The principles of common intention constructive trust and proprietary estoppel apply to situations when the person who has been promised property or land has relied upon that promise to his/her detriment but has been denied the right to the property or land.
Common intention constructive trust
Constructive trust claims can be made under the Trust of Land and Appointment of Trustees Act 1996. In order to establish a common intention constructive trust, you need to show:
(1) a common intention to share ownership of a property; and
(2) detrimental reliance that significantly altered his/her position.
Where there is no evidence of an agreement or arrangement, you can rely upon the conduct of the legal owner in order to establish a common intention to share in the property beneficially, such as the person seeking to prove an interest in the property having contributed to the purchase price or mortgage.
Proprietary estoppel
An estoppel is a legal principle that can be raised to prevent a person from going back on his/her word where permitting him/her to do so would result in creating injustice. One kind of estoppel is proprietary estoppel, which is estoppel in relation to ownership of property or land.
In order to establish proprietary estoppel, you need to show:
(1) a promise/assurance/representation, which can be active or passive; and
(2) detrimental reliance.
There must be a connection between the promise and the detriment, and you must have suffered a substantial loss in reliance on the promise. The detriment must be such that it would be unconscionable for the party who has the promise/assurance to be allowed to go back on it.
Are they the same?
The two principles above are very similar in a way that both:
(1) rely upon a promise which has been relied upon and a detriment due to the reliance on the promise; and
(2) can act as an exception to the formalities required in relation to land transactions. However, they are different in terms of:
- Remedies;
Lord Walker set out the different standards for the two principles in the case of Stack v Dowden [2007] NZHL 17 stated that:
“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. A “common intention” constructive trust, by contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests.”
- Their elements
First, there is a broader range of promise/assurance/representation that can support a proprietary estoppel claim than a claim for a common intention constructive trust.
Second, in the context of proprietary estoppel, there is an extra side-element of unconscionability that goes beyond an assessment of detrimental reliance. When considering relief, the Court will consider all of the relevant circumstances and see whether the relief is proportionate to the detriment.
Third, it may be easier to establish reliance for proprietary estoppel claims. Walker LJ in the case of Gillett v Holt [2001] Ch 210 stated that:
“Detriment is required. But the authorities show that it is not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances…”
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