Clarke v Harlowe: ChD 12 Aug 2005

A house was bought in the joint names of the parties. It was in bad condition. An express declaration of trust said they held as beneficial joint tenants. One tenants was earning much more than the other. He paid all the mortgage instalments. Very substantial building work was carried out during the relationship – all of which he paid for. Following a breakdown it was conceded that the other joint tenant was entitled to a half share and that there was no intention to alter the shares; it was argued that principles of equitable accounting applied and that he should be entitled to credit for the cost of the improvements.
Held: The argument failed. tt had been the common understanding that he would pay for the improvements and thus there was no obligation to account. Behrens J said: ‘There are a wide variety of situations in which a property may be bought in joint names with an express declaration of trust in relation to the beneficial interest. These vary from the common situation where a man and a woman form a relationship and decide to live together to the commercial type situation where for example two people buy a house intending to do it up and resell it at a profit.
In the commercial type of situation there may be an express agreement between the parties that each will contribute equally to the outgoings, any mortgage instalments and to the cost of any improvements. It may be that one of the parties is unable to honour this agreement with the result that he or she pays less than his or her fair share of the outgoings or the cost of the improvements. Notwithstanding this failure the property may still be developed and resold during the course of the relationship between the parties. On such a resale the division of the proceeds will of course have to be in accordance with the express declaration of trust. However I do not see why a court of equity should not take account of the failure by one of the parties to honour their agreement as to the contributions to the outgoings and the improvements by means of equitable accounting. I equally do not see that such equitable accounting is prohibited simply because the relationship is not at an end.
It is to be noted that in the example I have given the considerations leading to equitable accounting involve a breach or failure by the accounting party to honour the arrangements or agreements between the parties as to the payments for the outgoings or the improvements to the property.
It seems to me that this failure or breach is at the heart of the matter. Before there can be a duty to account by one party to the other there must be a breach of or failure to comply with some obligation owed by that party to the other. There may be a debate in individual cases as to the nature of the obligation necessary to give rise to a duty to account but there must still be an obligation.’

Behrens J
[2005] EWHC 3062 (Ch), [2007] 1 FLR 1, [2007] 3 FCR 726, [2006] Fam Law 846, [2006] BPIR 636, [2005] WTLR 1473
Bailii
Trusts of Land and Appointment of Trustees Act 1996
England and Wales
Cited by:
CitedWilcox v Tait CA 13-Dec-2006
The court considered the principles of equitable accounting as between co-owners of land.
Held: The question of whether there is a liability to account depends on the intention of the parties. Jonathan Parker LJ said: ‘Moreover, it is in any . .
CitedKetteringham and Another v Hardy ChD 3-Feb-2011
Two partners had together bought several properties for development, and now disputed the interests in one of them. One partneer had dies, and the refusal of development permission and the fall in property values left the land in negative equity. . .

Lists of cited by and citing cases may be incomplete.

Land, Trusts

Updated: 02 November 2021; Ref: scu.270428