Marilyn Stowe Blog

Aspden v Elvy: a tangled web and the problem with Principle. By Lindsey Randall.

Marilyn writes: Aspden v Elvy is a Chancery case dizzying in its complexity and I am sure most readers, like me, will find it difficult to understand. But what it boils down to in essence is this. When former cohabitants have a property dispute, because the property has been bought in the woman’s name but the man believes that, because of his substantial financial contribution, he too should have a share in that property, does he acquire a share even if his name is not on the deeds? If so, how much is his share to be?

In this particular case, the male claimant’s original financial contribution to the property was assessed at between £60,000-£70,000 by the judge. With an uplift it was ultimately assessed at £100,000, representing one quarter of the equity in the property.

Simple? You might think so, and you might also think that this matter could have been sensibly resolved long before trial, where the costs risks to both parties (of the loser paying the other’s costs) should surely have outweighed the amount in dispute. However the case was prolonged, no doubt because of the tortuous state of the law which gave both parties the opportunity to get tangled up in the most complex areas of property law. I suspect that ultimately neither party, clearly at war with each other, knew for sure what the outcome would be given all the complexities of the law, and so toughed it out. The judge then seems to have taken the most sensible and pragmatic course available to him.

Is this another case which cries out for cohabitation law reform? Undoubtedly. But how long will it be before someone dares to grasp the nettle? Perhaps rather than call it cohabitation law reform, it may be sensible to start instead with the less obviously controversial reform of property law.

Aspden v Elv [2012] EWHC 1387 (Ch)  is another case involving two former cohabitants, and their dispute over property. This is the second cohabitation and property case that I have written about on this blog in as many months, following May’s post about the division of assets in the case of Geary v Rankine.

What makes Aspden v Elvy notable is that it is the first application of the Supreme Court’s landmark ruling in Jones v Kernott. That judgment established that when it is not possible to ascertain a common intention between the parties as to how they should share the interest in a property, the court should impute an intention considered to be fair in light of the course of dealing between the parties in relation to the property.  The discretionary jurisdiction of the court is thereby invoked.

I should warn you in advance: Aspden v Elvy is a complex case. It demonstrates that when cohabiting couples separate, this issue of fairness in the distribution of property can be problematic.

Aspden v Elvy: the background

Mr Aspden and Ms Elvy met in 1985. The following year Mr Aspden purchased Outlaithe Farm, which comprised a farmhouse, outbuildings, a derelict barn with planning permission for conversion to a dwelling and six-and-a-half acres of land. The property was purchased for £70,000, and he was registered as the sole proprietor. The couple moved in together shortly after this. They had two children together, both of whom are now grown up.

Ms Elvy did not initially work, but made improvements to the farmhouse. From 1988, she ran a cattery and dog kennels called Noah’s Ark, which made modest profits.

In 1995 the couple separated. Ms Elvy left Outlaithe Farm and went to live nearby with the two children. However she continued to run Noah’s Ark from the property, and saw Mr Aspden on a daily basis.

In 2006 Mr Aspden transferred Outlaithe Barn, which included almost all the land which had been comprised in Outlaithe Farm, save for the farmhouse itself, to his former partner. He also executed a homemade will in her favour.

Mr Aspden remained at the farmhouse until it was sold in January 2008 and received about £188,000 from the sale, after discharging creditors. Thereafter he lived in a static caravan situated, with Ms Elvy’s consent, on part of the land within the curtilage of Outlaithe Barn.

Steps were taken to convert Outlaithe Barn into a home. Mr Aspden made a substantial financial contribution to the £90,000 cost of the conversion works, and assisted with the labouring. The parties finally fell out in June 2009 when Ms Elvy had an affair, at which point she decided to sell the Barn.

A dispute arose as to the beneficial ownership of Outlaithe Barn. The complicating fact of this case is that the relationship effectively involved dealing with two groups of properties.  The parties disputed the circumstances of the 2006 property transfer to Ms Elvy and the parties’ intentions at that time. Mr Aspden argued that he had been motivated to make the transfer in an attempt to put the property out of reach of his creditors. He maintained that at the time of the transfer there was a common intention that he should retain an interest in the barn. Ms Elvy denied that there was any such intention.

The extent of Mr Aspden’s contribution to the building works at Outlaithe Barn was also a source of dispute. Mr Aspden contended that the payments he made were pursuant to a common intention that the parties would marry and cohabit as a family, or a belief on his part that this was the position. Ms Elvy contended that there was never any common intention that they would marry or cohabit, and that the payments were gifts to her in recognition of her contributions to the family, and in respect of her interest in Outlaithe Farm.

Mr Aspden argued his case on the basis of a constructive trust and/or proprietary estoppel. Ms Elvy contended that she was the absolute owner of Outlaithe Barn. She denied that any proprietary estoppel had arisen.

What is a constructive trust?

A constructive trust exists where the non-owning cohabiting party has made a contribution towards the property and therefore is judged to have an interest in it. The termcontribution is to be construed widely and may not be solely financial. (See Stack v Dowden [2007] UKHL 17.)

In law, there is a presumption that the sole legal owner of a property is also the sole beneficial owner of that property. The burden will be on the party without their name on the register to establish that there is a common intention constructive trust, which can be inferred from the course of dealing between the parties.

The court must decide whether or not there was a common intention that the beneficial interests in the property were to be shared. This may be an express agreement or understanding reached between the parties, however imperfectly remembered or imprecise.

If these conditions are satisfied, the court must then put a figure on each party’s respective interests. If there is no evidence as to how the parties intended the beneficial interest to be shared, the court must decide what would be a fair share for each party, having regard to the whole course of dealing between them in relation to the property.

This goes beyond inferring an intention based on conduct. Instead, it is imputing an intention not based upon evidence.

What is proprietary estoppel?

The features of an estoppel are summed up in Stack v Dowden as follows:

Proprietary estoppel typically consists of asserting an equitable claim against the conscience of the ‘true’ owner.  The claim is a ‘mere equity’.  It is to be satisfied by the minimum award necessary to do justice…which may sometimes lead to no more than a monetary award.

In order to establish that there is an estoppel, it is necessary to establish that one person led another to act to their detriment in the belief that rights over land would be acquired.

The overarching common factor in both a claim for constructive trust and a claim for proprietary estoppel is the discretion of the court and the question of the extent of such discretion. The court has to produce an outcome which is logical and not arbitrary.

In Aspden v Elvy, Ms Elvy owned the Barn outright. Mr Aspden had to establish his interest. He made a claim not only for the finding of a constructive trust, but also a claim for proprietary estoppel.

In April 2012 the case was heard by Judge John Behrens, at the High Court in Leeds.

The Course of Dealing and Common Intention

To decide whether or not Mr Aspden had an interest in the Barn, it was necessary for the court to look at the course of dealing between the parties in order to discern their common intentions with respect to the Barn. The court had to ascertain if it was intended that Mr Aspden retain an interest in the property at all and, if so, what share of the interest he should be allocated.  Although the Barn was the primary concern of the court, it also analysed the intention with regard to the Farm as it was before division as part of the course of dealing between the parties.  Both parties had differing accounts as to their dealings with the properties:

a) Outlaithe Farm

Mr Aspden maintained that the property was purchased in his sole name, and that he retained the full beneficial interest in the property throughout.  He had “invited” Ms Elvy to move in with him after completion and they occupied separate bedrooms when she moved in. Ms Elvy had not made any financial contribution to the purchase.

Ms Elvy maintained that the decision to purchase the Farm had been a joint one, and that part of the consideration is purchasing the property was to provide accommodation for her horses. She alleged that she had paid the £700 stamp duty. She stated that she had moved into the Farm at the same time as Mr Aspden and denied that they had occupied separate bedrooms.  She further stated that she had undertaken substantial improvements to the property.

b) Noah’s Ark

Mr Aspden asserted that he paid the overheads and undertook work on the outbuildings.  He stated that when he had received RSPCA cheques on Ms Elvy’s behalf, he had cashed them and paid the cash to her.  Mr Aspden also produced documentary evidence showing minor profits of £1,000 – £2,700.

Ms Elvy asserted that the business licence was in her name.  She stated that the profits were modest, but disputed the figures as presented to the court by Mr Aspden.  She maintained that Mr Aspey paid the RSPCA cheques into his account but that she did not receive any of the sums.

c) The 1996 separation

Mr Aspden denied allegations of domestic violence and alleged that Ms Elvy was a drunk.  He stated that he had paid substantial sums by way of maintenance each week for the children.  He did not go to the Child Support Agency.

Ms Elvy stated that she had been domestically abused.  She still ran Noah’s Ark and saw Mr Aspden on a daily basis, stating “we were friends”.

d) The transfer of Outlaithe Barn

In both accounts the dates of events crucially differed, which was a central difficulty for the judge.

Mr Aspden claimed to have telephoned Ms Elvy on 20 January 2006 with the suggestion that he ring-fence the farmhouse from the rest of the Farm so that his creditors could be paid from its sale.  He would then withdraw £58,000 from his bank account to prevent it being used to pay his legal costs.

He intended that the Barn then be converted into a new home for him.  He stated that he had told Ms Elvy that she could move in with him because she said that she stood to lose her current property because she would be losing her benefits. He further stated that he had proposed marriage and obtained information regarding the Registry Office.

Mr Aspden alleged that Ms Elvy had suggested that he put the remaining property in her name to avoid his creditors.  They discussed inheritance tax and that he had suggested that it would also be good to divide the property in two for inheritance tax reasons. He maintained that on 22 January 2006 Ms Elvy had stated that inheritance tax would not be an issue because they were going to get married.  She then allegedly suggested that they get “back-to-back” wills.

They walked the boundaries of the land to decide the way in which the Farm should be divided. Mr Aspden gave Ms Elvy a cheque for the Land Registry fee and the title deeds to effect the transfer of the Barn and land.

The farmhouse was put on the market and he withdrew the £58,000.  He also executed a will in favour of Ms Elvy.

He did not provide Ms Elvy with a ring and cohabitation did not resume after 1996, but he still believed that Ms Elvy intended that they would get married.

Ms Elvy alleged that Ms Aspden had stated that he would need to put the Farm on the market one week before an adverse costs order had been made against him in another case.  She had therefore suggested that he not sell the Farm in its entirety but rather divide it, especially as her business was located there.

She stated that Mr Aspden then gave her the title deeds one day later and told her to put the whole property into her name.  Ms Elvy sought the advice of a solicitor to undertake the transfer, who advised that she should not put the whole property in her name, as it would seem that it was an attempt to deprive Mr Aspden’s creditors.

Ms Elvy claimed that Mr Aspden agreed to this, and walked the boundaries with her to decide as to how it should be divided.  Mr Aspden then gave her a cheque to pay the Land Registry fee.

She alleged that at no point had she expressed fears about losing her home and needing to move in with Mr Aspden.  Moreover, there had been no suggestion that they would convert the Barn into a dwelling house.  There was no proposal of marriage and there had been no discussion of inheritance tax.  Mr Aspden had made no reference to marriage and there had been no offer of making “back-to-back” wills.

e) The conversion of Outlaithe Barn

Mr Aspden maintained that he carried out substantial work.  He laboured and used his JCB.  He plastered and dug a drainage system. In respect of his contribution to the costs of the conversion, he stated that he had spent in excess of the £58,000 he had withdrawn from his bank account.

Mr Aspden said that he made the payments because he had believed that the Barn would be their family home.

Ms Elvy asserted that Mr Aspden had contributed only £20,000 and that any payments made by him had been gifts on account that the Barn was to be their children’s home too.

Ms Elvy stated that to meet the remaining costs of the conversion, she had drawn upon an inheritance from a friend, and had also sold various items and had received benefits.

Aspden v Elvy: the findings

After going through the facts in detail, Judge Behrens made particular reference to Stack v Dowden and Jones v Kernott, the recent authorities on the beneficial entitlement to a shared home. As he pointed out, both of these were joint names cases, but there are passages in the speeches which refer specifically to the situation when the legal title is vested in one person. He pointed to the words of Lord Walker and Baroness Hale in Jones v Kernott:

To the extent that we recognise that a “common intention” trust is of central importance to “joint names” as well as “single names” cases, we are going some way to meet that hope. Nevertheless it is important to point out that the starting point for analysis is different in the two situations. That is so even though it may be necessary to enquire into the varied circumstances and reasons why a house or flat has been acquired in a single name or in joint names.

The starting point is different because the claimant whose name is not on the proprietorship register has the burden of establishing some sort of implied trust, normally what is now termed a “common intention” constructive trust. The claimant whose name is on the register starts (in the absence of an express declaration of trust in different terms, and subject to what is said below about resulting trusts) with the presumption (or assumption) of a beneficial joint tenancy.

As to proprietary estoppel, Judge Behrens referred to the three elements identified by Lord Walker in Thorner v Major [2009] UKHL 18: a representation or assurance made to the claimant; reliance on it by the claimant; and detriment to the claimant in consequence of his (reasonable) reliance.

The overarching common factor in both the claim for constructive trust and for proprietary estoppel is the discretion of the court and the question of the extent of this discretion.  In applying its discretion the difficulty for the court is to produce an outcome which is logical and not arbitrary.

Due to the differences in the parties’ accounts, it was necessary to address each issue and event in turn to make findings of fact before any consideration could be given to the overall outcome of the course of dealing. One central difficulty of this case was that the parties’ accounts differed and it was evident that to some extent, each party may have been untruthful.  Judge Behrens was therefore compelled to make findings of fact on each issue as to which account he preferred.

He made the following findings:

1.  The acquisition of the Farm

• There had been no common intention that Ms Elvy should have an interest in the property at the outset.
• There was no evidence of the extent of Ms Elvy’s contribution to the improvement of the property.
• It was possible to argue that she had obtained an interest, but equally possible that she had not.
• The judge felt it unnecessary to reach any conclusion as to the status of any interest Ms Elvy had in the Farm.

2. Domestic violence

The court was unwilling to make a finding.

3. The transfer of the Barn

• Mr Aspden’s account of the circumstances was found to be unreliable.
• Ms Elvy’s account was found to be more straightforward and was backed up by some documentary evidence.
• The transfer of the property to Ms Elvy had been intended as an outright transfer.
• There was nothing in the parties’ conduct to enable the court to infer an intention that the beneficial interest be shared at this stage.

4. The conversion of the Barn

• Mr Aspden’s contribution to the work had been substantial, and that had contributed to an increase in the value of the property.
• Moreover, the court found it difficult to determine how Ms Elvy would have funded the conversion to the extent necessary without Mr Aspden’s assistance.
• There was documentary evidence to support Mr Aspden’s contributions.  The court found him to have contributed £65,000-£70,000 in total.
• The court dismissed the notion that Mr Aspden’s contributions had been gifts, as the expenditure had left him living in a caravan.  The monies were a “very substantial part of Mr Aspden’s assets after he had paid off his creditors”. Mr Aspden’s expectation had therefore been that he would move into the Barn too.

Was there an interest in the Barn giving rise to a constructive trust?

Having objectively considered the conduct of the parties and Mr Aspden’s contribution, the court found there had been an intention that the beneficial interest be shared.

Was there a proprietary estoppel?

Judge Behrens stated the following:

In these circumstances it is not necessary to consider in detail the claim based on proprietary estoppel.  In my view the result would be the same.

What was the extent of Mr Aspden’s interest?

Judge Behrens found no evidence as to the intentions regarding the extent of Mr Aspden’s interest.  As such he stated that, following Jones v Kernott, he was compelled to impute an intention based upon what he deemed fair in light of the course of dealing between the parties.

He allocated Mr Aspden a 25 per cent interest in the property, which was now worth in the region of £400,000.  This represented Mr Aspden’s original financial contribution along with a taking into account of the increase in the value of the property.

The implications and Jones v Kernott

We have established that the standard to be applied to establishing the shares in a constructive trust is that of fairness in light of the course of dealing.  The emphasis in relation to proprietary estoppel is slightly different, however. In Aspden v Elvy, Judge Behrens discusses the tests to be applied in establishing an estoppel at length, but does not in the end fully consider the remedy.

When he explains estoppel in his judgment, he states:

The court has a discretion as to how the equity is to be satisfied in any particular case.  It has been said that this is an area where equity is displayed at its most flexible; however it has also been said that the court must take a principled approach and cannot exercise a completely unfettered discretion according to the individual judge’s notion of what is fair in any particular case.

Judge Behrens then goes on to refer to the case of Jennings v Rice [2003] 1 P & C R 8 and Lord Justice Aldous’ comments, highlighting that where the elements of proprietary estoppel are established an equity arises:

The value of that equity will depend upon all the circumstances including the expectation and the detriment.  The task of the court is to do justice.  The most essential requirement is that there must be proportionality between the expectation and the detriment.

In terms of estoppel, proportionality is something which Judge Behrens in his conclusion effectively equates to fairness in terms of constructive trust, stating that both remedies produce the same outcome for Mr Aspden.  Essentially, although the judge goes to the trouble of emphasising that the principles of estoppel and constructive trust should not be merged and there should be a clear distinction, he falls into this very trap.

What should the distinction be then and where does this leave the concept of ‘fairness’ in terms of certainty following Jones v Kernott?

Distinctions should be drawn between the terms fairness and equity. The former produces an outcome that is just and appropriate in the circumstances; the latter arises under a discretionary remedy where it would be inequitable not to hold a party to their promises or statements.

Equity is a system of rights and remedies.  A person is entitled to a remedy where a right is established on account of assurances and/or actions and they have relied on these to their detriment.

Fairness is a wider concept.  When fairness is considered with a view to a constructive trust and apportioning interest, the whole of the relationship between the parties is considered.  This is a key development of Jones v Kernott. A married couple is viewed as two equal partners, and the circumstances of the marriage are considered in view of whether shares should be equally divided. So too, although not to the same extent, are the circumstances of the relationship of cohabitees now to be considered – albeit not from the starting point of equality, but from the starting point of conduct.

It is worth bearing in mind the contrast of the concept of fairness in the context of cohabitation as against fairness within the marital regime.  Case law has established that in relation to financial relief in matrimonial proceedings, there are three strands of fairness when allocating shares of assets with regard to section 25 of theMatrimonial Causes Act 1973. These are needs, compensation and sharing, with first priority being given to meeting each party’s needs.  It is consequently not difficult to see the greater degree of certainty in relation to fairness in matrimonial proceedings.  Needs are,to a great extent objectively quantifiable. It is only on the rare occasions when the court moves onto compensation that fairness, in the sense in which it is explored in cohabitation cases, more distinctly comes in to play.

In the case of proprietary, estoppel proportionality is key. This has the effect of instituting the exercise of a narrower discretion. Estoppel is more principle-driven, while fairness poses the risk of an unfettered exercise of discretion.

Was the judge then wrong in his conclusion? Did he err when he did not clearly distinguish estoppel from constructive trust and a determination of what was “fair”?  Indeed, he would seem to admit that the exercise of his discretion has not been to any great extent fettered:

To my mind that represents a fair return for the investment…The figure is somewhat arbitrary but it is the best I can do with the available material.

I would say he has done the best he can in the circumstances, the factual background being one of complete inconsistency requiring an extensive finding of fact.

Aspden v Elvy thus demonstrates the difficulty in applying the concept of fairness in a case such as this.  As a concept, fairness demands a highly discretionary outcome and produces a high degree of uncertainty.  Moreover, the fairness which should be arrived at will not be fairness as the court perceives it, but something more external, albeit equally intangible.  The principle established in Jones v Kernott allows for an assessment of all of the circumstances, but in doing such it poses the risk of producing arbitrary results such as we have seen here.

Lindsey Randall studied at Trinity College, University of Cambridge, for an MA in English before deciding to pursue a career in law. She attended The College of Law in York before going on to study for the Bar at BPP Law School in Leeds. She is a barrister member of the Middle Temple, having been called to the Bar in 2010. She has now joined Stowe Family Law LLP where she is training to be a solicitor.