The claimant challenged a possession order made in respect of the house she occupied, alleging a constructive trust in her favour. The house had been occupied by the unmarried co-habiting couple for nearly 25 years before the death of one of them. He was the registered proprietor of the property but his partner, the appellant, claimed a beneficial interest under a common intention constructive trust. The issues were, first, whether she had any such interest and, if so, its size and, secondly, whether any such interest had priority over a registered legal charge granted by the deceased. At first instance, the judge held that the appellant had a 25% beneficial interest over which the charge took priority. The appellant now contended that her interest was 50% and that it took priority over the charge but this second issue became in the course of argument a question whether the appellant was entitled to an equity of exoneration in respect of the secured indebtedness.
Held: The sole issue at trial had been whether the appellant’s interest took priority over the charge, and reliance on an equity of exoneration as against the deceased’s estate had never been pleaded. It was raised only after judgment and it was by then too late because the judge had not made findings as to the use or destination of the loan proceeds. If it had been pleaded, it would have raised the issue ‘whether all or some of the debt secured by the mortgage charge represented lending which was not incurred for the benefit of the joint household but solely for the benefit of the deceased Norton York and/or his business interests’. If that was the case, there would have been the possibility, but not the inevitability, that she would be entitled to the equity. Whether the equity arises ‘depends upon the presumed intention of the parties and is highly fact-sensitive.’
As regards the possibility of an equity of exoneration arising, Tomlinson LJ said: ‘However for what it is worth the inference from such evidence as there was seems to me to point away from, rather than towards, the conclusion that the borrowing was for the benefit of Norton York alone. It was the judge’s implicit finding that Norton York was responsible for generating almost all of the income, and thus the assets, which the family unit enjoyed. It is apparent therefore that Miss Graham-York shared the benefit of the deceased’s business ventures and it would be unconscionable that she should do so without sharing the burden of the mortgage. As noted in paragraph 18 above, it was in fact her evidence that Norton York’s business ventures ‘provided us with the wherewithal to live on’. The point was well made by Miss Haren that the question whether it was intended by the parties that the beneficial interest of one of them should be exonerated from the burden of the mortgage debt, is dependent upon the same factors as come into the equation when considering the whole course of dealing between the parties in relation to the property, for the purpose either of deducing their intention or of determining what is fair in relation to their respective shares of the beneficial entitlement. The judge having concluded that Miss Graham-York’s entitlement was 25%, it would be artificial and illogical not to acknowledge that that must in the circumstances be a 25% interest subject to the mortgage indebtedness from which both she and Norton York had derived benefit.’
Moore-Bick VP, Tomlinson, King LJJ
[2015] EWCA Civ 72
Bailii
England and Wales
Cited by:
Cited – Armstrong v Onyearu and Another CA 11-Apr-2017
Exoneration of partner’s equity on insolvency
The court considered the equity of exoneration, where property jointly owned by A and B is charged to secure the debts of B only, A is or may be entitled to a charge over B’s share of the property to the extent that B’s debts are paid out of A’s . .
Lists of cited by and citing cases may be incomplete.
Land, Equity
Updated: 27 December 2021; Ref: scu.542439