Lloyds Bank plc v Rosset is a landmark case in English land law, trusts law, and matrimonial law. It deals primarily with the issue of beneficial interests arising under a common intention constructive trust and the concept of actual occupation as an overriding interest under the Land Registration Act 1925.
The case is particularly significant because it set strict criteria regarding when a non-owning cohabitee or spouse may acquire a beneficial interest in a property owned solely by their partner. Although the principles in Lloyds Bank plc v Rosset have since been subject to criticism and some limitation in later cases such as Stack v Dowden, it remains a leading authority in the area of constructive trusts involving a single legal owner.
Facts of Lloyds Bank plc v Rosset
In Lloyds Bank plc v Rosset, Mr Rosset purchased a semi-derelict property known as Vincent Farmhouse with money from a family trust. The trustees of the trust required Mr Rosset to be the sole registered owner of the property as a condition for using the funds. Mr Rosset bore the entire financial burden of purchasing and renovating the house.
Mrs Rosset, his wife and the defendant in the case, did not contribute financially to the acquisition or the renovation costs. However, she assisted by decorating and helping with some of the building work during the two months immediately before they moved in full time. She was physically present and involved in the works, including during evenings.
The property was in her possession from 7 November 1982, although contracts for the purchase were not exchanged until 23 November 1982. Mr Rosset later secured a mortgage on the property from Lloyds Bank on 14 December 1982 without Mrs Rosset’s knowledge or consent. Completion of the purchase took place on 17 December 1982, and the mortgage charge was registered on 7 February 1983.
Subsequently, Mr Rosset defaulted on the mortgage repayments. Lloyds Bank sought possession of the property as the loan had fallen into arrears in the late 1980s. Mrs Rosset contended that she had an overriding interest in the property because she was in actual occupation under section 70(1)(g) of the Land Registration Act 1925. She argued that her physical contributions and presence entitled her to remain in the property, notwithstanding the bank’s mortgage.
Issues
The main legal issues in Lloyds Bank plc v Rosset were:
- Whether Mrs Rosset had acquired a beneficial interest in the property by way of a constructive trust based on common intention between her and Mr Rosset.
- Whether Mrs Rosset was in “actual occupation” of the property at the relevant date to give her an overriding interest under the Land Registration Act 1925.
- Whether Mrs Rosset’s physical contributions and presence were sufficient to establish equitable proprietary rights that would override the bank’s interests.
- The relevant date for assessing actual occupation in the context of the mortgage.
Court of Appeal Decision in Lloyds Bank plc v Rosset
The Court of Appeal delivered a majority judgement (2-1) on the question of actual occupation and beneficial interest.
Nicholls LJ held that Mrs Rosset was in actual occupation of the property. He reasoned that physical presence was not strictly required, and that her regular visits to the house while renovations were underway were sufficient. He also suggested that the presence of the builders working on the house could be considered as actual occupation on her behalf. Nicholls LJ found that a common intention existed that Mrs Rosset would share in the beneficial ownership, based on her detriment and involvement.
Purchas LJ agreed with this approach and clarified that actual occupation should be understood in an equitable sense to protect undiscoverable interests. He believed Mrs Rosset’s occupation was “discoverable” by the bank and therefore should qualify for protection.
However, Mustill LJ dissented, concluding that Mrs Rosset was not in actual occupation on the relevant date.
Thus, the Court of Appeal allowed Mrs Rosset’s claim to an overriding interest based on her actual occupation, but the beneficial interest question remained contested.
House of Lords Judgement in Lloyds Bank plc v Rosset
The House of Lords reversed the Court of Appeal’s decision regarding the beneficial interest and held that Mrs Rosset did not have a beneficial interest in the property.
Lord Bridge delivered the sole legal opinion, with the other Law Lords concurring. He emphasised that there was no express or implied agreement or arrangement between Mr and Mrs Rosset that the property would be shared beneficially. No evidence showed any discussions or understanding to that effect.
Lord Bridge set out the foundational principle that the key question in constructive trust claims is whether, independently of conduct in sharing the home, there had been any agreement or understanding that the property would be shared beneficially. Such an agreement could be express, though possibly imprecise or imperfectly remembered, but must exist before a constructive trust can arise.
Where no such agreement existed, the court could only infer a common intention constructive trust if the non-legal owner made direct financial contributions to the purchase price or mortgage payments. Contributions in the form of physical labour, decorating, or renovation assistance were insufficient.
Lord Bridge stated:
“Direct contributions to the purchase price by the partner who is not the legal owner … will readily justify the inference necessary to the creation of a constructive trust. But … it is at least extremely doubtful whether anything less will do.”
He distinguished this case from others such as Eves v Eves and Grant v Edwards, where the female partners had been led to believe by the male owners that they would have a joint beneficial interest.
Regarding actual occupation, the House of Lords held, obiter, that the relevant date for determining actual occupation under the Land Registration Act 1925 was the date the mortgage charge was created (14 December 1982). However, since Mrs Rosset had no beneficial interest, the court found it unnecessary to decide whether she was in actual occupation at that time.
The House of Lords therefore allowed Lloyds Bank’s appeal, enabling the bank to enforce its mortgage and repossess the property.
Legal Principles Established
The ruling in Lloyds Bank plc v Rosset established important legal principles regarding beneficial interests and overriding interests in property:
- Common Intention Constructive Trust: To establish a constructive trust, there must be an express or inferred agreement or arrangement that the property is to be shared beneficially.
Where no express agreement exists, only direct financial contributions to the purchase or mortgage payments by the non-legal owner will suffice to infer such intention. - Physical Contributions Insufficient: Physical contributions such as decorating, renovating, or general household labour do not in themselves create a beneficial interest.
- Actual Occupation as Overriding Interest: Actual occupation under section 70(1)(g) LRA 1925 protects certain equitable interests. However, actual occupation is only relevant if a beneficial interest exists.
The relevant date for assessing occupation is the date the mortgage charge is created.
Conclusion
Lloyds Bank plc v Rosset remains a foundational case in English property and trusts law, particularly concerning beneficial interests arising between cohabitees or spouses. It clarified that without express agreement or direct financial contributions, a non-owning partner cannot claim a beneficial interest on the basis of physical work alone.
The decision protects lenders and registered owners from unexpected claims by non-owning partners who have not contributed financially. It also establishes that actual occupation as an overriding interest only protects those with existing beneficial interests.
While its strict approach has been softened by later case law, Lloyds Bank plc v Rosset continues to be binding authority in claims involving single legal owners and remains essential study material for understanding constructive trusts and proprietary rights in English land law.
