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08th August 2016

A conversation creates a Constructive Trust

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A Court of Appeal decision illustrates the importance of drawing up Declarations of Trust.

A Court of Appeal decision reported recently in the case of Ely v Robson illustrates how easily, informal oral discussions between former cohabitees can give rise to a constructive trust that they will be held to, and the importance of seeking to draw up Declarations of Trust as to beneficial interests in property.

In 1986 Mr Ely and Ms Robson met and soon after started a relationship together. Shortly after, Mr Ely purchased in his sole name without any contribution from Ms Robson. In 2005 the relationship between Mr Ely and Ms Robson broke down.  When Ms Robson refused to leave the property, Mr Ely applied for an order for possession against Ms Robson who defended and counterclaimed, stating that she and Mr Ely owned the beneficial interests in the property in equal shares, and that this reflected their common intention.

With a court date in place for September 2007, Mr Ely and Ms Robson met in August 2007 for a conversation in Poole Park to try and settle their respective claims. The result of those discussions was disputed. Ms Robson maintained that their settlement discussions came to nothing because she would not accept anything less than an equal share in the beneficial interest of the property. Mr Ely, on the other hand, claimed that different terms had been agreed.  Following the Poole Park meeting, a letter was sent from Mr Ely’s solicitors to Ms Robson’s solicitors conveying the essence of the agreement that Mr Ely understood had been reached. This letter explained how Mr Ely would hold the property on trust for himself for life, remainder as to 80% to his heirs and 20% to Ms Robson. The letter also confirmed that Ms Robson was permitted to continue living at the property for so long as her mother and aunt were alive.  Following this letter, a letter was sent to Court and signed by both parties’ solicitors stating that the parties had reached agreement and seeking an adjournment of the trial for a later date.  The September hearing date was vacated but the hearing was not re-listed.   

In July 2014, Ms Robson’s mother and the aunt had passed away, which led Mr Ely to apply for an order for the sale of the property. He asserted that he and Ms Robson had reached an agreement the terms of which had been set out in the letter of August 2007 and denied that any agreement as to equal beneficial ownership of the property had been reached. However, Ms Robson countered this, expressing her opinion that the letter in question was not the final agreement in relation to the property. On 16th September 2015, the matter came before Judge Blair. Mr Ely Maintained his view that he and Ms Robson had reached a binding agreement in Poole Park and that the terms of that agreement were set out in the letter of August 2007. Furthermore, Ms Robson represented to him that she would abide by the terms of that agreement and she never at any time suggested to Mr Ely that the content of the letter of August 2007 misrepresented this agreement. Judge Blair considered Mr Ely’s claim had enough clarity to give rise to a propriety estoppel.  He found that if the August 2007 letter had not accurately recorded the terms of settlement, it was inconceivable that neither Ms Robson nor her solicitors would seek to correct this. Neither would they have signed the joint letter to the Court.  The Judge found that Ms Robson had led Mr Ely to believe that they had reached agreement, and Mr Ely had relied on that to his detriment in failing to pursue his claim.  The Court of Appeal upheld the first instance decision, holding that the parties intended their oral agreement to be binding and acted upon.

For more information please visit our Disputes & Litigation page. Alternatively please contact Lucinda Brown on 01223 532721 or click here to email Lucinda.