A purchaser bought a bankrupt’s home, financed by a bank mortgage and also a loan from the bankrupt. The registered owner allowed the bankrupt to tenant the home for an agreed rental but when asked to leave, the bankrupt refused. The owner had neither possession nor rent for quite some time and was ready, willing and able to pay back his loan to the bankrupt. The bankrupt claimed that the loan was not a loan but purchase monies to become a co-owner and that the rental payments were mortgage repayments. The bankrupt claimed an equitable interest by way of a constructive or resulting trust and also a right to possession as against the registered owner. There was nothing in writing and all money was paid in case.
The law is that if a person contributes purchase monies but does not become a registered owner he may nevertheless receive an equitable interest by way of a resulting trust.
However the court found that the money paid was not purchase monies and there was no resulting trust. The court also found no agreement to develop the property and share the proceeds that could give rise to a constructive trust between joint venturers. Hence the court found that the bankrupt did not have an equitable interest in the home and granted the registered owner possession.
The court found that even if the bankrupt was a beneficiary of a trust over that portion of the property to which he contributed part of the purchase price, that would not entitle him to exclude the registered owner from possession – at most it would entitle him to have the property sold and an account from the proceeds. The court found the bankrupt not entitled to possession as against the registered owner.
The court also noted that the conduct of the bankrupt in going behind the backs of the trustees in bankruptcy disentitled him to relief with regard to possession in any event. The court found the bankrupt liable for rent but did not enter judgment owing to him being bankrupt. The court found that the bankrupt was estopped by his pleadings from arguing that the matter should be remitted to the tenancy tribunal but said that if it were wrong and there was a residential tenancy which required the matter to be remitted to the tribunal, then the court declared that the bankrupt had no interest in the property that denied the owner possession.