 25(2) of the Property Law Act; or enable claimants against estates to circumvent the requirements of the Law Reform (Testamentary Promises) Act  of sufficient services or work on account of any promise of reward by way of testamentary provision.

It is trite that hard cases make for bad law.  The law in this instance has been followed despite the seeming injustice.  Perhaps the opportunity to drill down to the bare elements of the common intention constructive trust has been missed, or perhaps it was just in the ether and never existed and all there was, was a promise that was never perfected.

Accordingly, Mr Beveridged was required to leave the property and account to Ms Harvey for mesne profits determined by the High Court to be in the amount of $40,700.00.

 References:

 

 

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