Home Information Cases SMQ v (1) RFQ (2) MJQ : RFQ v (1) MJQ (2) FBQ (2008)

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SMQ v (1) RFQ (2) MJQ : RFQ v (1) MJQ (2) FBQ (2008)

Summary

A proprietary estoppel arose in favour of a son who had paid for renovations on a property and moved into it in reliance on an agreement that the property would become his, contrary to his father's argument that he had retained ownership under an earlier agreement and that the son had acquired no interest in the property.

Facts

The claimant (H) and his wife (W) claimed an order vesting a property (B) in their names or in the name of H alone. H and W were divorcing and the ancillary relief proceedings between them could not be resolved until the question of B's ownership had been resolved. H and his brother (M) had made an arrangement in 1986 with their father (F) that F would transfer B, which was his property, to H and M so that they would avoid inheritance tax on his death. Other properties and shares were included in this arrangement. However, F did not actually lose control over the assets purportedly transferred, and continued to live in B. F moved out of B in 2000; in the same year M signed a deed of gift transferring his beneficial interest in B to H, while M identified various shares which he would get from F's estate in addition to those he already had. H and W borrowed money, raised more money by selling other properties and applied this to renovations at B. The following year, F withdrew his consent to the transfer of B into H's name. However, H and W later moved into B. H and W argued that there was an agreement between all the parties that they would renovate B and put their money towards this, in return for which B would become their home and would belong beneficially to H. They then acted on this agreement. F and M argued that B continued to belong to F under the terms of the 1986 agreement; at most, H and W had some right of occupation.

Held

A proprietary estoppel had arisen in favour of H, or of H and W. All the relevant parties had known and agreed during the course of 2000 that H and W were to sell their then home and other assets to pay for the renovation of B, that B would become their home, that H and M would hold the legal title to B and H would hold the entire beneficial interest by virtue of M's gift, and that M would receive additional shares from F's estate in compensation. F and M both agreed to these arrangements. F changed his mind the following year, by which time H and W had acted considerably to their detriment in reliance on the arrangements. The assurance had become irrevocable well before H and W could have known that either M or F were no longer content with the arrangement. The minimum award necessary to do justice in the light of the proprietary estoppel was for B to belong to H, or to H and W, Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd (1982) QB 133 Ch D and Gillett v Holt (2001) Ch 210 CA (Civ Div) applied. The issue of a constructive trust was dependent on the shared intentions of the parties. From the agreement reached in 2000 and the relevant documentation it was clear that the common intention was for the beneficial interest in B to belong to H alone; there was therefore a constructive trust in H's favour, Stack v Dowden (2007) UKHL 17, (2007) 2 AC 432 considered. F and M's arguments in support of their claim for B relied on the 1986 agreement, which had the illegal purpose of cheating the Inland Revenue of inheritance tax on F's death. The illegal purpose was the essence of the 1986 agreement and was therefore not too remote from the agreement to taint it, Barrett v Barrett (2008) EWHC 1061 (Ch), (2008) BPIR 817 and 21st Century Logistic Solutions Ltd (In Liquidation) v Madysen Ltd (2004) EWHC 231 (QB), (2004) 2 Lloyd's Rep 92 considered. Reliance on the agreement was reliance on the illegal purpose, which was impermissible, Tinsley v Milligan (1994) 1 AC 340 HL applied.

Judgment for claimant

Family Division
Black J
Judgment date
31 July 2008
References

LTL 16/9/2008 

Practice areas