In this edition of Lay of the Land, Gavin McLeod examines the acquisition constructive trust, an important but often overlooked tool for protecting beneficial interests in land without requiring proof of detrimental reliance.
It is a common enough scenario. A party owns the legal title to land. They want to get rid of it. Their intention, however, is to get rid only of that title. (Alternatively, the intention might be that such title is never to be theirs to start with). Either way, however, the intention is very much not that they should not have genuine control of, or benefit from, the land concerned. On the contrary, they very much want to retain (or obtain) such control or benefit. Still further, they may want others (apart from the prospective owner) to have that control or benefit, and even in succession to themselves.
The reasons for this desire – being that they themselves, or even someone else, should have benefit or control when the title is to be held by another person – are various. One explanation is of inheritance tax planning, albeit gone wrong. For, true enough, if a gift of land is made and the transferor survives for seven years, the transaction will not be taxable anymore (if it otherwise would or might have been). But if, in the meantime, the transferor had retained control or benefit, then the ‘retention of benefit’ provisions in the 1984 Act would kick in, so as to defeat that particular object. Nevertheless, that might well explain the scenario. Another reason might well be the wish to see a relative (and perhaps especially, an older child) take over the paternalistic responsibility for the ‘family property’ – in the interests of the parent transferor and/or the other children.
Of course, many iterations of this kind of situation would be covered by the principles of resulting and/or common intention constructive trust (when there is no express declaration of trust). For example, if property is not acquired in the ‘domestic consumer context’, but when another party advances the purchase money, then a resulting trust might be claimable. Further or alternatively (and in the ‘domestic consumer context’ also), if there is a common intention that the provider of the purchaser money (whether in whole or in part) should have an interest, then such is the archetypal province of the common intention constructive trust. Indeed, such a trust could also be claimed insofar as the claimant was transferring a property already in their name, with valuable equity in it, to a defendant relative – but on the basis that a beneficial interest should be retained. In that scenario, the detrimental reliance upon the common intention would be seen in the loss of the equity, and/or the ability to control the property and the dealings with it (as shown in Parker v. Parker-Bowyer [2024] EWHC 2239 (Ch); [2024] WTLR 1509, in which the author appeared).
So far, so straightforward. But of course, there are also more nuanced or difficult situations, for example as follows:
- A resulting trust claim might well be complicated by the operation of the presumption of advancement, in particular insofar as the acquirer of legal title is a child of the financial inputter;
- The transferor or financial inputter may well have wished to protect persons other than themselves, such as their other children, who (in turn) could never claim the benefit of a common intention constructive trust – precisely because they had not sustained detrimental reliance as regards the disputed transaction. Still further, and perhaps because they are minors, such children might never be said to have formed any common intention with the acquirer in the first place.
Equity has a response to this sort of situation – being of the unconscionable denial by a transferee or acquirer of the intended benefit of another person in the land. This would be when there had been a prior arrangement which looked to benefit that other person, and when that arrangement is, itself, the explanation for the acquirer’s own title. Nevertheless, equity’s response to the problem is not so very well known, and certainly when compared with its famous and commonplace sibling, the common intention constructive trust. Therefore, the response is often overlooked, and despite its (potentially) great significance.
For into these situations steps another form of constructive trust. It has had various labels attached to it. One is of a trust imposed to prevent the Law of Property Act 1925, s.53(1)(b) (concerning the necessity for the evidencing of trusts of land in writing) being used as an “instrument of fraud”. Another is of the so-called ‘acquisition constructive trust’. In a given case, meanwhile, this trust (howsoever styled) may well be capable of being pleaded together with another type, as in Parker v. Parker-Bowyer. There, a father transferred title in a valuable property to his son. This was pursuant to an arrangement whereby he (the father) was to retain the benefit and control of the property for his remaining lifetime. Accordingly, each of the acquisition constructive trust, and the common intention constructive trust, were made out in the father’s favour. But there are cases in which the acquisition constructive trust (as I shall label it) is the best, or even only, device to rely upon.
The origins of this type of trust go back a long way, to Rochefoucauld v. Boustead [1897] 1 Ch 196. That case is seen as the foundational representation of the principle of how equity will not allow the statute for signed writing to be used as an instrument of fraud. The logic then saw particular representation in Bannister v. Bannister [1948] 2 All ER 133. In that case, a transferor agreed with a marital relative, the transferee, that she (the transferor) should be able to continue to live in a cottage rent-free. As a result of this agreement, the purchase price was heavily abated. Furthermore, it was found that, apart from the agreement, the transfer would have never have occurred to begin with. The transferee later tried to evict the transferor from the cottage. The transferor successfully defended the possession action, claiming that the plaintiff relative was her constructive trustee for life.
In more recent times, the law is usually thought to be most authoritatively set out in the combination of three cases, the first two of which were in the Court of Appeal: De Bruyne v. De Bruyne [2010] EWCA Civ. 519; [2010] 2 FLR 1240, Khan v. Khan [2025] EWCA Civ. 1436, and Archibald v. Alexander [2020] EWHC 1621 (Ch); [2020] 2 FLR 1123. In De Bruyne, Patten LJ explained the relevant principles as follows:
- The authorities dealing with common intention constructive trusts provide only one example of a situation in which equity will impose a trust upon the owner or transferee of property based on the circumstances in which the property is acquired or dealt with. For a trust to be created the court has to be satisfied that it would be unconscionable for the legal owner to assert his legal interest in the property to the exclusion of the alleged beneficiaries. The fiduciary obligation which that involves arises most obviously in an express trust where the property is held under the terms of a trust instrument in which the interests of the beneficiaries are clearly identified … In the case of a constructive trust, the obligation is imposed upon him as a result of his unconscionable conduct.
- In common intention constructive trusts the equity arises because it would be unconscionable for the owner of the property to be allowed to deny the cohabitee the interest which it was agreed or understood that he or she would have and in reliance on which the cohabitee acted to his or her detriment … This requirement of detrimental reliance is closely bound up with the question of unconscionability…
- There are, however, a number of situations in which equity will hold the transferee of property to the terms upon which it was acquired by imposing a constructive trust to that effect. These cases do not depend on some form of detrimental reliance in order to re-balance the equities between competing claimants for the property. They concentrate instead on the circumstances in which the transferee came to acquire the property in order to provide the justification for the imposition of a trust … [E]quity will regard it as against conscience for the owner of the property to deny the terms upon which he received it. It is not necessary in such cases to show that the property was acquired by actual fraud (although the principle would apply equally in such cases). The concept of fraud in equity is much wider and can extend to unconscionable or inequitable conduct in the form of a denial or refusal to carry out the agreement to hold the property for the benefit of the third party which was the only basis upon which the property was transferred. This is sufficient in itself to create the fiduciary obligation and to require the imposition of a constructive trust. The principle is a broad one …:”.
In Khan, the following elaborations were given:
- As seen in Bannister, whereby there was an (abated) purchase price (and Parker, whereby the son assumed liability for the father’s debts by becoming liable on a remortgage loan), the trust is not defeated simply by the presence of value, as given by the acquirer in the transaction. Of course, the extent and nature of that value might be such as to imperil the claim – and especially if full market value (or something close to it) is given. In Khan, the court left open when or how it might be that the provision of value by the acquirer would defeat the acquisition constructive trust (at [57]).
- There is no requirement that the acquirer should have procured the transfer, or brought it about by actual fraud (at [58]). For example, as in Archibald, the arrangements might have related to an original acquisition, as opposed to a transfer to the defendant by an existing owner. (In Archibald, the genesis of the transaction had been the parent’s money, used on the basis that she and the defendant would take joint title, for the sake of the parent for life and afterwards for the children together. In no meaningful sense had the defendant ‘procured’ the transaction of transfer. It was an arms-length purchase from a third-party, albeit funded by the parent). Still further, ‘fraud’ in equity is a wide concept, concerned with unconscionable dealings or behaviour, and not necessarily with any type of deceit or dishonesty.
- There may be cases in which, whether by way of the claimant’s disreputable conduct or otherwise, equity would no longer treat the agreement as one which the acquirer must respect. This possibility was expressly acknowledged (albeit without developed consideration) (at [62]).
The particular utility of the acquisition constructive trust to support claimants who have not detrimentally relied has already been assessed. But even an unsuccessful defendant may see that there are advantages to this model, as against a common intention constructive trust (which would arise when sufficient detrimental reliance had first been sustained by the claimant). For the repeated message of the Court of Appeal appears to be that it is not the date of transfer or acquisition which is the first date for the beginning of the acquisition constructive trust. Rather, and as per the highlighted passage of De Bruyne (together with the observation in Bannister that it is the fraud (as equity sees it) of setting up the absolute character of the conveyance for the purpose of defeating the beneficial interest which equity relieves against), it seems that the trust interest first arises only with the unconscionable denial of right, or (if different) because of an unconscionable refusal to implement the agreed arrangements. (See also in this respect, Khan (at [53] and [62]). Such unconscionable behaviour (referred to in Khan as “going back on” the original arrangement), in turn, may occur many years after the defendant’s acquisition. It follows that a principled understanding of when the trust begins could well prove to be of importance, and especially insofar as the defendant is afterwards sought to be made liable to account for profits (such as in rent) accruing on the land, but when these were made by them before their express denial of anything.
In that sense, explanatory dicta of Fancourt J in Archibald (at [31]), apparently to the effect that the trust comes into being upon acquisition, may well be debatable, if not actively doubtful. (It is notable in this respect that, in the next paragraph, he proffered a more orthodox rationale, being that “[t]he owner only obtains the property on the terms of the agreement and equity does not permit them unconscionably to refuse to give effect to the terms” (emphasis added).
To date, there appears to be no decision which determines decisively whether the trust could only come into being at a later date – so as, in particular, to defeat the pursuit of equitable compensation in respect of an earlier time. In Khan, for example, an account was originally ordered to take place from the date of the parent’s death in 2008. It would seem, however, that any active ‘going back’, as it might be described, first occurred only several years later. It may be therefore that this point will have to be determined in the accounting process.
In conclusion, the acquisition constructive trust is an important and useful tool for the armoury of any land lawyer seeking to enforce informal arrangements as to the rights of others in land, as made with an acquirer who would now seek to say that they have free rein as owner. This is especially so, insofar as the client is a person who did not themselves underpin the arrangement through any detrimental reliance. In turn, this type of trust is not only of long heritage, but seems to be becoming more central to familial trust disputes, as shown by Khan and Archibald. Whilst, as in Parker, it may represent but a supplementary or alternative route to the claimant’s success, in other cases the claimant’s entire beneficial right in the property could depend exclusively upon it (as in Khan, whereby only one claimant brother sustained detrimental reliance, and so as to mean that the other brother’s claim depended on the acquisition form of trust). Therefore, it is of particular importance that all real estate practitioners are familiar with the principles of acquisition constructive trusts, and with their operation.
This article reflects the law as of the date it was published. Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational and/or informational purposes. It is not intended to be a substitute for specific legal advice and should not be relied upon for this purpose. This article represents the opinion of the author and does not necessarily reflect the view of any other member of St Philips Chambers.
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