Court finds detriment not necessary in beneficial ownership claim

The recent case of Hudson v Hathway (2022 EWHC 631 QB) saw the judge, Mr Justice Kerr, rule that a claim for an increased share of a family home does not require detriment or a change of legal position in order to succeed.

The two parties, Lee Hudson and Jayne Hathway, bought their home in 2007 and registered it in joint names with no declaration of trust. Their relationship broke down in 2009 with Hudson continuing to pay most of the mortgage on the house.

In 2011, the property was affected by an oil spill which affected its ability to be sold. Two years later, the parties sought to negotiate a separation of their affairs. They agreed via email that Hathway would retain all the equity from the house and Hudson would retain all his shares.

In 2019, Hudson issued a claim for the sale of the house and half of its proceeds. Hathway subsequently claimed that she was entitled to the all the proceeds under a constructive trust that arose following their common intention and agreement in 2013.

The trial judge ruled that they had indeed agreed, despite the deal not satisfying the necessary formalities for transferring legal title of to declare a trust. He subsequently declared Hathway the sole equitable owner of the property as she had acted to her detriment by accepting ownership of the house and not claiming ownership of any of Hudson’s other assets.

Hudson appealed, arguing that the County Court judge was wrong to decide detrimental reliance on Hathway’s part as she had not changed her legal position for the worse in reliance on the deal she had made with Hudson. Hudson also argued that, as the couple were unmarried, Hathway had no rights to his other assets.

The High Court judge, Kerr J, considered whether detriment is required in a jointly registered family home case where there has been no expressly declared trust, with the court taking Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] AC 776 as the legal precedents.

Kerr J noted that the judgements in these cases made no mention of whether a claimant must prove detrimental reliance. He concluded that it was unlikely that the Supreme Court would have omitted to mention a necessity to establish detrimental reliance in cases involving a family home bought in the joint names of a cohabiting couple with a joint mortgage, but without an express declaration of beneficial interests. He therefore found that there was no need for Hathway to show detriment of a change of her legal position in order for her to succeed. He dismissed the appeal and awarded beneficial ownership of the whole house to Hathway.

He did note, however, that “the issue is always ultimately one of unconscionability” and that it would always be necessary to prove that any part that denies an equitable interest cannot do so on the grounds of unconscionability.

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