Cambridge Family Law Practice

A woman involved in a long-term relationship was entitled to all the equity in her home thanks to an agreement reached in email with her former partner, the Court of Appeal has concluded.

The couple had begun their relationship in 1990. He moved into her home and became a joint owner. They had two children but never married. Later they sold the home and jointly bought another property. In 2007, they acquired a mortgage and moved to a third property, which was again jointly owned. However, the couple never drew up a declaration of trust, a document which would have formalised the percentage of ownership held by each of them.

They both worked in the financial services industry but she eventually left and began working for a charity. As a result, his salary quickly overtook hers.

In 2009 the relationship broke down and the man moved out. He began a relationship with another woman and later married her. Meanwhile, his previous partner remained in the house with the children. The mortgage on the property was still paid by both parties from a joint account but as he earned more, he ended up paying the majority of the mortgage payments for a number of years.

Two years later, oil from a neighbouring house leaked into the property in which the woman was still living. This caused considerable damage, preventing a sale and necessitating a complicated insurance claim that took years to resolve.

The former couple discussed the financial aspects of their separation by email. They eventually agreed that she would receive the entire equity from the house when it was eventually sold, as well as their savings accounts and the contents of the house, while he would retain his shares and pension.

As time passed, he began to complain about the lack of progress made in completing the clean-up and selling the property. He eventually stopped contributing to the mortgage, and she took on responsibility for it.

A few years later, the man applied for a legal order compelling the sale of the property, with the proceeds to be shared between them. In response, she argued that he was not, in fact, entitled to any of the proceeds under the term of their previous deal.

In the Court of Appeal, Lord Justice Lewison explained:

“[The woman] agreed that the house should be sold but contended that she was entitled to the whole of the proceeds under a constructive trust following a common intention and agreement, in reliance on which she had acted to her detriment.”

A constructive trust is legal remedy concerning the ownership property, in which one party relies on an agreement and suffers a disadvantage because of this.

The Lord Justice continued:

“The detrimental conduct relied on was: paying all interest payments on the joint mortgage from January 2015; desisting from claiming against assets in [the man’s] sole name acquired during their relationship; not claiming financial support for the benefit of the children under the Children Act 1989; accepting sole responsibility for the oil spill and insurance claim; at her own expense, maintaining and redecorating the property from January 2015; relying from 2014 on the understanding that she was sole beneficial owner, in conducting her finances and lifestyle; and living frugally to afford the upkeep and mortgage.”

In court, the first judge ruled in her favour, saying she was entitled to the entire proceeds of the house sale because she had not made any claims against her former partner’s shares or pension (albeit she couldn’t have done so anyway) and this had amounted to a disadvantage or detriment for the purposes of property law.

An appeal court differed on the latter point, concluding that it had not been necessary to add “detrimental reliance” to the email agreement: it had already been enforceable.

The man launched a further appeal, questioning whether the legal concept of a constructive trust could apply to their earlier agreement without his ex-partner having to show that she had been disadvantaged by relying on it.

Lord Justice Lewison concluded the earlier appeal judge had been mistaken and that it had indeed been necessary for the woman to prove that she had been disadvantaged by relying on the agreement and foregoing a claim to the shares and pension. But since she had done so, the case was still decided in her favour: she would receive the full proceeds from the sale of the house.

Kathryn Evans, partner here at Cambridge Family Law Practice, comments:

“With an increasing number of couples choosing not to marry, and with no clarity on if or when legal rights for cohabiting couples will be introduced into the law, this intriguing case shows how difficult it can be to justify changes to property ownership agreements, even informal ones, and is potentially relevant to a large number of people. It also shows how important it is to have up to date, formal, legal documentation in place to clearly evidence property ownership.”

Read the full judgement here.