• February 23, 2024
 Not just detriment: A more detailed look at Hudson v Hathway

Not just detriment: A more detailed look at Hudson v Hathway

Extended feature: Freeths’ Robert Hill examines the issues around Hudson v Hathway [2022] EWCA Civ 1648

The seminal decision in Hudson v Hathway was handed down on 14th December 2022, shortly before the Christmas break. It prompted something of a flurry in the legal press, particularly as the decision confirmed that which many practitioners had suspected for some time: that, notwithstanding the decisions in Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53, detrimental reliance on the part of a claimant remains an essential element for bringing a common intention constructive trust claim.

However, during the second appeal, the Court of Appeal also looked at several other aspects of a dispute over jointly owned property. These are not points which, in the writer’s experience, are regularly pleaded in such claims. The judgment therefore serves as a timely reminder to practitioners not to disregard these aspects in a claim.

Background facts

This case concerned a dispute over the equitable title to a property known as “Picnic House”. The property was owned legally and beneficially by Jayne Hathway and Lee Hudson as joint tenants, who had been in a relationship since 1990 and had bought Picnic House in 2007.

The relationship broke down and Lee moved out in 2009. At that stage, the mortgage, which had been in joint names, was switched to an interest-only mortgage, paid for by Lee (whose earnings by this point far exceeded Jane’s).

Following the breakdown of the relationship, there were several e-mail exchanges which took place between November 2011 and September 2013. Each party held various assets they sought to divide. This included Picnic House, which they agreed Jayne would take. All these e-mails were signed off by Jayne and Lee typing their names at the bottom.

There were however issues with an insurance claim on the property and, frustrated by the lack of progress, Lee stopped paying the mortgage in 2015. He eventually issued a claim seeking an order for sale and 50% of the proceeds of sale.

At first instance, the trial judge found that there was an agreement that Jayne would own 100% of the equitable title to Picnic House. He also found that, in order for the court to uphold that agreement, Jayne had to show detrimental reliance (which, on the facts, the judge found that she had).

On the first appeal, Kerr J found that Jayne did not have to show detrimental reliance, in light of the decisions in both Stack and Jones. He also held that, even if he was wrong about that, the trial judge was entitled to have taken the view which he did on detrimental reliance.

Issues to be decided

The issues for the second appeal are those which Kerr J had to consider on the first appeal:

  1. Must a party claiming a subsequent interest in its equitable share necessarily have acted to its detriment?
  2. Is common intention alone enough to alter equitable shares?
  3. Was the judge right to decide that the requirement of detriment was met?

However, the court, “for reasons it found difficult to understand”, noted that the parties had not considered s. 53 (1) of the Law of Property Act 1925. The court invited Jayne’s team to take the point, which she duly did.

Lee of course objected and, the court confirmed that, in allowing a new point to be raised, it had to consider:

  1. the nature of the proceedings which took place in the lower court;
  2. the nature of the new point of law;
  3. the prejudice to the opposing

Having taken all the above into account, the court allowed Jayne to argue that the requirement of s. 53 had been satisfied, thus introducing a fourth point for the appeal.

S. 53. (1) (c) of the Law Of Property Act 1925

  1. 53 (1) (c) of the Law Of Property Act 1925 states the following:

“a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.”

The court also had to consider s. 36 (2), which states:

“No severance of a joint tenancy of a legal estate, so as to create a tenancy in common in land, shall be permissible, whether by operation of law or otherwise, but this subsection does not affect the right of a joint tenant to release his interest to the other joint tenants, or the right to sever a joint tenancy in an equitable interest whether or not the legal estate is vested in the joint tenants: Provided that, where a legal estate (not being settled land) is vested in joint tenants beneficially, and any tenant desires to sever the joint tenancy in equity, he shall give to the other joint tenants a notice in writing of such desire or do such other acts or things as would, in the case of personal estate, have been effectual to sever the tenancy in equity, and thereupon the land shall be held in trust on terms which would have been requisite for giving effect to the beneficial interests if there had been an actual severance.”

The court looked at whether the e-mails sent by Lee were such as to amount to release of his interest, in particular considering whether:

  1. the e-mails amounted to a “disposition”;
  2. whether they were “in writing”;
  3. whether they were “signed”.

The judgment contains a helpful analysis on the case law in this area for practitioners facing arguments over whether e-mail correspondence is sufficient to meet these terms. The court’s response to those three points were:

  1. The e-mails amounted to a disposition, citing Lord Hoffman’s dicta in Newlon Housing Trust & Alsuleimen [1999] AC 313; that it means “an act by which someone ceases to be the owner of that property in law or in equity”.
  2. The e-mails were in writing pursuant to 1 of the Interpretation Act 1978.
  3. The e-mails were signed, the court in particular focussing on the previous case law and noting that Lee had consciously elected to type his name into the e-mails.

On the basis of the above therefore, the court found that Lee had released his beneficial interest to Jayne. The case could therefore have been decided in Jayne’s favour on this point alone.

The requirement of detriment

Notwithstanding the decision on s.53, the court (wisely in the writer’s view) took the opportunity to clarify whether the requirement of detriment was indeed a necessary element of a common intention constructive trust claim.

To say the court did a thorough job is perhaps an understatement. Lewison LJ looked at the dicta in no less than 17 cases and passages from seven leading practitioners texts. His conclusion however, was that it remained very clear that detrimental reliance was indeed required for the court to uphold a common intention constructive trust.

He relied heavily on the analysis of the court in Gissing v Gissing [1971] AC 886, Grant v Edwards [1986] Ch 638 and Oxley v Hiscock [2004] EWCA Civ 546. All these cases confirmed the need for detrimental reliance.

Dealing with the fact that detrimental reliance was not clearly dealt with in either Stack or Jones, which has of course been the source of much discussion in the legal world, Lewison LJ’s explanation was relatively simple. Dealing with Stack initially, he noted that although Lord Walker and Lady Hale did not confirm detrimental reliance was required, they had both adopted the principles in both Oxley and Grant, and had not confirmed that detrimental reliance was unnecessary.

Similarly, he noted that when Lord Walker and Lady Hale delivered the lead judgment in Jones, they again referred to Grant, Oxley and Stack, making no reference to the fact that the requirement for detrimental reliance had been abrogated. He also noted that detrimental reliance was so obvious that it had not been a point taken.

As such, his conclusion was that the House of Lords / Supreme Court had no intention of revoking the requirement for detrimental reliance, commenting that, if this was intended, it had gone completely unnoticed by the legal world.

His conclusion was reinforced by the decisions in 10 reported cases post Jones which made it clear that detrimental reliance was still required. The dicta quoted in each of these cases is also helpful reading for any practitioner dealing with a case where detrimental reliance is in question.

The court also helpfully confirmed that detrimental reliance was required in both sole and joint names cases.

In this case, the court found that Jayne had relied on Lee’s representations to her detriment, in that she had not pursued claims against him in relation to other assets and effectively released those claims in 2013.

Where this leaves us

The key significance of the decision in Hudson v Hathway is the clarification which many practitioners have been waiting for since Jones: namely that, though not expressly discussed in the judgment, detrimental reliance remains a key requirement for those advancing common intention constructive trust claims.

But the decision does contain other important practice points. For example, in delivering the court’s main judgment, Lewison LJ confirms his view that detrimental reliance is an essential ingredient of any equitable remedy. The comments appear to be obiter, but it is a strong reminder of what the court expects when granting equitable remedies.

The other key point is that, for those who are running claims under s. 14 of the Trust Of Land And Appointment Of Trustees Act 1996, the correspondence passing between the parties should not be overlooked. There will often be an implied severance of the joint tenancy and, as was the case here, there will be occasions where equitable interests have been released pursuant to s. 53 of the Law Of Property Act 1925.

In the context of inter partes negotiations prior to the instruction of solicitors, the application of s. 53, particularly in the context of e-mail correspondence, remains a significant trap. The court confirmed the need to interpret old legislation in accordance with modern technology not in existence at the time of enactment, and, as communications change, it seems likely that other forms of electronic media will satisfy the requirements of “signing” and “in writing”.

Robert Hill, Freeths

Leave a Reply

Your email address will not be published. Required fields are marked *