The High Court (Chancery Appeals) has allowed an appeal in a long‑running property dispute, clarifying that an oral agreement varying beneficial interests under an established constrictive trust is unenforceable in equity without there also being evidence of substantial post‑agreement detrimental reliance by the party seeking to benefit. Mr Justice Adam Johnson held that the mere inclusion in an agreement of a term that a party would adopt a burden was of itself incapable of amounting to detrimental reliance. As the position could be retrieved, what mattered was that substantial detriment had in fact been suffered in consequence of the agreement. Section 53(2) of the Law of Property Act 1925 does not dispense with the requirement for “reliance”; section 53(1)(c) bites on dispositions of existing equitable interests unless a new constructive trust arises.
James Sandham instructed by MTG Solicitors appeared for the successful appellant.
Background and first instance decision
Two brothers, Jamal and Fakar, disputed the beneficial ownership of the family home acquired in 1999, initially registered solely in Jamal’s name but intended to be held 50:50, a position later formalised by an October 2002 TR1 declaring a joint tenancy. At a December 2007 family “Bisar”, the Recorder found that Jamal orally agreed to give up his share so that Fakar would become sole beneficial owner and held that a “new constructive trust” arose, dismissing Jamal’s claim for a declaration and sale.
The appeal
Jamal argued that any disposition of his subsisting equitable 50% interest required signed writing under section 53(1)(c) LPA 1925, and that the Recorder erred in finding a constructive trust absent proof of detrimental reliance by Fakar after the Bisar. Johnson J agreed, holding that while constructive trusts are exempt from formality under section 53(2), a common intention constructive trust requires detrimental reliance by the party asserting it, in line with Hudson v Hathaway and Guest v Guest. The Recorder had identified an agreement but did not make the necessary finding of post‑Bisar reliance by Fakar; describing the quid pro quo of giving up an account was insufficient.
Detrimental reliance: what was missing?
The High Court emphasized that it is not enough to prove a shared intention or bargain; there must be action or inaction leaving the claimant substantially worse off because of reliance on that common intention. The Recorder focused on what was agreed at the Bisar, not on subsequent reliance. Post‑Bisar expenditure and subsequent steps, including remortgage‑related costs, were not found or analysed as reliance, and the period was complicated by Jamal’s swift equivocation and the subsequent forgery of a TR1 in Jamal’s name in 2008.
Outcome and next steps
The appeal was allowed and the decision of detriment remitted.
Key takeaways for practitioners
- A change in beneficial ownership under a common intention constructive trust requires clear proof of substantial detrimental reliance after the new intention is formed. Agreement alone does not suffice.
- Section 53(1)(c) LPA 1925 bites on dispositions of existing equitable interests unless a new constructive trust arises; section 53(2) does not dispense with the requirement for “reliance”.
- The focus of the evidence focus should be on acts or omissions subsequent to the agreement, as distinct from mere consideration within the bargain.
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