Lloyds Bank v Rosset [1988] 3 All ER 915

Facts

  • Mr. and Mrs. Rosset purchased a property using funds from Mr. Rosset’s family trust, with legal title registered solely in Mr. Rosset’s name.
  • The property was mortgaged to Lloyds Bank.
  • Mrs. Rosset claimed a beneficial interest in the property, asserting she contributed to its acquisition and renovation through her labor and oversight of building works.
  • Following a mortgage default by Mr. Rosset, Lloyds Bank sought possession of the property.
  • Mrs. Rosset resisted the bank’s claim, arguing her beneficial interest should take priority over the bank’s charge.

Issues

  1. Whether Mrs. Rosset’s contributions (labor and oversight in renovations) were sufficient to establish a beneficial interest under a constructive trust.
  2. Whether a beneficial interest, if established, could take priority over Lloyds Bank’s rights as mortgagee.
  3. What evidentiary requirements must be met to establish a beneficial interest in property through common intention and detrimental reliance.

Decision

  • The House of Lords found no express agreement between Mr. and Mrs. Rosset regarding shared beneficial ownership of the property.
  • The court determined that, in the absence of an express agreement, a common intention to share ownership could only be inferred if the claimant’s contributions were directly referable to the acquisition (such as to the purchase price or mortgage payments).
  • Mrs. Rosset’s contributions to renovation and oversight, while significant, were held to be insufficient to establish a common intention or a constructive trust beneficial interest.
  • The bank’s charge had priority, as Lloyds Bank had neither actual nor constructive notice of Mrs. Rosset’s alleged interest and her interest was not properly registered.
  • The court emphasized the high threshold of evidence required for claimants asserting beneficial interests arising from constructive trusts.

Legal Principles

  • Establishing a beneficial interest in property requires clear evidence of a common intention to share ownership, either through an express agreement or inferred from conduct directly related to acquisition.
  • Detrimental reliance must be demonstrated by claimants seeking to assert a constructive trust.
  • Contributions limited to renovation or improvement are generally insufficient; financial contributions to the purchase or mortgage are required.
  • For a beneficial interest to override a mortgagee’s claim, the interest must be registered or the mortgagee must have notice of it.
  • The judgment distinguishes between contributions to property improvement and those that indicate an intention to share ownership.

Conclusion

Lloyds Bank v Rosset remains a leading authority on the evidentiary and legal requirements for proving constructive trusts and the priority of beneficial interests versus mortgagee rights, highlighting the importance of clear agreements, direct financial contributions, and proper registration in property disputes.

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