Hudson v Hathway [2022] EWCA Civ 1648

Hudson v Hathway [2022] EWCA Civ 1648

This case concerned a couple, Mr Hudson and Ms Hathway, who were in a relationship and had two children but never married.

In 2007 they bought a property with a mortgage in joint names but did not make a declaration of trust confirming the intended split in ownership of the property.

Two years later in 2009 they separated, Ms Hathway remained in the house with their children and Mr Hudson moved out of the property. As before, the mortgage continued to be paid from the joint bank account into which both their salaries were paid. Over the years the amount that Mr Hudson paid towards to mortgage substantially exceeded Ms Hathway’s contributions.

In 2011 oil leaked into and underneath the property from a neighbouring tank. This incident caused an insurance claim that went on for many years. Following the incident Mr Hudson and Mrs Hathway were corresponding by email about financial separation arrangements.

It was agreed by email that Mr Hudson would have sole ownership over his shares and pension and Ms Hathway would have the equity from the house, the house contents, savings and income from endowments. Mr Hudson stated that he has no interest whatsoever in the house and told Ms Hathway to have everything that was available to have now and when the house was sold. Ms Hathway accepted this and stated that she would do everything possible to get the house ready for sale as soon as the oil incident had been resolved.

In 2015 Mr Hudson ceased contributing towards the mortgage and Ms Hathway took over the payments. In 2019 Mr Hudson sought an order for sale of the property with equal division of the proceeds. Although Ms Hathway agreed that the house should be sold, she disputed that Mr Hudson was entitled to any of the sale proceeds. Ms Hathway contended that she was in fact entitled to the whole of the sale proceeds under a constructive trust following a common intention and agreement, in reliance on which she had acted to her detriment.

The Decisions (First Instance, High Court and Court of Appeal)

The original trial judge held that in order to enforce the agreement evidenced by the emails, Ms Hathway would have to show that she had changed her position or relied on the agreement to her detriment. He held that not claiming against Mr Hudson’s shares and pensions amounted to detrimental reliance and held that Ms Hathway was entitled to the whole beneficial interest in the property.

The Appeal Judge disagreed with the conclusion that Ms Hathway needed to show detrimental reliance or any change of position at all and so dismissed the appeal.

Mr Hudson was given permission to appeal the decision to decide the point of principle, whether a constructive trust can arise simply as a matter of common intention without the need to show any detrimental reliance.

It was also considered as to whether Mr Hudson’s emails had effectively released his interest in the beneficial joint tenancy.

Under s36(2) of the Law of Property Act 1925 a joint tenant can release their interest to the other joint tenant and there is no particular form of words required to do so. The focus here was whether dispositions of equitable interests in land should be made by signed writing. This point was not argued at trial or first appeal.

However, there is no definition of ‘signed’. The touchstone for determining what is a signature is an intention to authenticate the document. It was held that Mr Hudson’s emails amounted to a disposition, transferring his equitable interest to Ms Hathway and that the email was signed due to him signing off the email with his first name ‘Lee’.

In conclusion, the Court of Appeal determined that detrimental reliance is still required in such cases, however it held that Ms Hathway had acted in detrimental reliance by foregoing any claim against Mr Hudson’s other assets. The practical outcome was therefore the same for Ms Hathway; she was entitled to the proceeds of sale.