The relevance of context in property law: a case for judicial restraint?

The relevance of context in property law:a case for judicial restraint?lest_186 175..198

Nicholas Hopkins*Reader in Law, University of Southampton

A distinction between the domestic and commercial context is commonly drawn in propertylaw discourse and has been brought into focus by three recent House of Lords’ decisions.The thesis of this paper is that while the distinction is a useful explanatory tool, it runs intodifficulties when given legal effect by the courts. There is a definitional problem inunderstanding what is included within each context. Indeed, the distinction assumes theexistence of a dichotomy when, in fact, the domestic and commercial spheres are betterseen as a continuum. In Stack v Dowden, the majority of the House of Lords gave legaleffect to context and considered that different rules should apply to determine ownershipof the home. This paper locates its decision in the broader debate on judicial restraint andcreativity. By analogy with current discussion of due deference in public law, it is sug-gested that, in light of the policy issues involved and the broader ramifications of thedecision, insufficient justification was given for the approach adopted by the majority.

INTRODUCTION

This paper considers the significance of the distinction between the domestic andcommercial context in property law. It takes as its focus how the distinction is used inresolving questions of ownership, but it extends to consider undue influence in whichthe distinction plays a significant role. Reference to the distinction is common inproperty law discourse. It is seen as implicit in the classification of interests in land aslegal and equitable in the 1925 legislation;1 it has been used to explain why someinterests in land are held under a trust, while others are not;2 and why some interests areover reachable and shift on a sale from the land to the proceeds of sale, while others donot.3 In a review of the seventh edition of Cheshire’s The Modern Law of Real Property,in which the discussion of estates and interests in land was structured around a divisionbetween beneficial and ‘commercial interests’, Hargreaves commented:4

‘The classification into Family Interests and Commercial Interests, or Com-mercial and Non-commercial Interests, or Commercial Ownership and Beneficial

* The development of the ideas in this paper benefited from discussion with colleagues at aseminar at the University of Southampton in January 2010 and comments on written drafts fromProfessor Peter Sparkes and Dr Emma Laurie. A particular debt is owed to Dr Laurie forextensive discussions on due deference which have been invaluable in shaping my thinking onthe analogies drawn in this paper.1. C Harpum, S Bridge and M Dixon Megarry & Wade: The Law of Real Property (London:Sweet and Maxwell, 7th edn, 2008) para [6-007].2. Ibid.3. Birmingham Midshires Mortgage Services Ltd v Sabherwal (2000) 80 P&CR 256 at [28].4. A Hargraves ‘Modern real property’ (1956) 19 MLR 14 at 16. This structure was retaineduntil the seventeenth edition of the book.

Legal Studies, Vol. 31 No. 2, June 2011, pp. 175–198DOI: 10.1111/j.1748-121X.2010.00186.x

© 2010 The Author. Legal Studies © 2010 The Society of Legal Scholars. Published by Blackwell Publishing, 9600Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

Ownership, is of no more than secondary importance. Every system of land law –every system of property law – must stand or fall by its treatment of the basicproblems of ownership, possession and incumbrances.’

This assessment stands as a reminder that the classification of interests is not an enditself. It is a means to an end to help determine the ‘basic problems’ that property lawmust resolve, including that of ownership. In each of the examples referred to above,the distinction between domestic and commercial contexts is a helpful explanatorytool, but no more than that. It can help us to understand and explain distinctions, butit has no legal force in drawing them.

The significance of context in relation to ownership has been brought into focus bythree recent decisions of the House of Lords: Stack v Dowden,5 concerning a claim toa common intention constructive trust, and Cobbe v Yeoman’s Row Management Ltd6

and Thorner v Major,7where the claims were founded on proprietary estoppel. As willbe seen, the significance of context was treated differently under each doctrine. Inrelation to the trust, in Stack the majority of the House of Lords gave legal effect to thecontext of the case. They considered that different rules should apply to ascertainownership when dealing with the home than would be applied to commercial prop-erty.8 In contrast, in Cobbe and Thorner, the context of the claims was not used todetermine which rules to apply, but is discussed only in relation to the application ofthe relevant rules. This is the approach that Lord Neuberger had advocated should betaken towards the trust in his minority judgment in Stack.9 An examination of thejudgments in Cobbe and Thorner shows that when context is discussed in relation tothe application of estoppel, it is used only as an explanatory tool. In the final analysis,the outcome of an estoppel claim is dependent upon the individual facts and circum-stances (the specific context in which the case arises),10 not whether the case fallswithin the ‘domestic’ or ‘commercial’ sphere.

The thesis of this paper is that the distinction between the domestic and commercialcontexts, while a useful explanatory device in understanding the operation of thecommon intention constructive trust and proprietary estoppel, encounters difficultieswhen given legal effect in relation to the constructive trust. In particular, there is adefinitional problem in classifying cases as either ‘domestic’ or ‘commercial’; theability to classify being a necessary pre-requisite for using the distinction as the basisfor determining the applicable rules. This definitional problem has already attractedacademic comment11 and Sloan has noted that ‘proprietary estoppel and the construc-tive trust may not fall on the same side of the [domestic/commercial] line whenadjudicating upon similar factual scenarios’.12 This paper goes further and demon-strates that the distinction between domestic and commercial contexts is drawn dif-ferently in relation to each doctrine. While this difference is unproblematic when the

5. [2007] UKHL 17, [2007] 2 AC 432.6. [2008] UKHL 55, [2008] 1 WLR 1752.7. [2009] UKHL 18, [2009] 1 WLR 776.8. An approach the current author has termed ‘context-specific’: N Hopkins ‘Regulatingtrusts of the home: private law and social policy’ (2009) 125 LQR 310 at 311.9. An approach the current author has termed ‘context-neutral, outcome-specific’: ibid.10. See further B Sloan ‘Proprietary estoppel: recent developments in England and Wales’(2010) 22 Singapore Academy of Law Journal 110, para 52. He notes, ‘[i]n a sense the “context”could simply refer to the circumstances of the case’.11. J Mee ‘The limits of proprietary estoppel: Thorner v Major’ (2009) 32 CFLQ 367 at 374.12. Sloan, above n 10, para 49.

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distinction is used for explanatory purposes, it will be shown that it gives rise tospecific difficulties when given legal effect in relation to the trust because of the closerelationship between the constructive trust and proprietary estoppel. By way of com-parison, the paper then shows that the definitional problem exists, and has not beenresolved, in another situation in which a division expressed as being between ‘com-mercial and ‘non-commercial’ cases has been given legal effect; where a claimantseeks to set aside a transaction as against a third party (typically a bank) on the groundthat its entry was procured through undue influence. Despite being presented by thecourts as a dichotomy, it will be argued that, in reality, the domestic and commerciallie on a continuum of factual situations.13 It will be suggested therefore that even if theapproach to context taken by the majority in Stack is desirable, it should be rejectedas being unworkable.

Having established the difficulties with the majority’s judgment, this paper reflectson the nature of the decision in Stack. By giving legal effect to the context of the case,the House of Lords made a policy decision to treat the home differently.14 It is notdoubted by this author that the courts do and should make policy decisions as part ofa law-making role. The rules of property law are imbued with policy judgements andnowhere is this more apparent than in equitable doctrines, including the constructivetrust and proprietary estoppel. Few would disagree with Lord Neuberger’s observationin Stack that the legal principles used to determine ownership of the home ‘are notstatic and develop as the needs and values of Society change’.15 It is suggested,however, that in assessing how the courts exercise their law-making role, currentdebate in public law on the nature of ‘due deference’ provides useful parallels.Opinions on whether the House of Lords was ‘right’ to treat the home differently inStack will no doubt differ. By analogy with the due deference debate it will besubmitted, however, that the House did not provide sufficient justification for doing so.

BACKGROUND TO THE CASES

Stack, Cobbe and Thorner each reached the House of Lords against the background ofparticular tensions that had arisen as regards the operation of the common intentionconstructive trust, on the one hand, and of proprietary estoppel, on the other. Under-standing the tensions arising separately within each of these doctrines is useful inanalysing the decisions in these cases. Arguably, however, it served also to mask thepractical overlap in the application of the doctrines, in the light of which the differentapproaches taken to context is problematic.

The existence of a practical overlap between the doctrines (the scope of which isconsidered below) is unsurprising when it is recalled that constructive trusts andproprietary estoppel are tied by a common role of enabling the informal creation ofrights in land. The creation of proprietary rights in land is generally characterised bya ‘policy of formality’16 imposed by statutory requirements that also presuppose thatproperty rights are the product of an identifiable and definable transaction. Equitable

13. A point noted, in a different context, by R Bigwood Exploitative Contracts (Oxford:Oxford University Press, 2003) p 443, n 375.14. Hopkins, above n 8, at 333.15. Above n 5, at [101].16. N Hopkins The Informal Acquisition of Rights in Land (London: Sweet and Maxwell,2000) p 5.

Relevance of context in property law 177


doctrines enable informal acquisition when insistence on formalities would defeatrather than advance the aims of formality requirements and recognise that the parties’dealings over time may result in the creation of rights without an identifiable trans-action ever taking place.17 Intuitively, it might be expected that informality is acharacteristic of the ‘domestic’ rather than ‘commercial’ sphere. Writing extra-judicially on Cobbe and Thorner, Lord Neuberger observed, ‘It may very well be thatproprietary estoppel will not often assist a claimant in a commercial context, butthat is probably all to the good’.18 However, as the case-law discussed in this papershows, in reality the picture is more complex and more nuanced than a dichotomybetween the domestic and commercial allows.

Stack in context

In Stack the question of ownership of the home arose in the typical circumstances ofthe breakdown of a relationship between cohabitees. It is well established that deter-mining ownership of the home in these circumstances is a matter of property law.19 Inthat respect, the case arose against a background of debate as to how much weightproperty law should give to non-financial contributions when determining ownershipof the home. In doctrinal terms, this debate is reflected in a question of the relationshipbetween the resulting trust and the common intention constructive trust. While theformer is focused on monetary contributions, the latter provides the vehicle for abroader range of conduct to be considered. It is, however, equally well established thatproperty law is a blunt instrument to determine the parties’ respective entitlements;particularly when compared with the courts’ jurisdiction to make property adjustmentorders on the breakdown of a marriage by divorce or the dissolution of a civilpartnership.20 Stack arose at a time when the Law Commission was preparing its finalreport on provisional recommendations for legislative reform that would shift theparties’ entitlements away from the determination of property rights. That report hassince been published, but has not been enacted.21 The pace of any legislative change,the scope of the Law Commission’s current work and the conclusions it had reachedin a previous project all provided an important backdrop for Baroness Hale ofRichmond’s leading judgment in the case.22

Cobbe and Thorner in context

In Cobbe, the application of proprietary estoppel arose in the context of a commercialjoint venture. The doctrine has successfully been invoked in such circumstances23 and

17. See below n 64 and text in which it is seen in the context of proprietary estoppel that overtime ‘hope’ may turn into an ‘expectation’.18. Lord Neuberger ‘The stuffing of Minerva’s owl: taxonomy and taxidermy in equity’(2009) 68 CLJ 537 at 543.19. See, eg, Law Commission Report No 278 Sharing Homes: A Discussion Paper (2002)para [1.11]. Relationship breakdown is identified by the Law Commission as one of foursituations in which ownership of the home may arise for determination.20. Matrimonial Causes Act 1973, s 23, Civil Partnership Act 2004, Sch 5, para 2.21. Law Commission Report No 307 The Financial Consequences of Relationship Break-down (2007).22. Above n 5, at [46]–[48]. See below n 81 and text.23. Holiday Inns Inc v Broadhead (1974) 232 EG 951 has been interpreted as such a case (egin Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372 at 397–398) although this



more generally by commercial parties involved in pre-contractual negotiations,24 butcourts have acknowledged the need for caution in using equitable doctrines to inter-fere with arm’s length negotiations between commercial parties.25 Giving the majorityjudgment in the case, Lord Scott of Foscote did not merely reject the estoppel claim,but appeared to signal such a restrictive approach to proprietary estoppel thatMcFarlane and Robertson pronounced the death of the doctrine.26 The restrictiveapproach suggested by Cobbe provided the immediate background to the judgment inThorner. That case required the House of Lords to revisit the restrictive interpretationthat had been taken in Cobbe on facts arising in the domestic context of a promise ofan inheritance; a factual situation in which estoppel claims have become increasinglycommon.27 Across the two cases the significance of context is brought sharply intofocus, particularly in the judgments of Lord Walker of Gestingthorpe. He delivered aseparate concurring judgment in Cobbe which gained only the support of Lord Brownof Eaton-under-Heywood (who also expressed agreement with Lord Scott’s majorityjudgment), but Lord Walker’s judgment in Thorner received the support of the major-ity in that case.

The doctrinal overlap

Cutting across the individual tensions to be found in each of these doctrines is thecomplex and unresolved question of the relationship between them.28 Since Browne-Wilkinson VC first noted the similarities between the doctrines,29 there have beenjudicial statements that at least in some circumstances they may merge or coincide. InStack, Lord Walker commented on this trend (and on his own role in it)30 before notingthat he was now ‘rather less enthusiastic about the notion that [the doctrines] can orshould be completely assimilated’.31 He suggested a functional difference between thedoctrines. In his view, while the common intention constructive trust ‘[identifies] thetrue owner or owners’, estoppel ‘typically consists of asserting an equitable claimagainst the conscience of the “true” owner’.32 Analytically, this is undoubtedly correct.However, at a practical level the doctrines are not necessarily so separable. Proprietaryestoppel is frequently used by a claimant seeking to establish ‘ownership’; indeed, thislay at the heart of the claims both in Cobbe and Thorner.

There is at least one situation where the relationship between the doctrines is likelyto remain significant. Under s 2 of the Law of Property (Miscellaneous Provisions) Act

interpretation was doubted by Lord Scott in Cobbe at [24]. He preferred to analyse the case asinvolving the Pallant v Morgan [1953] 1 Ch 43 equity, though that doctrine has some overlapwith proprietary estoppel; see N Hopkins ‘The Pallant v Morgan “Equity?” ’ [2002] Conv 35.24. Eg JT Developments Ltd v Quinn (1991) 62 P&CR 33.25. See, eg, Cobbe, above n 6, at [81].26. B McFarlane and A Robertson ‘The death of proprietary estoppel’ [2008] LMCLQ 449.27. The use of estoppel in this context dates to the nineteenth century, but a notable cluster ofclaims followed Re Basham [1986] 1 WLR 1498.28. See, eg, S Nield ‘Constructive trusts and estoppel’ (2003) 23 LS 311 and N Hopkins‘Unconscionability, constructive trusts and proprietary estoppel’ in M Bryan (ed) Private Lawin Theory and Practice (London: Routledge Cavendish, 2007).29. Grant v Edwards [1986] Ch 638.30. Yaxley v Gotts [2000] Ch 162 at 176.31. Stack, above n 5, at [37].32. Ibid, at [37].



1989 contracts for sale of land are void unless made in signed writing. In Yaxley vGotts33 it became clear that some proprietary estoppel claims are vulnerable to chal-lenge as being in direct contravention of the provision. The vulnerability arises inrespect of claims that are founded on an agreement, as the agreement may be seen astantamount to an informal contract rendered void by the provision. How wide the netof s 2 is cast in this respect remains difficult to identify. Writing in this journal, Dixonhas noted that the further away from an informal agreement an estoppel claim lies, theless likely it is that s 2 will be invoked.34 Dixon’s purpose is to expose for criticism thefact that the law apparently seems ‘happy to give some validity to entirely non-contractual promises by reason of proprietary estoppel . . . but at the same timerefuse[s] to act in relation to more formal (but failing) agreements’.35 Implicit inDixon’s comment is a recognition that there is some ill-defined (and probably inca-pable of being defined) point at which an estoppel claim arising from an agreementmoves sufficiently far away from being an ‘informal contract’ so as not to pose a threatto (or be challenged under) s 2. However wide the net of s 2 is cast, in Yaxley v Gottsa partial solution was found in the overlap between constructive trusts and proprietaryestoppel. Constructive trusts benefit from a statutory exemption to the formalityrequirement (contained in s 2(5)), and by invoking this exception courts have beenable to intervene at least in those cases where the proprietary estoppel overlaps witha constructive trust.

CONTEXT AND THE CONSTRUCTIVE TRUST

In Stack, the parties’ home had been conveyed into their joint names, but the transferwas silent as to their respective beneficial shares. Their relationship had broken downafter a long period of cohabitation during which they had raised four children. TheHouse of Lords unanimously decided that Ms Dowden was entitled to 65% of thebeneficial interest in the home and Mr Stack the remaining 35%. However, they weredivided in their reasoning by four to one. The majority, led by Baroness Hale,considered the initial presumption in a case of joint legal ownership to be joint andequal beneficial ownership. This presumption can be rebutted by the party claiming anunequal share through a constructive trust by establishing that the common intentionof the parties was that their beneficial interests should differ from their legal interest(which is necessarily held as a joint tenancy).36 Such a claim was considered unlikelyto succeed unless the facts are ‘very unusual’.37 The majority were satisfied that thefacts of the case were sufficiently unusual to depart from the presumption of joint andequal ownership, principally on the basis that the parties had kept their financial affairs‘rigidly separate’.38 Ms Dowden had claimed 65% and the majority were satisfied thatthe evidence justified such an award.

33. [2000] Ch 162.34. M Dixon ‘Confining and defining proprietary estoppel: the role of unconscionability’(2010) 30 LS 408.35. Ibid, at 415. The current state of affairs is the subject of further and stringent criticism byLord Neuberger, above n 18, at 546, whilst acknowledging that it is consistent with a numberof Court of Appeal decisions.36. Law of Property Act 1925, s 1(6).37. Above n 5, at [68] per Baroness Hale.38. Ibid, at [92] per Baroness Hale.



Lord Neuberger agreed that the initial presumption is that of joint and equalbeneficial ownership,39 but in his view it is readily rebutted where the parties havecontributed unequally.40 In such a case, each receives a share proportionate to theircontribution through a resulting trust. A claim founded on a constructive trust maythen be made by a party seeking a share disproportionate to their contribution.41 OnLord Neuberger’s analysis, Ms Dowden was entitled to 65% through a resulting trust,reflecting her greater contribution to the purchase.42 There was no evidence to supporta constructive trust to confer on Mr Stack a beneficial share disproportionate to hiscontribution.

The difference in approach between the majority and Lord Neuberger was drivenby a difference of opinion as regards the significance of context to a claim. BaronessHale’s judgment is underpinned by the ethos that ‘[i]n law, “context is everything”and the domestic context is very different from the commercial world’.43 The ques-tion of ownership would therefore be approached differently where it arises in rela-tion to the home. At one level, the majority’s approach constitutes a preference forthe constructive trust over the resulting trust, which facilitates a focus away fromfinancial contributions as a means of determining each party’s share. However, it issubmitted that their approach goes beyond this and gives the distinction legal effectby using the domestic and commercial context as the basis for determining theapplicable rules. On their approach, different rules apply to determine ownershipdepending on the context in which the case falls. In all cases, the initial presumptionis the same (joint and equal beneficial ownership). Context is then used to determinehow this presumption is rebutted. In domestic cases alone a higher threshold is putin place to a party’s ability to rebut the presumption (the facts must be ‘highlyunusual’). The parties’ financial contributions, together with their doctrinal bedfel-low, the resulting trust, are marginalised. Even in those cases in which a case forrebutting the presumption is made, no necessary account is taken of the parties’financial input. The focus immediately shifts to ascertaining the parties’ commonintention through a range of factors that draw holistically on the parties’ arrangementof their domestic and personal lives.44

Perhaps confusingly, in Stack, in the event, the parties’ unequal contribution tothe purchase appeared decisive to the majority’s decision. As noted, the parties’rigid separation of their financial affairs was the principal basis upon which the factswere considered sufficiently unusual to rebut the presumption of joint and equalbeneficial ownership. The beneficial shares awarded reflected the parties’ respectivefinancial contributions (although this accorded with the share claimed by MsDowden). If cases continued to follow a pattern of marginalising contributions inprinciple, but producing decisions that reflected them in practice, then the differencein approach between domestic and commercial contexts signalled by the majoritywould quickly be exposed as an illusion. The recent Court of Appeal decision inKernott v Jones45 appears however to have confirmed the marginalisation of finan-cial contributions, although Rimer LJ acknowledged the ‘challenge’ that Stack

39. Ibid, at [109].40. Ibid, at [110].41. Ibid, at [123].42. Ibid, at [122].43. Ibid, at [69].44. Ibid.45. [2010] EWCA Civ 578.



presents to a trial judge.46 In Kernott, Ms Jones’ sole discharge of all financialobligations in relation to a home throughout a 14-year period since the parties hadseparated was considered insufficient to rebut the presumption of joint and equalbeneficial shares that was conceded to have existed at the time of their separation.

Lord Neuberger clearly interpreted the majority’s judgment in Stack as giving legaleffect to the context of the claim. In sharp contrast, he rejected the idea that thedomestic context requires different rules. In his view, ‘[i]n the absence of statutoryprovisions to the contrary, the same principles should apply to assess the apportion-ment of the beneficial interest as between legal co-owners’,47 irrespective of theirrelationship. Lord Neuberger acknowledged the significance of context to the appli-cation of the rules (in contra-distinction to justifying different rules). For example, henoted ‘the fact that the parties are in a close and loving relationship would render iteasier, than in a normal contractual context, to displace the resulting trust solutionwith, say, an equal division of the beneficial ownership’.48 Such an outcome involvesa ‘gratuitous transfer of value’ by the party who made the greater contribution, which‘is less unlikely between two parties in a long-term loving relationship than betweentwo commercial entities or even two friends . . .’.49 Further, it is apparent that indrawing on the relevance of context to the application of rules, Lord Neuberger seesthe context of the claim as merely an explanatory tool. The presumption of resultingtrust is more likely to be displaced not because a case arises in the domestic contextper se, but because the reasons that would justify departing from the presumption aremore likely to be found within that sphere.

The ratio of Stack, and therefore the situation in which context is given legal effect,is confined to the quantification of beneficial ownership in jointly owned propertywhere the transfer is silent as to the parties’ respective shares. The extent to which thedecision will spill-over to the antecedent question, in cases of sole legal ownership, ofwhether a claimant can establish any beneficial share, remains unclear, but an exten-sion appears both possible and logical.50 The starting point in cases of sole legalownership (as acknowledged by the House of Lords in Stack) is sole beneficialownership. A spill-over of the majority’s reasoning would affect how the presumptionis rebutted. In domestic cases, the search would again be to ascertain the commonintention of the parties, by reference to the broad range of factors referred to byBaroness Hale. In commercial cases alone, emphasis may be placed (at least initially)on the parties’ monetary contributions through the resulting trust.

CONTEXT AND PROPRIETARY ESTOPPEL

As has been noted, in Cobbe and Thorner discussion of the scope of proprietaryestoppel was played out against the background of diverse claims. Collectively, thecases have reined-in the scope of the doctrine through focusing attention on the natureof the expectation that must have been generated in the estoppel claimant and thestrength of the assurance on which the expectation is based. The context of the claim

46. Ibid, at [75]. See generally Rimer LJ’s discussion of the significance of the parties’contributions to the outcome in Stack, at [72]–[75].47. Stack, above n 5, at [107].48. Ibid, at [136].49. Ibid.50. Hopkins, above n 8, at 335.



has been drawn upon heavily by the House of Lords in discussing both of these aspectsof the claim. However, the discussion has related to the application of a singleprinciple of proprietary estoppel. Even in relation to the application of the principle,the context of the claim was seen only as an explanatory device.51

Cobbe arose from an oral agreement for the redevelopment of a block of flats intotown houses. The agreement was entered into between Mr Cobbe, an experiencedproperty developer, and Yeoman’s Row, a company which held the freehold title to theflats and was owned and controlled by Mrs Lisle-Mainwaring. Under the agreement,Mr Cobbe would seek planning permission for the redevelopment. If successfullyobtained, the freehold would be sold to him for a fixed price and he would carry outthe development with profits being distributed on agreed terms. Both parties wereaware that their oral agreement was not an enforceable contract. The expectation wasthat successful negotiations for a formal contract would follow once planning permis-sion was obtained. Mr Cobbe was successful in obtaining planning permission, atwhich point Mrs Lisle-Mainwaring reneged on the agreement and sought morefavourable terms both in respect of the sale price and the distribution of profits. MrCobbe’s claim for relief succeeded on the basis of proprietary estoppel at first instanceand in the Court of Appeal, but failed in the House of Lords where he was restrictedinstead to a personal restitutionary remedy for quantum meruit.

Central to the failure of Mr Cobbe’s claim was the House of Lords’ assessment ofhis expectations. Lord Scott, delivering the leading judgment, explained that MrCobbe did not expect to receive a property right. His expectation was of ‘a successfulnegotiation of the outstanding terms of a contract for the sale of the property to him’.52

Only through that contract did Mr Cobble expect to receive a property right in theland. In other words, Mr Cobbe’s claim failed because one of the key elements of aclaim to proprietary estoppel (an expectation of property rights) was not met. LordWalker, while agreeing with the assessment of Mr Cobbe’s expectations, consideredwhy the nature of the claimant’s belief had not received the same scrutiny in success-ful estoppel claims arising in the domestic context (including Gillett v Holt andJennings v Rice which Robert Walker LJ, as he was then, had heard in the Court ofAppeal).53 He concluded that the lack of discussion of the issue in these cases was notcoincidental:54

‘In the commercial context, the claimant is typically a business person withaccess to legal advice and what he or she is expecting to get is a contract. In the

51. Lord Neuberger appears to go further, writing extra-judicially, above n 18, at 543–544.Commenting on the view that Cobbe precludes estoppel succeeding unless the claimantbelieved he had a legally enforceable claim, Lord Neuberger says ‘I agree – and, at least in acommercial context, what’s wrong with it?’ In contrast he explains that ‘at least in manydomestic cases, it would be inappropriate to require strict adherence to a rule that the claimantmust have believed that he had a legally enforceable right’. To the extent that this indicates thatdifferent principles should apply to estoppel claims depending on whether the case falls withinthe domestic or commercial context it runs counter to Lord Neuberger’s own approach inrelation to the trust in Stack discussed above n 47 and text.52. Above n 6, at [18].53. Gillett v Holt [2001] Ch 210; Jennings v Rice [2002] EWCA Civ 159, [2003] 1 P&CR100. The creation of estoppel expectations is discussed by Robert Walker LJ in Gillett v Holt,but did not arise in Jennings v Rice in which the appeal was confined to the question of estoppelremedies.54. Above n 6, at [69] (original emphasis).



domestic or family context, the typical claimant is not a business person and is notreceiving legal advice. What he or she wants and expects to get is an interest inimmovable property, often for long-term occupation as a home. The focus is not onintangible legal rights but on the tangible property which he or she expects to get.The typical domestic claimant does not stop to reflect (until disappointed expec-tations lead to litigation) whether some further legal transaction (such as a grant bydeed, or the making of a will or codicil) is necessary to complete the promisedtitle.’

Hence, while Mr Cobbe’s claim failed because of the lack of the requisite expectation,as an explanatory mechanism it may be useful to suggest that the reason why anexpectation could not be shown (and the type of case in which it typically will be)relates to the context in which the claim arises. In a commercial context it is morelikely that the claimant’s expectation is that formality requirements will be completed;in the domestic context it is more likely that the expectation will be of a propertyright.55 On Lord Walker’s view, the estoppel claim failed on the ‘simple . . . point’56

that the parties knew that they were able to walk away from negotiations withoutliability unless and until there was a binding contract.

Context again proved a useful device in assessing the nature of the claimant’sexpectation in Thorner. Here, reflecting Lord Walker’s observation in Cobbe of thetypical approach in domestic cases, it was not directly questioned whether the claim-ant expected a property right as opposed to the appropriate formality (a will);57 theissue was whether there was sufficient evidence of an assurance to generate theclaimant’s expectation. The claim concerned an assurance of an inheritance made bya farmer, Peter Thorner, to his second cousin David Thorner, who had worked onPeter’s farm for no payment for over 30 years. It seems beyond doubt that Peterintended David to inherit the farm. He had executed a will in David’s favour, butrevoked the will having changed his mind about another intended beneficiary and diedintestate. David claimed the estate through proprietary estoppel. A key question waswhether the evidence was sufficient to establish an assurance of rights. This wascentral to the claim as the evidence of an assurance was based on ‘implication andinference from indirect statements of conduct’ rather than an express representation.58

While the House of Lords was unanimous in upholding David’s claim, there was somedivision as to whether the assurance must be ‘clear and unequivocal’ (Lords Scott andNeuberger) or simply ‘clear enough’ (Lords Walker and Rodger). The parties aredescribed as ‘taciturn and undemonstrative men’.59 Peter was ‘a man of few words,who generally maintained his privacy about his personal financial affairs . . . and who

55. So stated, this approach has resonance with Dixon’s ‘double assurance’ theory, thatestoppel requires an assurance of rights without compliance with formalities. The theory wasfirst outlined in M Dixon ‘Proprietary estoppel and formalities in land law and the LandRegistration Act 2002: a theory of unconscionability’ in E Cooke (ed) Modern Studies inProperty Law vol 2 (Oxford: Hart Publishing, 2003) and is expanded in this journal in Dixon,above n 34. Mee, above n 11, at 373–374 is critical of the connection drawn by Lord Walkerbetween the context of the case and the likely expectations of the parties.56. Above n 6, at [91].57. This issue is implicit in the judge’s finding, referred to by the House of Lords, that theclaimant had moved from a ‘hope’ to an ‘expectation’ of an inheritance: see below n 64 and text.58. Above n 7, at [2] per Lord Hoffmann, citing Lloyd LJ’s judgment in the Court of Appeal.59. Ibid, at [59] per Lord Walker.



hardly ever spoke in direct terms’.60 It was ‘scarcely to be expected’ that he wouldaddress the issue of David’s inheritance directly.61 Against this background, the judgeat first instance had found an assurance despite the absence of an express represen-tation and the House of Lords considered he was justified in doing so.

The significance afforded to context in these estoppel cases is clearly very differentto the approach of the majority in Stack. Context is drawn upon heavily, particularlyby Lord Walker, in explaining the outcome of the claim, but there is no suggestion thatthe domestic or commercial context of the case determines the applicable principles.Indeed, in Cobbe Lord Walker noted that the (same) principle of proprietary estoppelhas been applied ‘in quite a wide variety of factual situations, sometimes of a domesticnature, sometimes commercial’.62 Lord Walker refers to the context of the cases whenexplaining whether the claimant had an expectation of property rights, rather thanmerely an expectation of a formality (such as a contract) through which alone propertyrights would be acquired, and whether the assurance that has generated the expecta-tion is ‘clear enough’. However, piercing the surface of this explanation, it is clear thatcontext per se is not the determining factor in the claims. The key factor is the natureof the parties’ relationship. The description of cases as arising in the domestic orcommercial context is a useful explanatory device for highlighting the likelihood ofwhether the claimant will reasonably expect to receive property rights withoutcompletion of formalities. But, as Lord Walker explains, it is the ‘typical’ commercialclaimant who expects formalities to be required and the ‘typical’ domestic claimantwho expects to receive property rights without formalities. A commercial claimantmay successfully establish an expectation of a property interest and a domesticclaimant may fail as they did not expect to receive a property right other than throughthe completion of a formality.

Equally, the success of David Thorner’s claim cannot be explained simply on thebasis that it arose in the domestic context. The fact that it arose in the domestic contextimplicitly explains why the courts’ focus was on assessing the evidence of theassurance, rather than assessing whether David expected a property interest, or merelya formality. The domestic context made it more likely that David expected a propertyright. But in claims to an inheritance by estoppel, courts are astute of the need todistinguish between those who ‘hope’ to inherit (by will) and those with an ‘expec-tation’ of an inheritance (regardless of a formally executed will).63 In Thorner, specificevents were identified through which David’s hope became an expectation, though itis emphasised by Lord Walker that these provided only part of the narrative.64 Inthe final assessment, David succeeded because, judged in the specific context ofthe lifestyle and personalities of the actors, rather than simply generically as a case in

60. A description given by the judge at first instance [2007] EWHC 2422 (Ch) at [94] andcited by the Court of Appeal [2008] EWCA Civ 732 at [66] and by Lord Neuberger in the Houseof Lords, ibid, at [70].61. Ibid, at [24] per Lord Rodger.62. Above n 6, at [47].63. The distinction between an (unenforceable) current indication of testamentary intent andan irrevocable assurance giving rise to an estoppel is discussed in Gillett v Holt, above n 53, at227–229.64. The events related to the handing over to David of bonus notices on life assurance policiesby Peter ‘for his death duties’. Echoing the findings of fact by the judge, cited above n 7, at [40],Lord Walker, at [60], refers to these events as ‘[marking] the transition from hope to expecta-tion’. Contrast, however, his judgment in Cobbe, above n 6, at [66] in which he suggested ‘thepoint that hopes by themselves are not enough’ is more commonly made in commercial cases.



the domestic context, Peter’s inferences had generated a sufficiently clear assurance ofproperty rights, upon which it was reasonable for David to rely, and on which he hadrelied to his detriment.

THE DOMESTIC AND COMMERCIAL CONTEXT

As will be shown, the basis upon which the distinction between domestic and com-mercial contexts has been drawn differs in relation to the constructive trust andproprietary estoppel. Further, the basis upon which cases are classified under Stack isneither suitable nor workable in estoppel. The different respect in which the distinc-tion has been drawn in each doctrine simply reflects the utility of the division tounderstanding the key issues that arise in the application of each doctrine. Thedifference in approach becomes problematic, however, in light of the practical overlapbetween the constructive trust and proprietary estoppel when the distinction is givenlegal effect in Stack. Even assessed on its own merits, it will be seen that there aredifficulties in giving legal effect to context in relation to the constructive trust. In orderto do so, it is essential that property can be classified as domestic or commercial and,as will be seen, no clear dividing line exists.

The basis of the distinction: two doctrines, two approaches

In Stack, Baroness Hale referred variously to the ‘domestic’ or ‘consumer’ context anddistinguished this from ‘the commercial world’. Subsequent cases have establishedthat the factor that determines whether a case falls within the domestic context is thepurpose for which the property has been acquired.65 A case falls within the domesticcontext if the property has been bought as a home for one or more of the purchasers.

A focus on the purpose for which property is acquired is not workable as a meansof classifying cases in relation to estoppel claims. There is no analogous test inestoppel where the claimant is likely to claim a proprietary interest already held by therepresentor, or to be derived from the representor’s existing proprietary interest.Consideration could be given to the current use of the property by the representor, orthe intended use by the estoppel claimant; but neither test would provide a satisfactoryanalogy. A focus on the current use by the representor is open to criticism that such useis not determinative in trust claims.66 Focusing instead on the intended use by theclaimant would seem to result in a classification of cases at odds with how they havebeen described by the courts. For example, it would mean that cases involvingtestamentary promises would fall to be classified as commercial if it is not intendedthat the estoppel claimant will live in the property; yet promises of a testamentaryinheritance are generally described as being within the domestic context, as was thecase in Thorner.67 At the least, it would create a wholly artificial division between

65. This has become apparent following the decisions in Adekunle v Ritchie [2007] BPIR1177 (Leeds CC) and Laskar v Laskar [2008] EWCA Civ 347, [2008] 1 WLR 2695.66. Eg Lasker v Lasker, ibid. The current use of the property at the time of purchase was as ahome for one of the purchasers who was entitled to a discount under the Right to Buy. The casewas classified as commercial, however, as the property was bought as a ‘buy to let’ investment.67. See further Cobbe, above n 6, at [66] in which the testamentary promise claims of Gillettv Holt, above n 53, Ottey v Grundy (Andreae’s Estate) [2003] EWCA Civ 176 and Jennings vRice, above n 53, are discussed by Lord Walker as examples of domestic claims.



those cases where the claimant was intended to live in the property and those whereit was anticipated that the claimant would use the property as an investment; and whatof cases where the claimant’s future use is simply not known? In short, like caseswould not necessarily be classified alike and some cases would defy classification.Further, such a distinction bears no relation to the key issues likely to arise insuch cases. The claimant’s intended use of the property tells us nothing about whetherthe representation made was a mere indication of current intent or an irrevocableassurance.

When estoppel claims are described as domestic or commercial, the courts neces-sarily have something in mind other than the intended use of the property. Writing inthe context of the requirement of reliance in estoppel cases, Nield draws a distinctionbased on the nature of the parties’ relationship. She explains that in commercial claimsthe parties’ relationship ‘is more likely to be confined to and defined by the assuranceand detriment’; while in domestic cases, ‘the relationship is the backdrop againstwhich the assurance and detriment are to be assessed’.68 As has been seen in thediscussion of Cobbe and Thorner above, it is the parties’ relationship that is of keysignificance in assessing the requirement in an estoppel claim of an expectation ofproperty rights generated by a sufficiently clear assurance. It is consistent with thisanalysis, and with Lord Walker’s description of the respective expectations of the‘typical’ domestic and commercial claimants, to use the parties’ relationship as thebasis for drawing a distinction between domestic and commercial estoppel claims.

Undoubtedly questions may still arise as to whether some cases should be consid-ered domestic or commercial. For example, in Yaxley v Gotts a claim to estoppel arosefrom an informal business venture between two friends for the refurbishment of flats.Nield discusses the case as arising in the commercial context, while noting that therelationship between the parties provided the backdrop against which Mr Yaxley hadrelied on the assurance.69 In this respect, the parties’ relationship appears central to theoutcome of the claim. The description of the case as commercial reflects the businessnature of the parties’ venture. However, this was a case in which the parties’ relation-ship was not confined to and defined by the estoppel claim, but provided the back-ground within which the claim arose. If, as has been suggested, the classification ofcases within estoppel is based on the parties’ relationship, the case might equally beclassed as domestic despite involving a business venture. Ultimately, Yaxley illustratesthe secondary importance of classification for an estoppel claim. As long as thefeatures of the relationship are understood in assessing the elements of the claim, itmakes no difference whether we describe Yaxley as a commercial case in which theparties’ friendship justified the claimant acting in reliance on circumstances that maynot be sufficient for a claim where parties are negotiating at arm’s length; or as adomestic case in view of that pre-existing relationship. The case reminds us that thedescription of cases as domestic or commercial is no more than an explanatory tooland, like other such tools, there are limits to its utility.

Hence it seems that the distinction between domestic and commercial contexts isbeing drawn differently in trust and estoppel cases. In relation to the trust, the focusis on the intended use of the property; in respect of estoppel, the focus lies in therelationship between the parties. This difference is wholly explicable in terms of thefactors significant to the application of each principle. As regards the trust, it is the fact

68. S Nield ‘Estoppel and reliance’ in E Cooke (ed) Modern Studies in Property Law vol 1:property 2000 (Oxford: Hart Publishing, 2001) p 95. See also p 78.69. Ibid, p 85.



the property is acquired as a home which indicates that matters other than financialcontributions may be relevant in ascertaining the parties’ common intention as to itsbeneficial ownership. In applying estoppel, the parties’ relationship provides thebackground against which the words and conduct of the representor fall to be inter-preted, to ascertain whether an expectation of proprietary rights was generated in theclaimant. In Thorner, knowing whether it was anticipated that David Thorner wouldlive on the farm tells the court nothing from which it can judge whether there is asufficiently clear assurance of an inheritance. That depended on an assessment of whathad been said and done throughout the time David had worked on Peter’s land, againstthe background of the parties’ personalities. Equally, a focus on the parties’ relation-ship explains why promises of an inheritance can be classed as domestic estoppelclaims regardless of the purpose for which the property is to be used. Practically, sucha promise is unlikely to arise unless there is some existing relationship between theparties, whether as family, friends or carer.

Problems with giving legal effect to context: doctrinal overlap

As has been noted, a practical overlap between estoppel and the constructive trustremains significant in cases where an estoppel claim arises from an informal agree-ment. The courts’ ability to intervene is dependent on the overlap between estoppeland constructive trusts due to the statutory exception to formality requirements pro-vided for the trust. Claims may arise in situations which would be considered toinvolve either the domestic or the commercial context for both the constructive trustand proprietary estoppel, assessed against the different criteria through which thedistinction is drawn in each doctrine. However, cases may also arise that would beanalysed differently under each principle. Yaxley v Gotts may be such a case. Theacquisition of the property for investment purposes undoubtedly marks the case ascommercial within Stack, while, as has been seen, the relationship between the partiesmay justify the case being classed as domestic within estoppel. Using the context ofthe claim to determine the applicable rules for a trust creates an analytical problemwith the reasoning that has been adopted by the courts to reconcile intervention withstatutory formalities. Applying Stack, any overlap between constructive trusts andproprietary estoppel is likely to be confined to the domestic context (as that isunderstood in relation to the trust as dependent on the use of the property), as it is inthat context that the constructive trust is used to depart from the presumption of solelegal ownership. However, the question of compliance with formality requirements isequally likely to arise in cases that would be considered to fall within the commercialcontext under Stack.70 To maintain the courts’ current reasoning, the operation of theconstructive trust overlapping with estoppel in Yaxley v Gotts may need to be ratio-nalised as an exceptional instance where the constructive trust is invoked in thecommercial context. The difficulties that arise in maintaining the courts’ currentanalysis of a claim to estoppel within s 2 is a specific and perhaps the most readilyidentifiable illustration of the problems created by giving legal effect to the context ofa case in relation to the constructive trust, given the doctrine’s practical overlap withestoppel. It is not insurmountable, but the need to recognise an ‘exceptional’ use of theconstructive trust casts further doubt on the utility of the underlying distinctionbetween the domestic and commercial contexts.

70. Eg, the point would have arisen in Cobbe, above n 6, if the estoppel claim had not failedon other grounds.



Three further points should be noted, two of which raise a question as to the extentof the ‘problem’ that is under discussion. First, the need to invoke the constructivetrust to save estoppel claims from falling foul of s 2 is the subject of considerable andever-mounting criticism. Dixon has recently argued in this journal that the trust is notrequired once the role of unconscionability in confining and defining proprietaryestoppel claims is properly understood.71 Lord Neuberger has signalled his own view(extra-judicially) that ‘section 2 offers no bar to a claim based in equity’.72 If this viewis reflected in subsequent judicial developments, then the problem under discussionsimply falls away. Secondly, we are concerned with cases in which the claimant hassought to establish property rights, not merely quantify an interest that has alreadybeen shown to exist. In the analysis adopted by Stack, these are cases involving solelegal ownership where the initial presumption is sole equitable ownership. As has beennoted above,73 it remains unclear whether the reasoning in Stack directed at thequantification of shares in a trust will spell over to the antecedent question of whethera trust has been created. If Stack is confined to the quantification of shares, then thedecision will not interfere with the application of the constructive trust to create aninterest in land in estoppel claims in which s 2 is raised. Thirdly, for the avoidance ofdoubt, it should be noted that constructive trusts have a further and different use inrelation to proprietary estoppel. Once estoppel has successfully been claimed, thecourt may impose a constructive trust in the exercise of its remedial discretion. Theconstructive trust imposed is not, however, a common intention trust of the type underdiscussion in Stack and is not affected by the decision in that case. It appears to be aform of remedial constructive trust.74

Problems with giving legal effect to context: assessing Stack on its merits

Assessed on its own merits, at least two difficulties arise with the reliance placed oncontext in Stack. First, borderline cases may readily be envisaged. Questions mayarise, for example, as to the classification of second and holiday homes and otherproperty that is bought equally for use and investment potential. Where the context ofthe case is drawn upon only as an explanatory device, borderline cases are notproblematic but serve merely to highlight the limits of the utility of the distinction.Once the distinction is given legal effect, however, categorisation of cases becomesessential to determining the applicable rules.

The difficulties caused by the apparent need to classify cases have already begun toemerge, without a consistent approach developing. In Stack, by reference to Muschin-ski v Dodds,75 Lord Walker considered the situation of two people who ‘have lived andworked together in what has amounted to both an emotional and commercial partner-ship’.76 He suggested that the resulting trust may still have a useful function in suchcases. Lord Walker appeared to treat such cases as a residual category of domestic casein which the resulting trust remained appropriate. Hence, his approach is to adhere tothe classification of the case as ‘domestic’, but admit it as an exception where the

71. Dixon, above n 34, at 416–417.72. Lord Neuberger, above n 18, at 546.73. Above n 50 and text.74. Nield above n 28, at 312–313.75. (1985) 160 CLR 583.76. Above n 5, at [32].



resulting trust is still useful. In Adekunle v Ritchie,77 the court indicated that the initialpresumption of beneficial ownership may be more readily rebutted where the partiesare not cohabitees. There, the court classified a case as domestic where a mother andson jointly purchased a property as a home for the mother, but rebutted the presump-tion of joint and equal beneficial ownership and found a common intention for theparties’ shares to reflect their financial contribution. This produced the same result aswould have been reached by following Lord Walker’s approach and classifying thecase as a domestic one in which the resulting trust remained useful. It is suggested thatboth Lord Walker’s Muschinski v Dodds example and the facts of Adekunle reveal thedeficiencies in giving legal effect to the context of the case: the classification of suchcases as domestic does no more than place an additional obstacle in the reasoning ofthe court. Cases have to be rationalised as ‘residual’ or exceptional instances of theapplication of a trust outside of its ‘normal’ sphere of operation, or presumptions areseen as more easily rebutted in some circumstances than others. The different routesby which the same result is achieved (beneficial shares in proportion to financialcontributions) shows us that Stack has done nothing to resolve the doctrinal overlapbetween resulting and constructive trusts.

The uncertainty of the approach to take in borderline cases may be expected at thisstage in the development of Stack. However, it is suggested that it is merely symp-tomatic of a second and more significant problem with giving legal effect to context.That is, that the ‘home’ is not a uniform category. Indeed, the history of the LawCommission’s work is instructive in this regard. The Law Commission sought toprovide a scheme to determine the property rights of all those who share the home inall circumstances in which the issue arose (excluding cases of relationship breakdownwithin existing statutory schemes).78 As Baroness Hale noted in Stack,79 the LawCommission abandoned this attempt, concluding that ‘it is quite simply not possibleto devise a statutory scheme for the ascertainment and quantification of beneficialinterests in the shared home which can operate fairly and evenly across the diversityof domestic circumstances which are now to be encountered’.80 Baroness Hale con-sidered the abandonment of the Law Commission’s initial project as demonstratingthat ‘the evolution of the law of property to take account of changing social andeconomic circumstances will have to come from the courts rather than Parliament’.81

With respect, however, what the Law Commission’s experience also shows is that anysuch evolution that takes as its starting point that different rules should be used todetermine property rights in the home is prone to encounter difficulties. The LawCommission’s work shows that the home is simply too diverse a concept to providethe focus for rules designed to determine property rights. This warning seems of equal(if not greater) prescience to the ad hoc evolution of doctrines by the courts as it is tothe creation of statutory schemes. Indeed, Lord Neuberger suggested that the LawCommission’s work provided ‘a warning shot against the courts (as opposed to thelegislature) refashioning the law’.82

As will now be seen, the definition problem highlighted in this section exists, andhas not been resolved, in another situation in which the distinction between domestic

77. Above n 65.78. Above n 19.79. Above n 5, at [46].80. Above n 19, para [1.31].81. Above n 5, at [46].82. Ibid, at [104].



and commercial cases has been given legal effect; where a claimant seeks to set asidea transaction as against a third party on the ground that its entry was procured throughundue influence.

Undue influence

Undue influence has proved a particularly effective weapon in enabling guarantor orsurety transactions to be set aside where the home has been used to secure businessdebts. Transactions may be rescinded not only against the party who exerted the undueinfluence (the borrower/debtor), but also against third parties (typically banks) seekingto enforce the surety. In claims against third parties, an initial question arises whetherthe defendant is put on inquiry.83 The answer to this question is dependent both on thenature of the transaction (whether, on its face, it is not to the financial advantage of thesurety) and the relationship between the claimant and debtor.84 In Royal Bank ofScotland v Etridge (No 2), in determining the nature of the relationships in which abank is put on inquiry, Lord Nicholls drew on the distinction between domestic andcommercial cases. He explained that a bank is put on inquiry ‘in every case where therelationship between the surety and the debtor is non-commercial’.85 In contrast, hesaid:86

‘different considerations apply where the relationship between the [debtorand surety] is commercial . . . Those engaged in business can be regarded ascapable of looking after themselves and understanding the risks involved in thegiving of a guarantee.’

Hence, in determining whether a bank (or other third party) is put on inquiry, thedistinction between domestic (‘non-commercial’) and commercial cases is given legaleffect and is used to determine the applicable rules. It is essential to categoriserelationships as only in respect of domestic cases is the bank required to take steps ‘tobring home to the individual guarantor the risks he is running by standing as surety’.87

However, the basis upon which the classification is to be made is far from clear. Whilethe focus is clearly said to be on the ‘relationship’ between the parties, the classifi-cation is not determined by whether the parties have a familial or other close rela-tionship. Hence, Lord Nicholls classified Credit Lyonnais Bank Nederland NV vBurch,88 where the parties were employer and employee, as a non-commercial case.89

Conversely, Bank of Scotland v Makris and O’Sullivan was considered a commercialcase. That case arose from the failure of a joint business venture that had been enteredinto by three friends who are described by the judge as ‘good mates who hung out alot together’.90 As we have seen, the nature of the parties’ relationship also providesthe basis of the distinction between the domestic and commercial spheres in propri-etary estoppel. As regards that doctrine, the classification appears to be based on

83. Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773 at [44]–[49].84. For further analysis of these requirements, see Harpum et al, above n 1, paras [25–125]–[25–128].85. Above n 83, at [87].86. Ibid, at [88].87. Ibid, at [87].88. [1997] 1 All ER 144.89. Above n 83, at [86].90. (Unreported) 15 May 2009 (ChD) at [1].



whether the parties’ relationship is confined to and defined by the facts that have givenrise to the estoppel claim, or provides the backdrop against which the claim hasemerged. This use of the parties’ relationship cannot, however, be carried over toexplain the division for the purposes of undue influence. It is inherent in the notionthat the relationship is one in which ‘trust and confidence’ is reposed that the rela-tionship between the parties transcends the particular transaction.

The state of affairs revealed in undue influence appears unsatisfactory. The courtshave drawn upon the classification of cases as domestic or commercial to determinethe applicable rules without clear guidance as to the basis upon which the distinctionis to be made. Paradoxically, the root of Lord Nicholls’ approach in Etridge is foundin a different problem of definition. He considered his approach to be justified both onthe basis that the burden imposed on a bank once it has been put on inquiry is a modestone91 and by the apparent impossibility of defining the types of relationship in whichtrust and confidence may be found. Such relationships, he explained, are ‘infinitelyvarious’ and incapable of exhaustive definition or of being comprehensively listed.92

Adopting the same approach to all ‘non-commercial’ relationships therefore appearedto offer simplicity. In fact, what it has done is to replace one definitional problem (thetypes of relationship in which trust and confidence can be found) with another (whenis a relationship ‘non-commercial’).

Dichotomy v continuum

As has been shown, even if it was desirable in Stack to apply different rules accordingto the domestic or commercial context of the case, it is unworkable to do so becauseof the definitional problem in classification. It is suggested that the courts haveassumed that a dichotomous division can be drawn when in fact the domestic andcommercial exist on a continuum. This point comes to the fore in borderline cases: inestoppel, in relationships that are both commercial and personal; in the constructivetrust, where property is bought both to be used as a home and for its investmentpotential. We have seen that where context is given legal effect, borderline casesbecome problematic. In estoppel, where it is used simply as an explanatory tool,borderline cases do no more than reveal the limits of the classification even as an aidto understanding claims. The different effect of borderline cases depending on howcontext is used can be seen by a comparison of Makris and O’Sullivan and Yaxley vGotts. In both cases the courts were presented with a business venture entered intobetween friends. In discussing estoppel we have seen that ultimately it does not matterwhether Yaxley is seen as a domestic case because of the parties’ friendship, or as acommercial case despite their relationship. As the distinction is used only as anexplanatory device in estoppel, the same decision would be reached regardless of theclassification of the case. In Makris and O’Sullivan the claim to undue influenceultimately failed on other grounds, but if it had not done so the classification of thecase would have been essential. Context had legal effect and the classification of thecase as commercial would have meant that the transaction was not susceptible to beingset aside. Where context determines the applicable rules, borderline cases must beclassified one way or the other. In Makris and O’Sullivan the court rejected an

91. Above n 83, at [87].92. Ibid, at [86].



argument that the case should be seen as ‘hybrid’ or as ‘not “purely commercial” ’.93

The judge explained that there was ‘no room for such a concept. On the contrary, LordNicholls was, as I understand his reasoning, concerned to create a single and clearbright line of division . . .’.94 The cases demonstrate, however, that there is in fact nobright line that can be drawn.

It is useful, in this respect, to consider the origin of the idea underpinning BaronessHale’s judgment in Stack that ‘context is everything’.95 Although given as a quotationin her judgment, the source of this expression is not cited. However, it seems anapparent reference to R (Daly) v Secretary of State for the Home Department in whichLord Steyn used the same phrase to emphasise the significance of context in deter-mining the role of the judiciary in adjudicating human rights cases.96 Significantly,however, Lord Steyn saw context as dictating against a strict classification of cases andas demonstrating that not all human rights are the same or are subject to the sameintensity of review by the courts. As Laurie explains, the standard of review ‘nowappears as a spectrum of different standards applicable to different questions’.97

Traced to its probable origins, the ethos that underpins Baroness Hale’s judgmenttherefore appears as an argument against, rather than in favour of, dichotomousdivisions. It supports the need to take into account the individual context of the casealong a domestic and commercial continuum, rather than a bright line classification ofcases.

REFLECTIONS ON STACK: JUDICIAL RESTRAINT AND CREATIVITY

As was noted in the introduction to this paper, in Stack the majority of the House ofLords made a policy decision to treat the home differently and used the context of thecase to determine the applicable rules. It has been seen that this approach is unwork-able both on its own merits and because of the close relationship between the con-structive trust and proprietary estoppel, in respect of which the basis on which thedistinction between domestic and commercial cases is drawn is different. The effect ofStack is that we have two systems of property rules for determining ownershipdepending on the context in which the case arises.

Writing in this journal on a different matter (the availability of proprietary restitu-tion), Swadling dismissed the suggestion that there should be different rules forawarding property rights depending on the context in which the question is raised.Swadling therefore rejected a school of thought that argues that the availability ofproprietary claims should be determined by the consequences of the award on therecipient’s bankruptcy. Shortly stated, this school of thought, led by Burrows,98

suggests that a claimant should be awarded proprietary restitution if he or she ought

93. Above n 90, at [49].94. Ibid.95. Above n 5, at [69].96. [2001] 2 AC 532 at [28]. I am indebted to Dr Emma Laurie for bringing the source of thequote to my attention.97. E Laurie ‘Judicial responses to bright line rules in social security: in search of principle’(2009) 72 MLR 384 at 407.98. A Burrows The Law of Restitution (Oxford: Oxford University Press, 2nd edn, 2002)pp 69–75.



to be afforded priority in the defendant’s insolvency. Swadling reveals the flaw lyingat the heart of the argument in the following terms:99

‘He [Burrows] seems to be proposing that we have different rules for theaward of proprietary rights depending on the context in which the issue arises. This,however, is not how our legal system works. There is not, for example, one law ofproperty for the civil law and another for the criminal law. When the criminal lawis concerned with “property belonging to another”, it does not invent its own lawof property but relies on that of the civil law. Why then should there be a law ofproperty for questions of unjust enrichment different in the context of insolvencyfrom all others?’

It is submitted however that Swadling does not go far enough in explaining whyordinary rules of property law apply to the criminal law and why they should be usedto determine the availability of proprietary restitution. Property law’s rules determin-ing ownership can be, and are, departed from in a number of instances, usuallythrough statutory intervention. This is the case, as has already been noted, where thedistribution of assets falls to be determined on a divorce or dissolution of a civilpartnership. In that situation, a policy decision has been made that reliance on ordinaryproperty law rules will not meet the desired objectives. Conversely, in respect of thecriminal law, it may be more accurate to say that property law rules apply because nopolicy decision has been made to depart from them. Similarly, in respect of proprietaryrestitution, property law’s rules should apply unless and until a policy decision ismade to depart from them.

In Stack, in making a policy decision to treat the home differently, the majorityeffectively decided to depart from ordinary rules of property law when ascertainingownership of the home. An assessment of the House of Lords’ decision to do so shouldbe seen in light of broader debates on judicial restraint and creativity. This is an issuethat has found particular application in discussions of the courts’ role in the applica-tion of the Human Rights Act 1998; the situation which, as has been seen, provides thelikely origin of Baroness Hale’s statement in Stack that ‘context is everything’. TheHuman Rights Act 1998 has generally brought the relationship between the courts andParliament to the fore through the duty of interpretation conferred by s 3. Aside fromthat duty, a key issue that has arisen is the meaning and scope of the idea that courtsshould afford ‘due deference’ to Parliament and administrative decision makers;particularly when deciding whether an infringement of a qualified Convention right(such as Art 8) is ‘justified’. Deference carries the idea of ‘a court, exceptionally, outof respect for other branches of government and in recognition of their democraticdecision-making role, declining to make its own independent judgment on a particularissue’.100 In this respect, deference is fundamentally a matter of public law and, at firstblush, seems far removed from the development by the courts of doctrines of equity.There is no doubt that, particularly in areas not governed by legislation, courts have acreative or law-making role.101 Deference is not incompatible with the recognition ofsuch a role, but ‘simply denies that judicial intervention is appropriate in every caseand every context’.102 There are at least practical limits on the courts’ law-making role

99. W Swadling ‘Policy arguments for proprietary restitution’ (2008) 28 LS 506 at 520.100. Lord Steyn ‘Deference: a tangled story’ [2005] PL 346 at 349.101. Ibid, at 348.102. A Kavanagh ‘Defending deference in public law and constitutional theory’ (2010) 126LQR 222 at 248.



that call for a balance between creativity, on the one hand, and restraint or deference,on the other. As Lord Steyn explains, ‘it is necessary for courts, when developing thecommon law, to proceed with caution lest they undermine confidence in their judg-ments’.103 King notes that the way in which judges ought to exercise restraint ‘is acrucially important constitutional issue that cuts across most areas of public law andpossibly across much of private law as well’.104 Against this background, it is sug-gested that current jurisprudence and academic commentary on deference can be usedmore generally to aid our assessment of law-making by the courts, even in the realmof private law and including our evaluation of policy choices made by the courts whenexercising their law-making role.

It is beyond the scope of this paper to attempt a full description, let alone reconcili-ation, of competing theories of due deference. Different opinions exist as to whetherdeference should exist as a free-standing doctrine or lies only in the analysis of themerits of specific claims;105 whether its basis lies in institutional capacity or democraticaccountability;106 and how and when it should be applied. Collectively, however,debates on deference tell us that there are some questions which courts should not, or arenot best placed to, determine. This is for a variety of factors including a lack ofdemocratic accountability and concern that the adjudication process does not provide asuitable forum within which some types of issues can be properly assessed. AsKavanagh notes (writing in relation to s 3 of the Human Rights Act 1998):107

‘[J]udges lack the opportunity (and occasionally the expertise) to engage inwidespread, radical reform of an entire area of law. The judicial choice is oftenbetween conservation of the existing legal position or innovation in some small,partial aspect of it. The problem is that partial reform can create too much discor-dance in the law as a whole . . .’

These concerns are echoed in suggestions that amongst the matters in which deferenceshould be shown are questions of economic and social policy and so-called polycen-tric issues.108 Polycentric issues have been defined as those comprised of ‘a large andcomplicated web of interdependent relationships, such that a change to one factorproduces an incalculable series of changes to other factors’.109 Understood as such,an analogy has been drawn with Lord Reid’s caution against the courts changing thelaw when ‘it would be impracticable to foresee all the consequences of tamperingwith it’.110 The extent to which polycentricity can be used to explain the limits of

103. Above n 100, at 349.104. JA King ‘Institutional approaches to judicial restraint’ (2008) 28 OJLS 409 at 440.105. TRS Allan ‘Human rights and judicial review: a critique of “due deference”’ (2006) 65CLJ 671. A response to his arguments is provided by Kavanagh, above n 102.106. For a summary of these, see Dyson LJ ‘Some thoughts on judicial deference’ [2006] JR103.107. A Kavanagh ‘The elusive divide between interpretation and legislation under the HumanRights Act 1998’ (2004) 24 OJLS 259 at 280.108. See, eg, RA Edwards ‘Judicial deference under the Human Rights Act’ (2002) 65 MLR859 at 876.109. JA King ‘The pervasiveness of polycentricity’ [2008] PL 101 at 101. The idea that suchdisputes are unsuitable for adjudication originates with L Fuller ‘The forms and limits ofadjudication’ (1978–1979) 92 Harvard Law Review 353.110. Steadman v Steadman [1976] 1 AC 536 at 542. The analogy is drawn by JWF Allison‘Fuller’s analysis of polycentric disputes and the limits of adjudication’ (1994) 53 CLJ 367 at367.



adjudication or provide an argument for judicial restraint has been called into ques-tion.111 King argues that polycentricity is pervasive in adjudication and suggests that‘[i]t may be that every leading private law case involves the resolution of a heavilypolycentric problem’.112 At the least, however, without being ‘no go’ areas for thejudiciary,l the polycentric nature of a problem raises the question whether it is bestdealt with by the courts. Similarly, judicial deference does not necessarily involve theimposition of general limitations on the jurisdiction of the courts. Deference calls forrestraint but not ‘abstention’.113 Hunt eschews an interpretation of deference as impos-ing limits on the courts’ jurisdiction and views it instead as providing the basis of a‘culture of justification’.114

The question of beneficial entitlement that arose in Stack is one where Parliamenthas not trodden and where the history of the Law Commission’s work suggests that itwill tread (if at all) with caution. The absence of legislative intervention justifies andeven necessitates an active role for the courts. Against this, as has been noted, the LawCommission advised against a scheme for determining ownership that takes as itsstarting point that the property is a home. While Baroness Hale saw the Law Com-mission’s abandonment of its project as a reason for judicial intervention, it has beensuggested above that it in fact demonstrates the difficulty of attempting to devisespecific rules for the home. Whether the home should be treated differently raisesquestions of social policy that have not received a consistent approach in those areaswhere legislation has been enacted.115 The issue may be described as polycentric giventhat the ramifications of the decision reach far beyond the resolution of the disputebefore the court. As has been noted, the decision in Stack logically extends from thenarrow question of quantification at issue in the case to the broader question of thecreation of the trust and even impacts on the relationship between the constructivetrust and proprietary estoppel. Further, the identification of property rights affects notonly the relationship between the parties to litigation, but also their relationships withthird parties, including creditors with security interests over the home. The multi-faceted nature of the issues all point towards the need for some degree of restraint.

Opinions on how the balance is drawn between judicial restraint and creativity inany particular instance are bound to differ. In light of the competing factors at play, toask whether the House of Lords was ‘right’ in Stack to make a policy decision to treatthe home differently would almost certainly be misconceived. However, a morepertinent question (echoing the interpretation of deference favoured by Hunt) iswhether the House of Lords provided sufficient justification for doing so. It is in thisrespect that it is submitted that the decision falls short. The majority were acutelyaware of the social and economic significance of the breakdown of relationshipsbetween cohabitees;116 of the disparity that arises through the resolution of conse-quential disputes as to entitlement to assets (including the home) by property law’srules on ownership compared with legislative intervention on divorce and dissolution

111. King above n 109, and Allison, ibid.112. King, ibid, at 110.113. Kavanagh, above n 102, at 241.114. M Hunt ‘Sovereignty’s blight: why contemporary public law needs the concept of “duedeference”’ in N Bamforth and P Layland (eds) Public Law in a Multi-Layered Constitution(Oxford: Hart, 2003) p 351.115. Hopkins, above n 8, at 318–321.116. See, in particular, above n 7, at [45] per Baroness Hale. Lord Walker observed, at [14], thathe ‘cannot usefully add to, still less improve upon, [Baroness Hale’s] account of the human andsocial issues involved. . . . ’



of civil partnerships;117 and of the history of statutory non-intervention in this area.118

The emphasis on the need for unusual circumstances to rebut initial presumptions asto ownership also reflects a concern to reduce litigation in an area in which the costsare likely to be disproportionate to the sums involved.119 However, the specific issuefor decision (quantification of shares in jointly owned property where the transfer issilent as to the parties’ respective shares) was relatively narrow and one which, asBaroness Hale noted, could be resolved by a change in Land Registry practice.120

There is limited discussion of the consequences of the decision for the rules governingthe creation of trusts121 and (in Lord Walker’s judgment) of the relationship betweenconstructive trusts and proprietary estoppel. However, there is no discussion of thewider ramifications of the decision; for example of how the parties’ respective ben-eficial holding may impact on the resolution of other disputes between the beneficia-ries or on claims by third parties. The absence of discussion of these matters isunsurprising given that they did not arise on the facts. However, it demonstrates thedifficulty that is created when the courts make policy decisions and the need for suchdecisions to be carefully considered and justified. Lord Neuberger was equally awareof the concerns that drove the majority’s decision. In a paragraph of his judgment thathas clear parallels with the arguments raised in discussions of due deference, heexplained:122

‘A change in the law, however sensible and just it seems, always carries a realrisk of new and unforeseen uncertainties and unfairness. That is a particular dangerwhen the change is effected by the court rather than the legislature, as the changeis influenced by, indeed normally based on, the facts of a particular case, there islittle room for public consultation, and there is no input from the democraticallyelected legislature.’

In a claim involving principles of equity in which the courts have been thedriving force of change, it is difficult to imagine a clearer plea for restraint. In LordNeuberger’s view, while the case for a change in the law may have been made out, thecase for that change being made by the judiciary had not.

CONCLUSION

In his review of Cheshire cited in the introduction to this article, Hargreaves notes thathow property law deals with ownership is one of the basic problems by reference towhich the system stands or falls. There is a strong body of opinion, now led by theLaw Commission, that the ordinary property law rules on ownership provide aninsufficient mechanism to determine entitlement to the home, at least in instancesof relationship breakdown; a fact already recognised in cases of divorce and the

117. Ibid, at [43] per Baroness Hale.118. Ibid, at [46]–[48] per Baroness Hale.119. Ibid, at [27] per Lord Walker.120. Through a mandatory declaration where property is registered in joint names: ibid, at[52]–[53].121. In particular in urging a move away from a focus on direct financial contributions: see thediscussion by Lord Walker, ibid, at [24]–[26] whose discussion is endorsed by Baroness Haleat [60].122. Ibid, at [102].



dissolution of civil partnerships. In Stack, the majority of the House of Lords soughtto treat ownership of the home differently to other property by distinguishing betweendomestic and commercial cases. This paper has revealed the difficulties with thisapproach, both on its own merits and as a result of the close relationship betweenconstructive trusts and proprietary estoppel. It has highlighted, by way of comparison,similar and unresolved problems that arise in claims to undue influence. The case forreform may be strong. However, by analogy with current debates on due deference, ithas been suggested that sufficient justification has not been provided for reform tocome at the hands of the judiciary.



The relevance of context in property law: a case for judicial restraint?

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