• In the case of Hodgson v Marks 1971 1 Ch 933, it was held that an automatic trust arises where an express trust fails for lack of formality.

Facts of the Case

  • In June 1960, the claimant, who since 1939 had owned the house in which she lived, executed a voluntary transfer of the house to her lodger (E).
  • E was registered as proprietor of the house though it was orally agreed that the beneficial ownership was to remain in the claimant.
  • The claimant and E continued to live in the house as owner and lodger respectively.
  • In 1964 E sold the house to the first defendant who executed a charge on it in favour of a building society, the second defendant.
  • The first defendant was registered as proprietor subject to the charge.
  • In 1965 when the claimant and the first defendant learnt of each other’s claims, the claimant issued a writ seeking, inter alia, a declaration hat the first d3fednant was bound to transfer the house to her free from the charge.
  • On June 16th, the action was dismissed.

Issues in Hodgson v Marks 1971 1 Ch 933

  • Did the trust bind both the defendants?

Held by Court of Appeal

  • Appeal allowed

Russell LJ

  • It was held that the rights of a person who was in occupation of land were not overridden whenever the vendor was, or appeared to be also in occupation and accordingly, as the claimant was de facto living in the house as her house, she was at all material times a person in actual occupation thereof for the purposes of the Land Registration Act 1925.
  • “Registration itself is subject to overriding interests. Moreover, G a person who remains in actual occupation does not do anything to abandon the rights which her actual occupation protects, unless on inquiry she does not reveal them: that is what section 70 (I) (g) enacts. The plain­tiff did not arm Mr. Evans with the apparent ability or power to deal with the property free from any overriding interest. Caunce v. Caunce [1969] 1 W.L.R. 286. In that case the occupation of the wife may have been rightly taken to be not her occupation but that of her husband. In so far, however, as some phrases in the judgment might appear to lay down a general proposition that inquiry need not be made of any person on the premises if the pro­ posed vendor himself ‘appears to be in occupation, I would not accept them. Accordingly, I would allow the appeal with such order as may be consequential on the establishment by the plaintiff of her overriding bene­ficial entitlement to the premises.” P 934-935