Summary

Property purchased by a council tenant at a 60 per cent discount pursuant to her right to buy and otherwise entirely financed by her son, was held on a resulting trust for her and her son in the ratio of 60:40, as the right to buy discount was treated as a contribution to the purchase price.

Facts

The claimant widow (L) claimed a beneficial interest in the proceeds of sale of a property previously owned by her mother-in-law (E) and left to L's son (P) in E's will. E had had a right to buy her council house at a 60 per cent discount. E's son (J) provided the remaining 40 per cent and the property was transferred into E's sole name. At or about this time E drew up a will leaving the property to J. Several years later J's business was failing and there was a prospect of personal bankruptcy. A decision was made to change E's will in order to leave the property to P. J went bankrupt and eventually died before E. When E died the property was sold and the proceeds were paid over to P. L commenced proceedings against P, claiming a beneficial interest in the proceeds of sale. L argued that (1) a constructive trust arose in her favour as it had been the common intention of E and J when the property was bought from the Council that it should be a home for E for the rest of her life, and thereafter should belong to J; (2) alternatively E held the property on a resulting trust for herself and J in the ratio of 60:40.

Held

(1) There was no firm evidence that there was an agreement or understanding between E and J at the time when the property was acquired that the property was to be E's for the remainder of her life and that it should then belong to J. Had such an agreement or understanding been made out on the facts it would have given rise to a constructive trust under which E would have been a tenant for life under the Settled Land Act 1925 leaving her with no beneficial interest which she could dispose of in her will. The very fact that E made a will at or about the time the property was acquired, leaving it to J, presupposed that she had at least some beneficial interest in the property beyond a mere life interest. Nor could it be argued that J had provided the cash needed to purchase the property without acquiring any stake in it. The fact that J had borrowed the money strengthened the inference that he never intended to make a gift of the money to his mother. (2) The resulting trust analysis, treating the value of E's right to buy discount as a contribution to the purchase price, was the correct one. L was entitled to 40 per cent of the net proceeds of sale of the property.

Judgment for claimant.