O’Neill v Holland [2020] WTLR 1397

WTLR Issue: Winter 2020 #181





This was a second appeal against the decision of HHJ Pelling to overturn the trial judge’s order declaring inter alia that A was a 50% beneficial owner of A and R’s former home (the property) under a common intention constructive trust.

The trial judge had found that A’s father had bought the property in 1998 with the intention that it should be A and R’s family home. In 2008, A’s father had transferred the property to R for nil consideration. The trial judge had found that A’s father intended A to have a beneficial interest in it and had originally planned to transfer it into A and R’s joint names, but had instead transferred it into R’s sole name because A had agreed to this as R had wrongly told her that she would not be able to obtain a mortgage. The trial judge had held that there was a common intention that A and R should be equal beneficial co-owners and that R therefore held the property on trust for himself and A as tenants in common in equal shares.

HHJ Pelling allowed an appeal against the trial judge’s finding on the ground that A had not pleaded or proved that she had detrimentally relied on the parties’ common intention that the property should be equally co-owned. He also dismissed arguments in A’s respondent’s notice that the trial judge conclusions should be upheld because the reason why the property was not transferred into A and R’s joint names was that R had wrongly told A that she would not get a mortgage, or because it would be unconscionable to permit R to deny the parties’ agreement or common understanding.

A then appealed to the Court of Appeal. On appeal, A did not question that she needed to show detrimental reliance. However she contended that the facts pleaded by her and found by the trial judge constituted sufficient detrimental reliance to create a common intention constructive trust. She also advanced alternative arguments based on the rules in Rochefoucauld v Boustead [1897] and Pallant v Morgan [1953].

Held (allowing the appeal):

Detrimental reliance is an essential ingredient of a successful claim under a common intention constructive trust where the legal estate is in the sole name of the other party (Gissing v Gissing [1971], Grant v Edwards [1986], and Curran v Collins [2016] followed, Stack v Dowden [2007] and Jones v Kernott [2012] explained).

‘Detriment’ in this context is an objective state of affairs which leaves the claimant in a substantially worse position than she would have been in but for the transfer into the sole name of the defendant.

HHJ Pelling had erred by finding that A had failed to plead and prove detrimental reliance. A had pleaded a case based on informal discussions between A, R, and A’s father. It was implicit in these allegations that, but for R’s alleged representations, A’s father would have transferred the property into A’s sole name or into A and R’s joint names. Had that pleaded case been accepted by the trial judge, there would have been sufficient detriment – A would have exchanged a situation in which the property was in the sole beneficial ownership of her father and she would have been able to occupy it rent-free for the foreseeable future, for a situation in which the property was beneficially owned by R alone and she would have to establish an interest under a common intention constructive trust to have any say in its future use. The pleading was therefore not inherently defective.

In the event, the trial judge did not accept either party’s pleaded case, but her findings did not differ very much from A’s pleaded case. The facts found by the trial judge also amounted to a position of clear detriment incurred by A in reliance on R’s misrepresentation that she would be unable to obtain a mortgage and led to the same conclusion that R held the property on trust for A and R in equal shares.

If it were not possible to establish detrimental reliance, the trial judge’s finding that R’s denial of the agreement would be unconscionable would not have been sufficient in itself. While such a finding might often implicitly entail a finding of detrimental reliance, that could not be accepted in this case. There was much force in HHJ Pelling’s criticism that the trial judge had not directed herself correctly to the law relating to detrimental reliance and nowhere identified the need to find it. Support for this conclusion could be found from the fact that the trial judge had accepted a submission that the authorities ‘hardly placed detriment at the heart of the gateway to relief’ and that ‘the test is whether it would be unconscionable to rely on the fact that the properties were in the name of [R] and to deny [A] that which… had been promised.’ This indicates that the trial judge did not regard the requirement of unconscionability as entailing or being based on a finding of detriment.

Detriment is to be determined objectively, not by reference to the parties’ subjective perceptions at the time. It was therefore open to the court to examine the trial judge’s findings of fact and the documentary evidence in order to conclude that A had objectively relied to her detriment on R’s assurances to A and her father that A was to have a beneficial interest in the property.

While it was not pleaded or argued, and therefore not open to the court to decide the case on this basis, there was much to be said for the view that the primary focus should have been on A’s father’s intentions when transferring the property into R’s sole name and asking whether A’s father had acted to his detriment. The court’s provisional view was that this analysis would have led to the same result.

The court’s conclusion made it unnecessary to consider the case under the principles in Rochefoucauld v Boustead [1897] or Pallant v Morgan [1953], though the court considered that the ground of appeal based on them was properly arguable.

An application by R to adduce further evidence on appeal was dismissed because the evidence could have been obtained with reasonable diligence for use at the original trial, and because it related to matters on which the trial judge had made no findings of fact and therefore played no part in her conclusions such that it could not have an important influence on the result (Ladd v Marshall [1954] applied).

In default of agreement, the case was remitted to HHJ Pelling to address grounds of appeal relating to equitable accounting which R had been given permission to pursue but which HHJ Pelling had not addressed because he had allowed the other parts of R’s appeal.

JUDGMENT HENDERSON LJ: Introduction [1] The central issue on this second appeal is whether the claimant and appellant, Ms Natalie O’Neill (Ms O’Neill), has established, on the basis of the facts found by District Judge Obodai (the District Judge) at a trial in 2017, that she has a 50% beneficial interest as an equitable co-owner …
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Counsel Details

Mr Simon Charles (St John’s Buildings, 24a-28 St John Street, Manchester M3 4DJ, tel 0161 214 1500, email clerk@stjohnsbuildings.co.uk), instructed by Joe Egan Solicitors (13 Mawdsley Street, Bolton BL1 1JZ, tel 01204 386 214, email info@joeegansolicitors.co.uk) for the claimaint.

Mr Leslie Blohm QC (St John’s Chambers, 101 Victoria Street, Bristol BS1 6PU, tel 0117 923 4700, email clerks@stjohnschambers.co.uk) and Mr Michael Horton (Coram Chambers, 9-11 Fulwood Place, London WC1V 6HG, tel 020 7092 3700, email clerks@coramchambers.co.uk) instructed on a direct access basis for the defendant.