Such trusts can be created informally, for example, pursuant to an unwritten arrangement that you would have a share in the equity. Our previous article, The decline of marriage: what property law rights apply to unmarried cohabitees?, sets out the basis on which these sorts of trusts can arise. However, one important but often overlooked aspect of trust law is that you must establish that you have suffered detriment in reliance on the arrangement in question.
Establishing detriment is fairly straightforward in some cases (for instance, if you have spent thousands of pounds on an extension to the property because your partner said that you had a share in the property). In other cases, it is less clear-cut.
In November 2020, the Court of Appeal handed down judgment in a case concerning detrimental reliance: Natalie O'Neill v Shaun Holland  EWCA Civ 1583, 2020 WL 06997189.
The case serves as a useful reminder of the key principles involved.
The property was in the sole name of Mr Holland. It had been originally purchased by Ms O’Neill’s father, and had been transferred into Mr Holland’s name for zero consideration in 2008.
Mr Holland and Ms O’Neill lived together in the property between 2000 and 2012. In 2016, following the breakdown of their relationship, Ms O’Neill applied to the county court for a declaration that she had a 50% beneficial interest in the property.
The county court judge concluded that the purchase funds had come from Ms O’Neill’s father, and that the property had been transferred to Mr Holland on the basis that Mr Holland and Ms O’Neill would each have a 50% beneficial interest. Accordingly, the district judge held that Mr Holland and Ms O’Neill each had a 50% beneficial interest in the property.
Mr Holland appealed to the High Court. The High Court judge ruled that Ms O’Neill had failed to establish that she had suffered detrimental reliance, and that Mr Holland therefore had a 100% beneficial interest in the property.
At the Court of Appeal, however, it was found that Ms O’Neill had met the requirement for detrimental reliance. Therefore, Mr Holland and Ms O’Neill were each entitled to 50% of the beneficial interest in the property. The Court of Appeal’s reasoning went as follows:
- The mere fact that O’Neill's father, having purchased the property, intended it to be a family home for Ms O’Neill could not, by itself, have given rise to a constructive trust in her favour.
- Nevertheless, the test for detrimental reliance had been met. The property had been put into Mr Holland’s sole name because Mr Holland had wrongly told Ms O’Neill that she would not be able to get a mortgage. The end result of Mr Holland not getting the mortgage offer in joint names was that Ms O’Neill had no legal interest in the property when the intention had been for the property to be in co-ownership. That was a position of clear detriment incurred by Ms O’Neill in reliance on Mr Holland's misrepresentation that she would be unable to obtain a mortgage.
This case illustrates that detrimental reliance does not necessarily require out-of-pocket expenditure on the property. Being tricked or misled into being left off the registered legal title can be sufficient, depending on the circumstances.
This case also illustrates the problems that can arise when people fail to set out their agreements in writing. This case went all the way to the Court of Appeal, incurring a huge amount of time and expense for both parties.
If you require any further information on property disputes of this nature, please contact Stephanie Butler on 01473 406312 or [email protected].
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2021.