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15th October 2020

Creation of a constructive trust without detrimental reliance upheld by High Court

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In the recent case of Archibald v Alexander, John and Brenda Archibald were awarded a share of the beneficial ownership of a house bought in the joint names of their late mother and their sister, Patsy Alexander, in 1997.

After their mother's death, Patsy claimed sole beneficial ownership of the property. John and Brenda claimed that Patsy held the title to the property on trust for herself and themselves, as tenants-in-common in equal shares.

John and Brenda alleged that shortly before the purchase of the house, the three children and their mother held a face-to-face meeting, where they agreed orally that the house would be bought in the name of their mother and one or more of the children as joint tenants, to hold it for their mother for life and, after her death, for the three children equally. Patsy had been named as the only legal co-owner because they had been unavailable to participate in the purchase formalities due to other commitments and believed their legal participation was unnecessary because of the oral promises that had been made.

The County Court found in John and Brenda’s favour, concluding that the property was held by Patsy on a constructive trust for all three in equal shares. Patsy appealed, claiming that any oral agreement that might have been made had not caused John and Brenda to decide not to become transferees in the 1997 purchase. She also argued that a constructive trust could not be created from such an oral agreement because John and Brenda had not relied on it to their detriment and a detrimental reliance was required as a condition when creating a common intention constructive trust.

The High Court dismissed both grounds, ruling that John and Brenda had relied on the agreement in not seeking to become co-owners of the house themselves and if an express agreement is made in such terms in a loving family context, the non-transferees will rely on that by not otherwise protecting their position.

Furthermore, the judge stated that a constructive trust can arise in favour of beneficiaries in circumstances in which essential ingredients of a common intention constructive trust are absent, namely an agreement or understanding with the beneficiaries and detrimental reliance. Here a constructive trust arose.

For more information on the items raised in this article please contact Tiffany Benson by clicking here.

Case citation: Archibald v Alexander (2020) EWHC 1621 Ch