THE DESERTED BANK AND THE SPOUSAL
EQUITY

*Mary We/stead

"... I would fain temper justice with mercy -- justice to the
bank, with mercy to the wife ..."l

Lord Denning's closing words in National Provincial Bank v. Hastings
Car Mart were made in the context of that familiar dispute between a wife
in occupation of the mortgaged family home and a bank, in circumstances
where the husband had reneged on his mortgage agreement with the
bank.2

Since then, there has followed a plethora of decisions in which both
banks and spouses, alike, hoped that judges would follow Lord Denning's
idealism and realise the almost unattainable - a satisfactory outcome for
both parties. In the latter part of the 20th century, it is not merely spouses
who continue to seek that quality of mercy which Mrs. Ainsworth sought
from Lord Denning, but also quasi -spousal partners of both heterosexual
and homosexual orientation who occupy the same, mortgaged to the bank,
familial home.
Not surprisingly, justice to the bank and mercy to the spouse have

remained elusive goals. This is not, merely, because the conflicting parties
will almost certainly view the justice and mercy of any given situation in a
partisan manner but as the Law Commission has also commented: "The
present legal rules are uncertain and difficult to apply and can lead to
serious injustice.")
The accusation of palm tree justice, leveled at Lord Denning's approach

• Senior Lecturer in Law, Buckingham Law School, The University of Buckingham.
1 National Provincial Bank v. Hastings Car Mart [1964] Ch. 665 at 691.
2 Ibid.
3 Sixth Programme of Law Refoml (Law Com. No. 234). See also [1996] Fam. Law 696
where Charles Harpum, a Law Commissioner is reported as describing, in his address to the
1996 S.P.T.L. Annual Conference, the present law as uncertain, unfair, illogical and that it is
not difficult to believe that the Law Commission cannot do better. However, the long awaited
consultative document from the Commission has not yet made an appearance. See also
Thompson, [1996] 154 Conv. 685.

113



DENNING LAW JOURNAL

in National Provincial Bank v. Hastings Car Mart, has been viewed as an
accurate assessment of much judicial thinking in this area of law.4

Certain key decisions between 1970 and 1995 permit a cogent analysis
of the means by which the courts have attempted to develop equitable
principles relating to the resolution of claims to beneficial interests in
family homes. The decisions appear to veer between judicial adherence to
a strict interpretation of the rules, primarily based on the concept of the
constructive trust, and a creative judicial manipulation of those same
rules, in a manner more akin to proprietary estoppel. The perceived justice
and mercy of any given situation would appear to determine, or be
determined by, judicial interpretation of the concept. A strict legal
interpretation of the principles tends to benefit lending institutions in that
the familial partner is liable to be denied a right, which would bind third
parties. By contrast, the creative estoppel based approach would appear to
assist familial partners in acquiring a proprietary right.5

It must, however, be questioned whether either of these approaches have
resulted in anything other than a continued lack of realism with regard to
familial arrangements, on the one hand, and a scant respect for the
economic realities of lending institutions on the other. The decisions have
left both banks and the non-borrowing familial partner with a residue of
uncertainty and considerable legal expenditure.
Any starting point for the analysis of the evolution and expansion of the

constructive trust doctrine in this context must commence with the
decision in Gissing v. Gissing.6 Here, the House of Lords attempted to
give a definitive formulation of the elements required to ground a
constructive trust of the family home. The language used by Lord Diplock
is remarkably similar to that of proprietary estoppel. He accepted that such
a trust is created.

"...by a transaction between the trustee and the cestui que
trust in connection with the acquisition by the trustee of a
legal estate in land, whenever the trustee has so conducted
himself that it would be inequitable to allow him to deny to

4 In National Provincial Bank v. Hastings Car Mart Lord Denning M.R maintained that "...it
is the way of English law to decide particular cases and then seek for the principle ..." See also
e.g. Springette v. Defoe [1992] 2 F.L.R 388, in which Dillon L.J. asserted that: 'The court
does not as yet sit, as under a palm tree, to exercise a general discretion to do what the man in
the street, on a general overview of the case might regard as fair..."[at p.393].
5 The conflict between banks and family members is primarily confined to the context of
secondary borrowing. In circumstances where the initial purchase of the property has been
made by way of loan, the bank will normally take priority following the decision in Abbey
National v. Cann [1991] 1 A.C. 56; see also Bristol & West Building Society v. Henning
[1985] 1 W.L.R. 778.
6 [1971] A.C. 886.

114



THE DESERTED BANK AND THE SPOUSAL EQUITY

the cestui que trust a beneficial interest in the land
acquired. And he will be held to have so conducted himself
if by his words or conduct he has induced the cestui que
trust to act to his own detriment in the reasonable belief
that by so acting he was acquiring a beneficial interest in
the land."?

Lord Diplock drew the distinction between two types of transactions,
which, in his opinion, would give rise to a trust of the beneficial interest.
In the first type of transaction there is an express agreement that the
parties should share the beneficial interest in the property. The person
without legal title must then proceed to do some act to facilitate the
property's acquisition. Such an act may take the form of a contribution to
the purchase price or the deposit or the mortgage payments or "make
some other material sacrifice by way of contribution to or economy in the
general family expenditure."s According to Lord Diplock, the beneficial
shares are to be calculated in accordance with the express agreement of
h . 9t e partIes.
Is Lord Diplock's definition of this first type of transaction anything

other than a slight variation of the doctrine of proprietary estoppel? It will
be recalled that the canonical view of this doctrine is that it arises in
circumstances where one party has been encouraged by the legal
titleholder to alter her position to her detriment in the expectation of some
entitlement in the property concerned. 10 The ensuing equity will be
satisfied in whatever way the court deems to be appropriate, taking into
account all the circumstances of the case. 11 In Lord Diplock's first
category of constructive trust the expectation of the claimant is more
specific; it relates to a share of the beneficial interest. His explication of
the associated detrimental reliance is more restrictive; it must be of a
direct or indirect financial nature. Finally, his approach to the
quantification of the share is confined to the nature of the express
agreement rather than allowing the court complete discretion.
In the second type of transaction, described by Lord Diplock, there is no

express agreement to share the beneficial interest in the property. If the

7 Ibid at p.905.
8 Ibid.
9 Ibid.
]0 See e.g. Dillwyn v. Llewelyn (1862) 4 De G.F & J. 517,45 E.R 1285; Ramsden v. Dyson
(1866) L.R. 1 H.L. 129; Willmott v. Barber (1880) 15 Ch. D. 96; Taylors Fashions Ltd. v.
Liverpool Victoria Trustees Co. Ltd. [1982] 1 Q.B. 133; Pascoe v. Turner [1979] 2 All E.R.
945; Re Basham [1986] 1 All E.R. 405; Matharu v. Matharu [1994] 2 F.L.R. 597.
11 See Plimmer v. Mayor etc. of Wellington (1884) 9 App. Cas. 699 at 714; Crabb v. Arull
D.C. [1976] Ch.179 at 189; Griffiths v. Williams (1977) 248 E.G. 947 at 949.

115



DENNING LAW JOURNAL

parties have not applied their minds in any way to the issue, the court may
not impute an agreement to them. 12 However, they:

"...may well have formed a common intention that the
beneficial interest in the land shall be vested in them
jointly without having used express words to communicate
this intention to one another; or their recollections or the
words used may be imperfect or conflicting by the time

d· .,,]3any lspute anses.

In those circumstances the parties' intentions to share the beneficial
interest, and the subsequent quantification of that interest, may be
objectively inferred from their words or conduct on the basis of the
reasonable man test. 14 Lord Diplock proceeded to outline those limited
circumstances from which the court would infer a relevant intention.
Where the claimant's actions are confined to direct financial contributions
to the outright purchase price of the property or to the initial deposit or
legal expenses and nothing more, a resulting trust would normally arise. 15
The quantification of the claimant's beneficial share would clearly be
inferred in direct proportion to the level of her financial contribution.
However, Lord Diplock acknowledged that where the family home was
purchased by way of mortgage loan, to limit the quantification of the
beneficial share to a consideration of the initial contribution would be to
ignore economic and social reality. He, therefore, extended the resulting
trust principle and accepted that post acquisition conduct on the part of the
claimant could also lead to an inference of an intention to share the
beneficial interest, or of an intention to enhance the initial share if
contributions to the purchase price or legal costs had already been made.
In this context, Lord Diplock differentiated between direct and indirect
contributions. He explained that direct contributions to the mortgage
payments would lead to the inference of either intention. Indirect
payments towards the mortgage payments, by way of financial
contribution to general household expenditure which would otherwise be
met by the mortgagor so as to enable him to make the mortgage payments,
would only be taken into account to give the claimant an enhanced
share. 16 Thus indirect contributions will be of no avail in those situations
where a mortgage loan of one hundred per cent of the value of the

12 Gissing v. Gissing supra n.6 at 906.
13 Ibid.
14 Ibid.
15 See e.g. Dyer v. Dyer (1788) 2 Cox. Eq.Cas. 92 at 93, 30 E.R. 42 at 43; Pettit v. Pettit
[1970] A.C. 777 at 814; Cowcher v. Cowcher [1972] 1 W.L.R. 425 at 431.
16 GL~singv. Gissing supra n.6 at p.907ff.

116



THE DESERTED BANK AND THE SPOUSAL EQUITY

property has been granted or where the claimant has made no initial
contribution to the legal costs, and the mortgagor demonstrates an ability
to finance both the mortgage payments and the general household

d' 17expen lture.
Given Lord Diplock's empathetic appreciation of the social reality of

familial behaviour,18 his differentiation between direct and indirect
contributions seems excessively legalistic, as does his failure to take into
account domestic contribution in inferring the relevant intention. 19
By contrast, in detennining quantification in the second type of

transaction, Lord Diplock declined to base it solely on the parties'
respective financial contributions to the mortgage payments, both direct
and indirect. He accepted that the court must do its utmost to discover, if
necessary by inference from conduct, the likely common understanding of
the parties vis-a-vis their respective shares even though such an
understanding might not have been expressly stated or even consciously
formulated in words by either party. In the case of contributions to
mortgage installments over a period of many years the level of the parties'
contributions from their individual income is likely to change in
accordance with the "the varying exigencies of family life to be expected
during the period of repayment.,,20 For instance, the wife might have to
forego earning money outside the home in order to take care of children
and it might be possible to infer that their common intention at the time of
acquisition of the familial home was that the beneficial interest should be
held by them in equal shares and that each should contribute to the cost of
its acquisition whatever amount each could afford at a given time.
If, however, a subsequent reduction in mortgage payments is not
attributable to a reduction in earnings due to motherhood or some other
cause from which the man benefits as well, it might seem a more likely
inference that the beneficial interest should be less than equal.
Lord Diplock decided that it may even be possible to infer that, on

acquisition, the parties made no agreement to quantify their respective
shares but would wait until a later date such as the end of the mortgage
period or sale and do so on the basis of their total respective direct and
indirect financial input.
If there is no evidence from which all inference with respect to

quantification can he drawn, Lord Diplock concluded that, the court might
have to apply as a rule oflaw, rather than an inference of fact, the maxim
"equality is equity" and grant an equal share of the beneficial interest to

17 See e.g. Bums v. Bums [1984] 1 All E.R. 244.
18 Gissing v. Gissing supra n.6 at p.906.
19 Cf the approach of the Canadian courts, Welstead, "Domestic Contribution and
Constructive Trusts: the Canadian Perspective" [1987] Denning L.J. 151.
20 Gissing v. Gissing supra n.6 at p.909.

117

http://www.ingentaconnect.com/content/external-references?article=0269-1922(1987)0L.151[aid=7390986]


DENNING LAW JOURNAL

both partners.
These conclusions seems close to fulfilling the belief that "palm tree

justice" rules in this area of law and a betrayal of the court's purported
sincere belief that both the intention to confer a beneficial interest on the
claimant and the quantification of that interest may only be inferred and
not imputed. If there is no other evidence, it is difficult to see how the
application of the equitable maxim of equality can ever be a more
appropriate approach than inferring quantification from the party's
respective financial contributions.
For many years after Gissing, the case law on constructive trusts of the

family home was forced into two neat categories based on Lord Diplock's
view of the two forms of agreement. Those family litigants, who could
coerce their circumstances into evidencing an explicit agreement, tended
to succeed in acquiring an equitable interest in the family home. Once
they were able to show such an agreement, the nature of the detrimental
reliance required was less onerous than for claimants maintaining an
inferred agreement. These first category of claimants could claim as
relevant detriment not merely direct financial contributions towards the
property but also indirect financial contributions whether or not they had
made any initial contribution to the property and regardless of the
mortgagor's ability to repay the loan without this indirect financial
contribution. Substantial physical work on the property could also be
claimed as a detriment.

Cooke v. Head, is illustrative of this first type of agreement.21 The
parties were cohabiting; they found land on which they decided to build a
bungalow, title to which was in the sole name of the man. The property
was funded by way of mortgage loan. He had, however, declared that the
property was:

"...as much hers as it is mine ...She has equal rights to it.
She has put as much into that bungalow as I have.,,22

The female claimant carried out considerable physical work to the
building of the property. The Court of Appeal accepted that a constructive
trust had arisen on the basis of an express agreement followed by some
other material sacrifice involving contribution to or economy in the
general family expenditure. However, the court departed from the Gissing
approach, which based quantification in these circumstances on the
explicit agreement. Lord Denning moved even closer to the estoppel
principle and chose to exercise the court's discretion and take into account

21 [1972] 2 All E.R. 38.
22 Ibid at pA2.

118



THE DESERTED BANK AND THE SPOUSAL EQUITY

all the circumstances of the case. The court proceeded to award the
claimant one third of the value of the property in spite of the clear
intention evidenced by the man's statement that they were to share it
equally.23 A further example of the manner in which claimants have
attempted to force their circumstances within the ambit of an explicit
agreement is to be found in Eves v. Eves.24 Here, the sole legal titleholder,
Mr. Eves, had began to live with the claimant, a young woman aged
nineteen. She took his name and gave birth to two children during their
short relationship of four years. Mr. Eves had told her that he was buying
a house for both of them and their children but that he could not put the
house in joint names as she was under twenty-one; this was of course
merely a devious ploy on his part. Mrs. Eves did substantial renovation
work on the property including the wielding of a sledgehammer.
Lord Denning accepted that the man's statement was an explicit

indication of his intention to share the beneficial interest in the property
with the claimant. The Court of Appeal exercised its discretion and
awarded the claimant one quarter of the equity in the property but without
explanation how quantification had been reached. Once again it must be
assumed that the discretionary principles of estoppel were used to
determine quantification, particularly in the light of Lord Denning's view
that as the claimant had remarried, "this share would I hope be regarded
by her as more in the nature of provision for the children than for her. •.25
Few claimants have been fortunate enough to be able to bring the

haphazard nature of their familial arrangements within the categorisation
of so-called explicit agreements. They have been forced, with little
success, to attempt to widen the category of payments, outlined in the
second category of transaction in Gissing, from which a relevant intention
to share the beneficial interest might be inferred.
In Bums v. Bums, for example, a long term female cohabitant had made

no initial contribution to the purchase price or legal costs of acquiring the
property but had made generous financial contributions to household
expenditure.26 She argued that such contributions should equally give rise
to an inference of a relevant intention to share the beneficial interest as
they would had she made a financial contribution to the deposit or legal
costs.
The Court of Appeal rejected this argument. Perhaps it was influenced

in its view by the fact that the claimant's partner maintained that he was
able to fund the mortgage payments without her help. In spite of his
benefiting in a more general way by her financial contributions to the

23 Wachtel v. Wachtel [1973] 1 All E,R. 829.
24 [1975] 3 All. E.R. 768.
25 Ibid at p.772.
26 Supra n.17 at p.252; see also Hayton, [1990] Conv. 370.

119



DENNING LAW JOURNAL

household, she was deemed to be simply generous spirited rather than
allowing the quasi-matrimonial home of nineteen years to be acquired.
May L.J. acknowledged that:

" over a very substantial number of years she may have
worked just as hard as the man in maintaining the family,
in the sense of keeping house, giving birth to and looking
after and helping to bring up the children of the union.,,27

The Court of Appeal accepted that the outcome of its rigid application of
the Gissing principles left the claimant in a difficult and harsh situation
but that it was for Parliament and not the courts to redress any perceived
injustice.

Some two years later, however, in Grant v. Edwards, there were signs of
an increasing awareness of a change in familial arrangements and social
expectations and that it was perhaps up to the courts to address the
problems in an equitable, rather than an excessively legalistic, manner.28

Here, the female claimant had cohabited with the defendant in the family
home, title to which was in his sole name. The defendant told her that her
name would not be put on the title because it might prejudice the outcome
of divorce proceedings between the claimant and her husband. This,
according to the Court of Appeal was not so much an explicit agreement,
but rather raised the distinct inference that there was a clear understanding
between the parties that they were to share the beneficial interest in the
house. Otherwise no excuse for not putting her name onto the title would
have been needed.29 The court also accepted the fact that insurance monies
received after a fire damaged the property were paid into a joint account
was further evidence of an inferred agreement to share the beneficial
interest.
This approach suggests a merging of the two categories of agreements

outlined in Gissing and an extension of the type of behaviour, which
might give rise to the inference of an implicit relevant agreement.30

Subsequently the woman had made substantial payments towards general
household expenses and housekeeping. The man could not have made the
mortgage payments had she not done so.

In Grant v. Edwards, Browne-Wilkinson V.-C. explained that where the

27 Ibid at p.264ff.
28 [1986] 2 All E.R. 426.
29 Ibid at p.433.
30 Waite L.J. in Midland Bank v. Cooke [1995] 4 AlI E.R. 562, suggested, at 573, that Grant
v. Edwards was a decision based on the doctrine of proprietary estoppel rather the doctrine of
constructive trusts. See also the comments of Browne-Wilkinson V.-C. in Constructive Trusts
and Unjust Enrichment (Holdsworth Club of the University of Birmingham, 1991).

120



THE DESERTED BANK AND THE SPOUSAL EQUITY

claimant had proven an explicit agreement or an inferred agreement
(albeit on the basis of a wider category of behaviour than discussed in
Gissing), prima facie, the interest of the claimant will be that which the
parties intended. However, he suggested that:

" ...the law of proprietary estoppel may again provide useful
guidance. If proprietary estoppel is established, the court
may give effect to it by giving effect to the common
intention so far as may fairly be done between the parties.
For that purpose equity is at its most flexible .... Identifiable
contributions to the purchase of the house will of course be
an important factor in many cases. But in other cases,
contributions by way of labour or other unquantifiable
actions of the claimant will also be relevant. ,,31

The principles of constructive trusts and proprietary estoppel appear to
have been elided 32 thus leaving open the way for a more realistic
evaluation of all familial behaviour in determining the satisfaction of the
claim and not merely the parties' intentions with respect to the direct or
indirect financial contributions referable to the acquisition of the property.
Although there was a brief return to the rigid dual categorisation of

agreements in Lloyds Bank v. Rosset,33 the trend towards a more
benevolent approach to familial arrangements prevailed in Midland Bank
v. Cooke.34 Waite L.J., in a judgment, more social than legal in content,
acknowledged the uncertainties and difficulties in interpreting and
applying the rules surrounding the concept of the constructive trust. He
demonstrated his awareness that home ownership has become socially and
economically significant and almost totally dependent on loans from
mortgagee banks.
In 1971, Mrs. Cooke, the second defendant, had contributed £500

towards the purchase price of the family home. The money came from her
share of a wedding present from her husband's parents. The balance of the
purchase price had been provided by way of mortgage loan of £6,540
from a building society and £1,000 from the husband's personal savings.
There was no explicit agreement between Mrs. Cooke and her husband
that she should have a beneficial share in the family home. Indeed, both
she and her husband said that they had no recollection of discussing at the
time of acquisition the precise arrangements in relation to the house; they

31 Grant v. Edwards [1986] supra n.28 at p.439; see also Eekelaar, [1987] Conv.93.; Browne-
Wilkinson V.-C. ibid.
32 Hayton, [1993] 109 L.Q.R. 485.
33 [1990] 1 All E.R. 1111.
34 [1995] 4 All E.R. 563.

121



DENNING LAW JOURNAL

were simply happy at setting up home together.
Mrs. Cooke made no direct payments towards the mortgage payments

from her income but did pay for general household expenditure. There
was no evidence that these payments had enabled her husband to make the
mortgage payments. She had also engaged in work on the property and
garden in the form of redecoration, alterations, improvements and repairs.
The judge at ftrst instance held that the wife had acquired a beneficial

interest of 6.47 per cent behind a resulting trust, based on her minimal
ftnancial contribution to the purchase price. He rejected any inference of
an agreement that her share should be enlarged because of her subsequent
indirect financial contributions and improvements to the property. Waite
L.J. acknowledged:

"the difftculties which these cases pose for the honest
recollections of witnesses and the barrenness of the terrain
in which judges and district judges who try them are
required to search for the small evidential nuggets on
which issues as to the existence -or the ~roportions- of
beneficial interest are liable to depend." 5

Whilst conceding that he was bound by the decision in Gissing, Waite
L.J. ' s dicta suggest a merging of the two categories of express and implied
agreements, particularly with respect to quantiftcation. He stated that once
the relevant intention to found a beneftcial interest came into existence
either by way of an express agreement or by inference, the duty of the
judge is:

"... to undertake a survey of the whole course of dealing
between the parties relevant to their ownership and
occupation of the property and their sharing of its burdens
and advantages. That scrutiny will not confine itself to the
limited range of acts of direct contribution of the sort that
are needed to found a beneficial interest in the ftrst place. It
will take into consideration all conduct, which throws light
on the question what shares were intended. Only if that
search proves inconclusive does the court fall back on the
maxim that 'equality is equity. ",36

35 Ibid at p.567.
36 Cf Springette v. Defoe supra n.4, in which Dillon L.J. declined to grant an enhanced share
to the claimant. He maintained that the presumption of resulting trust based on the claimant's
initial contribution should not be displaced where there was no evidence of an agreement as to
how the parties would share the beneficial interest. See also McHardy & Sons (a firm) v.
Warren [1994] 2 F.L.R. 338 in which Dillon L.J. took the opposite approach and declared that

122



THE DESERTED BANK AND THE SPOUSAL EQUITY

Waite L.J. accepted that the majority of young people agree to set up
joint homes in a spirit of mutual trust and hope of a permanent
relationship and do not concern themselves with legalistic matters relating
to the quantification of beneficial shares in their family home should they
decide to part at some uncertain point in the future. To do so would be a
contradiction of that trust and hope.
In his attempt to quantify the defendant's share of the beneficial interest,

Waite L.J. recognised, inter alia, the significance of her child care and
career as a teacher, her signature to consent forms accepting joint and
several liability for loans for the husband's business,37 her home
maintenance and improvements.38 Furthermore he acknowledged for the
first time in Enrlish law, in the context of constructive trusts, the
additional fact "".that this was a couple who had chosen to introduce into
their relationship the additional commitment which marriage involves ...,,39
He concluded that the inferred intention of the husband and wife was to

share the beneficial interest in equal shares.
There appears to be a very short judicial step from taking into account

all the circumstances of family life for the purposes of quantification of
the familial partners' beneficial shares in the home, to taking them into
account for the purposes of inferring the relevant intention and detrimental
reliance to ground an intention to share the beneficial interest in the first
instance. Such an approach suggests a merging of the doctrines of
proprietary estoppel and constructive trusts.
However admirable the efforts of the judiciary to understand the nature

of familial relationships and, thereby, ultimately escape the rigid, unreal
search for the elusive common intention, is it fair to grant an equitable
interest which has the potential, as an overridin~ interest, to bind banks
which lend on the security ofthe family home? 0 Waite L.J.
acknowledged in Midland Bank v. Cooke that in the joint venture of a
relationship the parties share the benefits and burdens of financial success
and failure. If the discretionary approach of the judiciary continues it
seems increasingly likely that it will be banks who bear the burden of

the parties held the beneficial interest equally even though there was no evidence of how the
farties intended to hold their shares.
7 It would seem that Mrs. Cooke was remarkably fortunate; it was held at first instance that
her consent was obtained by undue influence and the bank could not benefit by her consent
~et her consent was viewed in a positive way in quantifying her interest.
S See also Hammond v. Mitchell [1991] 1 W.L.R.1127; Drake v. Whipp [1996] 1 F.L.R. 826

39 Midland Bank v. Cooke supra n.30.
40 In the absence of overreaching, (see e.g. City of London Building Society v. Flegg [1988]
A.C.54), s.70 (1)(g) of the Land Registration Act 1925 governs the priorities in registered land
(see e.g. Williams & Glyn 's Bank v. Boland [1981] A.C. 487) whilst the doctrine of notice has
a similar effect in unregistered land, (see e.g. Kingsnorth Trust v. Tizard [1986] 2 All E.R.54).

123



DENNING LAW JOURNAL

financial failure rather than members of the family.41
They will not only have to find out whether there are additional

members of the family living in the about-to-be-mortgaged property but
they will also have to examine all the past and present circumstances of
the familial entourage before deciding whether to lend or not.
Banks are commercial organisations governed, inter alia, by duties to

their shareholders and clients, both borrowers and lenders. There is an
inherent tension between lending money to purchasers of family homes,
and doing so in a manner, which safeguards commercial interests. This
tension must be acknowledged. Protecting homeowners rather than banks
may seem socially desirable but ultimately it is homeowners who will pay
the price in terms of higher borrowing costs. A totally new approach to the
problems experienced by lending banks and family members, at each
other's hands, is required if the present judicial manipulation of concepts
is to be discontinued.42 Solutions appropriate for intra-familial disputes are
not often appropriate for disputes between banks and members of
families.43

One possible solution to the former type of dispute would be an explicit
acceptance of the judicial merging of the doctrines of proprietary estoppel
and constructive trusts. Once an expectation followed by a detrimental
reliance is established, an inchoate right will arise. The right will only
crystallise once the court has granted a discretionary remedy, which may
include the grant of a constructive trust, based on all the circumstances of
the case.44 Because the right dates from the time ofthe court hearing it
will not bind third parties. The process would not be dissimilar to the
courts' approach to the division of matrimonial assets on divorce.45

Banks lending money require greater certainty. They have already been
forced into setting up elaborate mechanisms to deal with the problems of
familial partners who, having waived their equitable rights, seek to rely on

41 See Reid, "The Legal Implications of Williams & Glyn's Bank v. Boland" in Gower,
Problems of Conflict of Interest in the Matrimonial Home (1981) at p.24.
42 See [1996] Fam. Law 696 where a Law Commissioner, Charles Harpum is reported as
having suggested four possible solutions to the difficulties; a twofold approach which would
combine a more precisely defined intention based constructive trust coupled with an adjustive
regime; a totally adjustive regime; a property law regime based on rules defining length of
relationship, the existence of children, and direct economic contributions and finally, the
encouragement of explicit agreements between family members which would be required to
be registered at the Land Registry. He concluded that there are "...no perfect solutions, merely
least awful ones."
43 See Browne-Wilkinson V.-C., supra n.30.
44 See e.g. the comments of Lord Denning M.R. in Hussey v. Palmer [1972] 3 All E.R. 744 at
748; In re Basham (deed.) supra n.lO at p.1504; Pearce v. Pearce [1977] 1 N.S.W.L.R. 170.
45 See Matrimonial Causes Act 1975 s.25.

124



THE DESERTED BANK AND THE SPOUSAL EQUITY

the doctrine of undue influence.46 Nevertheless, they remain at risk of
discovering an overriding interest under section 70(1)(g) of the Land
Registration Act 1925 in circumstances where it would have been possible
to have knowledge of the owner of that interest. Has the time arrived for
the abolition of such overriding interests?47 The 1925 legislators, clearly,
did not envisage the rise in constructive trusts and the consequent increase
in claimants of overriding interests some seventy years later. Familial
partners may already register their equitable proprietary rights as minor
interests.48 Why should they be given a second chance of pleading an
overriding interest?
It has been frequently argued that family members do not register their

informally obtained rights because registration appears as an aggressive
act towards the legal titleholder and would destroy the mutual trust and
hope between the parties that their relationship will endure and not require
legal protection.49 This is; however, a paternalistic approach, which
attempts to protect family members in times of economic misfortune
without the acknowledgement that they, not infrequently, obtain, benefits
from their partners who borrow in times of economic success. 50They
should be positively encouraged to register their rights. Once it becomes
accepted common behaviour to register rights or risk their loss for lack of
registration, it will cease to be regarded as a hostile act.51

If paternalism is accepted as an appropriate vehicle for the protection of
the family home, it may equally require recognition that the family home
is an inappropriate asset for the purpose of securing borrowings other than
for the initial purchase of the property itself. In those circumstances new
legislation might be enacted which would designate family homes as safe
havens for those who live there as members of the same family.52 Inherent
in such legislation would be rules governing the use of the family home as
security to obtain further borrowings. Family members would indeed be

46 See e.g. Barclays Bank v. O'Brien [1994] 1 A.C. 180; Bank of Credit & Commercial
International v. Aboody [1990] 1 Q.B. 923; C.1.B.C. V. Pitt [1994] 1 A.C. 200; Midland Bank
v. Greene [1994] 2 F.L.R. 827.
47 See Law Commission, Property Law:Second Report on Land Registration (Law Com. No.
158, 31st March, 1987, para 2.7.)
48 Land Registration Act 1925 s.3(xv).
49 See the comments of Waite L.J. in Midland Bank v. Cooke supra n.34 at p.575; see also
Hayton, supra n.26 at p.387.
50 See the comments of Waite L.J. in Midland Bank v. Cooke supra n.34 at p.575.
51 See Kantorowicz (1937) 53 L.Q.R. 326; see also (1984) 272 E.G. 1295.
52 A possible model for such legislation could be ss.62 & 63 of the Family Law Act 1996
which define a wide variety of familial relationships deemed worthy of protection by way of
occupation orders in the family home. See also the Joint Family Homes Act 1964 which was
enacted in New Zealand to grant limited protection, against creditors, to those familial
members who have settled their family home under the act.

125



DENNING LAW JOURNAL

truly protected and would have to find other means of borrowing to fund
all those ventures which are currently dependent on remortgaging the
family home.
Until a satisfactory statutory solution is reached in resolving the tension

between social justice for family members and protection of the economic
interests of lending banks, the ideological struggle between "mercy for the
wife and justice for the bank" will remain reflected in judicial
interpretation of the doctrine of constructive trusts.

126