In the workplace, it’s fairly common to proof-read a draft email a couple of times before we hit ‘send’ to make sure the content, tone, spelling and grammar is just right.
If we get it wrong, the stakes can be high. I think I speak for many when I say that I don’t adopt the same careful approach when texting and emailing family and friends. Sorry for the typos Mum.
A recent Court of Appeal case, Hudson v Hathway [2022] EWCA Civ 1648, is a word of warning that ill-considered emails we send even to family can come back to haunt us in the event of a dispute about property. In this case, emails the parties had exchanged went directly to showing their intention for how a property they co-habited was beneficially owned.
The facts
Mr Hudson and Ms Hathway were an unmarried couple who had been together since 1990 and had two children together. In 2007, they purchased a property, Picnic House, in joint names. In 2009, the parties separated. Mr Hudson moved out whilst Ms Hathway remained at the property with the parties’ children.
In 2011, an oil spill from a neighbouring tank caused damage to Picnic House. Following the oil spill, the parties exchanged various emails relating to their financial arrangements.
In an email sent on 31 July 2013, Mr Hudson agreed to give Ms Hathway various assets. In relation to the house, he said that he wanted “none of the proceeds of that either…”.
Ms Hathway responded by email dated 13 August 2013. She said: “your suggestion, as I understand it, is you get sole ownership of your shares and pension, I get the equity from the house…. Is that right? If so, then I will accept this…”.
Mr Hudson replied on 9 September 2013 confirming “yes, that’s right”. All of Mr Hudson’s emails were signed off as ‘Lee’.
Mr Hudson stopped paying towards the mortgage in January 2015.
Six years later, Mr Hudson issued court proceedings seeking an order for the sale of Picnic House with an equal division of the proceeds. Ms Hathway agreed that the property should be sold but argued that she was entitled to the entire proceeds.
Her argument was that the parties had a common intention (and agreement) that she would retain the entirety of the house and so a ‘constructive trust’ over the property had been established of which she was the 100% beneficial owner. She had relied on this to her detriment, for example, by being solely responsible for mortgage payments since January 2015.
Issues
One of the questions the Court of Appeal had to consider was whether the communications between the parties expressing their common intention that Ms Hathway should have the whole beneficial interest in the property complied with the statutory formalities. Under section 53(1)(c) of LPA 1925 a disposition of an equitable interest must be made in writing and signed. It was well established that a written email satisfied the ‘in writing’ requirement, but what of the ‘signed’?
The Court held that the statutory requirements had been met. In particular, the court concluded:
- A release of an equitable interest does not need any particular form of words.
- Mr Hudson’s emails did amount to a release of his equitable interest as they evidenced “a clear intention to divest him of that interest immediately, rather than a promise to do so in the future.”; and
- By adding his name “Lee” to the bottom of his emails, the requirement that a disposition of an equitable interest be made in signed writing under section 53(1)(c) of LPA 1925 was satisfied.
In the circumstances, there had been an express disposition by Mr Hudson of the equitable interest, which complied with the statutory formalities.
Therefore, it was not necessary for Ms Hathway to rely on a common intention constructive trust. However, the Court of Appeal did consider an important question: whether detrimental reliance was required to establish a common intention constructive trust. At first instance, the lower court had controversially cast doubt on this.
The Court of Appeal put an end to this doubt confirming that detrimental reliance is indeed a necessary ingredient of the common intention constructive trust. That means that Ms Hathway would have had to successfully show how relying on the ‘common intention’ resulted in her suffering a loss or injury. Ms Hathway would argue, for example, that paying the entirety of the mortgage payments from Jan 2015 was an example of her detrimentally relying on Mr Hudson’s emails.
Conclusion
This case highlights the need to be extra cautious when engaging in email correspondence in relation to property rights. Where there are ongoing negotiations about respective interests in property, it is worth getting solicitors involved and having a declaration of trust or cohabitation agreement drawn up to avoid any future disagreements.
Our family solicitors can advise you on your options if you wish to regulate your interest in a property. If you would like to speak to a member of our family team, please call 020 3826 7550 or complete our online enquiry form.