Detrimental Reliance And The Dangers Of Emails: Hudson v Hathway [2022] EWCA Civ 1648

• Law Firm: Gatehouse Chambers
• Subject Matter: Litigation, Mediation & Arbitration, Family and Matrimonial, Trials & Appeals & Compensation, Wills/ Intestacy/ Estate Planning
• Author: Ms Charlotte John
• Published date: 27 March 2023

The Court of Appeal's decision in Hudson v Hathway [2022] EWCA Civ 1648 is arguably the most important decision on the subject of constructive trusts of the family home since the House of Lords decided Stack v Dowden [2007] UKHL 17.

The decision brings clarity to an area of law that is notoriously nebulous. As Lord Justice Carnwath famously put it in the Court of Appeal's judgment in Stack, the law in this area seems like a "witch's brew, into which various esoteric ingredients have been stirred over the years, and in which different ideas bubble to the surface at different times."

The decision offers something old, in restoring the orthodox understanding in terms of the requirement for detrimental reliance, and something new, in considering the need for the application of the law in relation to statutory formalities to keep pace with technological developments.

Lewison LJ gives the lead judgment, which lays out a supremely detailed analysis of the relevant case law and the considerations that have shaped the law. The decision of the Court of Appeal establishes two key points of significance:

• First, email communications may amount to signed writing for the purposes of the statutory requirements for disposing of a beneficial interest (under s.53(1)(c) of the Law of Property Act 1925) if the sender signs off with their name.
• Second, a party claiming a subsequent increase in their equitable share as a result of a post-acquisition changed common intention must show detrimental reliance on that changed common intention.

Background

Ms Hathway and Mr Hudson started a relationship in 1990. In 2007, they purchased Picnic House. The house was acquired in their joint names, with no express declaration of trust. In 2009, Mr Hudson left Ms Hathway for another woman. The mortgage was converted to interest only and continued to be paid from a joint bank account into which both paid their salaries; Mr Hathway making by far the greater financial contribution. In 2011, the house was blighted by an oil spill, making it difficult to sell. An environmental clean up was required and the resulting insurance claim dragged on for years. Over the better part of the following two years, the parties had sporadic email discussions about their financial arrangements, which culiminated in the following pivotal email from Mr Hudson on 30 July 2013:

""So here it is. We were never married. You have no claim over what is mine. What I consider ring-fenced is what I get from my years of personal graft. They are not up for discussion. I'm not agreeing to give you any. .... The liquid cash, you can have. Savings in the bank, other plans, take it all. Physical property, the contents of the house ... again I don't want it; keep it. Which leaves the house, a bad asset which is preventing all of us [from] .. moving on with our lives.... You know what, I want none of the proceeds of that either. Take it. Buy yourself somewhere you can afford to live.... As for a Will, if I were to die before this financial mess is sorted, Heidi [his wife] will have no rights to Picnic House ... What I want is an end to it. So have everything that's available to have now and when the house is sold."

The email was subscribed at the end "Lee"."

After some further back and forth, he followed this up with a further email on 09 September 2013 that read:

"Under this arrangement, I've no interest whatsoever in the house, so whilst I will continue to contribute, I won't do so forever."

Again, that email was signed off "Lee".

Consistent with the position that he had abandoned his interest in the property, Mr Hudson sent further emails to Ms Hathway in which he noted the length of time that had passed since the parties "came to a deal" and emphasised his consequential disinterest in what the property might sell for.

In January 2015, he stopped paying the mortgage and Ms Hathway took over the payments.

Then in 2019, Mr Hudson issued a claim for an order for the sale of Picnic House with equal division of the proceeds.

Ms Hathway argued that she was entitled to the whole of the proceeds under a constructive trust following a common intention and agreement, in reliance on which she said she had acted to her detriment by doing the following:

• Paying all interest payments on the joint mortgage from January 2015;
• Desisting from claiming against assets in Mr Hudson's sole name acquired during their relationship;
• Not claiming financial support for the benefit of the children under the Children Act 1989;
• Accepting sole responsibility for the oil spill and insurance claim;
• Maintaining and redecorating the property at her own expense;
• Relying from 2014 on the understanding that she was sole beneficial owner, and living frugally to afford the upkeep and mortgage.

The decision at first instance

The trial judge ruled that Ms. Hathway had to demonstrate that she had changed her position or...