By Lesley King, College of Law, London

For richer, for poorer

Hyett v Stanley [2003] WTLR 1269

There seems to have been a recent glut of cases on proprietary estoppel and constructive trusts.

Hyett is a Court of Appeal decision.

The appellant, Ms Hyett, had cohabited since 1988 with the deceased, a farmer, who died, aged 46, in a hunting accident.

She claimed a half interest in the farm on the basis of a constructive trust.

In 1984, the deceased bought a farm in his sole name for 59,800.

There was a mortgage of 30,000 and he and his then wife provided the balance equally.

The deceased was divorced in 1992.

His wife made no application for financial provision on the understanding that the farm would continue to be held in the deceased's sole name but would pass to their two sons when he died.

In 1989, the deceased made a will leaving everything to his sons.

In order to provide for Ms Hyett he took out a life policy which he wrote in trust for her.

On his death, that policy produced 292,000.

Lord Justice Nourse, giving judgment, referred to the House of Lords decision in Lloyds Bank plc v Rosset [1991] 1 AC 107 which said there are two situations capable of giving rise to a constructive trust:

- The parties reach an express agreement or understanding For this, there must be evidence of some sort of discussion.

- There is no express agreement, but the conduct of the parties makes it possible for the court to infer a common intention to share the property beneficially.

A direct contribution to the purchase price or to the mortgage repayments will justify it but 'it is at least extremely doubtful whether anything less will do'.

In each case, one person acts to his/her detriment in reliance on the agreement.

Up until 1992, there was no express agreement between Ms Hyett and the deceased.

However, in 1992 she and the deceased needed to restructure the borrowings on the farm.

Barclays Bank would only make a loan on the security of the farm if Ms Hyett became a joint borrower.

Accordingly, they both executed the charge and gave a joint and several covenant that they would each be liable for the whole amount.

Ms Hyett was concerned for her security and asked the deceased to put her name on the title deeds.

He refused on the basis that he had always been the sole owner of the farm.

However, he said that she would be safe anyway 'with your name on the mortgage, you have a right to the property; you can prove it.'

At first instance, the trial judge found that this assurance related to the position during the lifetime of the parties.

There was no evidence that the deceased had changed his intention with regard to what should happen to the farm after his death.

Counsel for the deceased's sons accepted that, had Ms Hyett been sued on the joint covenant, she would have had the right to resort to the farm to satisfy her liability.

He argued that this did not affect the arrangement to apply after the deceased's death.

In his view, Ms Hyett was to have an immediate interest in the farm subject to defeasance.

Ms Hyett's answers in cross-examination indicated that her concern had been to secure her position if the couple fell out.

The Court of Appeal rejected these arguments.

The execution of the legal charge by Ms Hyett indicated that there was an agreement that she should have an immediate and absolute beneficial interest in the property.

There was discussion of the overlap between constructive trusts and proprietary estoppel.

Counsel for the deceased's sons had argued that the case should have been treated as one of proprietary estoppel.

His object was to take advantage of the discretionary nature of the relief available in estoppel cases.

He argued that it was uncon-scionable for Ms Hyett to take both the proceeds of the life policy (which had been intended to make provision for her after the deceased's death) and a beneficial interest in the farm.

The court held that the two doctrines were separate and that this was a case of a constructive trust.

However, the court said that it was not, in fact, unconscionable for Ms Hyett to have both.

The position in 1989 was very different to that in 1992.

By 1992, the deceased was in acute financial difficulty and could no longer retain the farm without the assistance of Ms Hyett.

Proprietary estoppel

Beale v Harvey LTL November 28 2003 is a proprietary estoppel case in which the claimant was unsuccessful because the detriment suffered was too insubstantial to justify the court's interference.

Probate practitioners will be familiar with 'heir locator' agreements.

Some companies write to individuals telling them that they have been left a legacy.

In return for a percentage of the inheritance, the company gives the individual the details of the estate.

Many people dislike such arrangements regarding the percentage fee as unduly high.

It is worth looking at the Irish case of Fraser v Buckle [2003] WTLR 1389 where an agreement with a London firm of genealogists was held to be unenforceable.

The Irish Supreme Court decided the case in 1996.

The court held that the proper law of the contract was English (the agreement specifically stated this).

The trial judge had heard evidence from two expert witnesses (both QCs) as to whether or not such agreements were enforceable under English law.

The Supreme Court agreed that his finding of fact as to English law was correct.

The finding was that in English law the case of Rees v De Barnady [1896] 2 Ch 437 has not been overruled and remains good law.

That case found that such agreements were champertous and unenforceable (although the company was entitled to payment on a quantum meruit basis).

In another case, Re Stedman [2004] WTLR 75, the Court of Appeal reversed the first instance decision.

Business property relief from inheritance tax was available in respect of the transfer of shares in a company that operated a caravan park.

The business did not consist mainly of the holding of investments within section 105(3) of the Inheritance Tax Act 1984.