Category Archives: Trusts

Brothers had operated all family properties and businesses as co-owners

The recent case of Bhushan & Ors v Chand [2015] concerned a family property dispute.

In the early period it was a traditional family under the close control of the head of the household, initially the husband and after his death his wife. All the sons of the family continued to pay over their wages to their mother who controlled the family’s money. The family home was transferred into her name, and it’s successor was bought in her name.

The mother received money from various sources and simply mixed it and applied it as she thought fit for the family’s benefit, either for daily expenses or in acquiring assets she expected to benefit her sons later.

The High Court said the mixing of funds under her control would make her the beneficial owner of the money each of her sons paid to her.

When an asset such as a house was bought with that money, the ownership of that asset would depend on her intention as expressed at the time, and was not to be treated as relating back to the respective contributions to the mixed fund.

It was the defendant brother’s case that he was or had been entitled either to the whole or some ascertainable share of the beneficial interest in the assets purchased from that fund merely because of his having paid an indeterminable part of the price out of his wages. The High Court said that was insufficient.

But neither had the claimant brothers established a general intention that there be common ownership of all the assets bought from the outset.

The High Court said insofar as assets were bought in his name from that fund, the prima facie position would be that they were legally and beneficially his, if no contrary intention at the time of purchase was proved.

However, if such a property was later sold and the money paid back to the mother, then ownership of that money would vest in her, again, subject to a contrary intention at that time being proven.

In that early period, there was no sufficient evidence of a contrary intention.

But later as the children grew older the evidence of what the family actually did overwhelmingly supported them having agreed to work together in business and build up assets in common.

All of the claimant brothers worked in the joint enterprise family clothes business much more consistently with being owners than with them being four unpaid employees dependant on generosity from a lead family member.

Investments were purchased from the funds of the family business for each brother without regard to their ostensible ownership of the business. The proceeds of those investments were used to buy properties which were not always owned by the same family members. Rental income from properties and cash accumulated were aggregated and applied without distinction as to their origin.

Whatever the distinctions as to ownership presented to outsiders, these did not correspond with the way the properties, businesses and their income were treated between the family members.

The nominal ownerships of the family businesses and the rental properties bore no relationship to the way in which the income and proceeds derived from them were used.

The decisions to use those funds were taken by family members other than the ostensible owners. Those members did not do so as assistants or secretaries to any lead family member.

When a major financial issue arose from the compulsory purchase of one of the properties, it was described to the professionals acting as being owned by all five and the proceeds obtained were predominantly reinvested in a club owned on the same basis.

Finally, there was evidence of arrangements between the brothers, supporting the existence of a common intention trust in that the defendant had acknowledged the existence of such an arrangement by discussing the division of assets, and, by beginning to compile his own list of the assets to be divided.

Anyone wanting to show a common intention constructive trust must have relied to his detriment on the agreement he, or she, argues existed.

That was easy here as each of the brothers himself worked in the various businesses bought or established, in circumstances where, prima facie, he would not otherwise be entitled to any reward from those businesses or interest in the assets.

In the circumstances it was unnecessary to go on to consider the doctrine of proprietary estoppel or the precedents set by the court decisions based on the previous case of Pallant v Morgan.

In any case the facts would not fit easily with Pallant v Morgan since there was no suggestion that one or more brothers had the opportunity to acquire particular properties but had instead stood back in favour of another.

An agreement for joint ownership fitted more easily with a common intention trust than a promise of an interest in the property of another.

Their respective cross entitlements under that ownership remained to be settled – being complicated by the fact that for some time the defendant had been operating the club and the other brothers had been operating the other businesses.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Court: Trustees could sell estate to that buyer at that price

Where a property is subject to a trust and the trustees are in doubt whether they should proceed with a propose sale, they can protect themselves from future actions by the beneficiaries by seeking court approval.

Since the giving of such approval will deprive the beneficiaries of their remedy, the legal precedents emphasise the requirement for caution by the court before approving trustees’ decisions to carry out “a momentous transaction”. The court will not approve a trustee’s decision without a proper evidential basis for doing so. Equally the court should not withhold approval from trustees “without good reason”.

One of the main tests is whether the trustees can show that their decision to enter into and complete the intended sale was “one which reasonable trustees could properly take in the interests of the beneficiaries”.

In the Court of Appeal case of Cotton & Anor v Brudenell-Bruce & Ors [2014] the court had to decide whether or not to approve a “momentous decision” made by trustees.

The case concerned Tottenham House, Savernake, Wiltshire (“Tottenham House”) which was the main asset of the Savernake Estate. It had been unoccupied since the 1990s, and was rapidly deteriorating. It was on English Heritage’s register of ‘at risk’ properties. Should the court approve the proposed sale to the existing buyer?

The trustees wanted the court to approve the intended sale. One of the main beneficiaries of the trust, Lord Cardigan opposed the intended sale.

For the trustees the intended sale price was a good one that presented an opportunity not to be missed. For Lord Cardigan the price was inadequate and was the outcome of an ineffective and inadequate marketing exercise.

The intended purchaser would originally have been able to walk away from the sale contract by now but had given the trustees an extension to the long-stop date to enable these proceedings.

The court was much concerned that the trust would be put “in an impossible bind” if court approval were withheld. The effects were potentially dire.

The trust had no money, and had to spend large amounts on insurance and maintenance. The trust had already defaulted in paying the bank, and the bank would probably enforce the security it held against three of the smaller properties on the estate.

The trustees would be thrown into an open marketing campaign, against the advice of their estate agent, GVA. They would risk losing the specially interested buyers who had meticulously assembled their bids.

The court had to be cautious to ensure that the trustees were indeed justified in proceeding with the sale but it was not the job of the court to place insurmountable hurdles in the path of trustees as badly placed as the Savernake Trustees were. “Caution cut both ways.”

The court confirmed to the trustees, that in acting on GVA’s professional advice to sell to that buyer at that price, the trustees would be fulfilling their duties to the trust beneficiaries.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Estoppel based on promise of permanent home

In the Court of Appeal case of Southwell v Blackburn [2014] the Appellant and the Respondent had set up home together in Droitwich, in 2002. The Respondent, a divorcee with 2 daughters, had given up a secure tenancy of a property in Manchester, which she had spent roughly £15,000 on, based on his representations that she would have a long term home and the same security as a wife. The Appellant funded the purchase of the house with the equity from his old house and a repayment mortgage in his sole name which he alone repaid.

When the relationship broke down 10 years later the Respondent unsuccessfully claimed that the Appellant held the Droitwich house under a constructive trust for the benefit of both of them in equal shares. But the judge at first instance found she had an enforceable equity, in the Droitwich house, by operation of proprietary estoppel to the tune of £28,500.

It’s notable that the representations he made to her were specific as to the nature and extent of the “long term commitment” he gave her “to provide her with a secure home” but were not specific as to ownership of their new home.

The judge at first instance found that he had led the Respondent to believe she would have an entitlement which would, on any breakdown of the relationship, be recognised in the same way as the contribution of a wife to the assets of a marriage would be recogised on a marital breakdown. Without that she would not have given up her secure tenancy in Manchester.

His promise had not been of a half share in the house, but he had given her a promise of security, which he had failed to fulfil, and it would be unconscionable for the Appellant not to try to put her back in much the same position as she was before she gave up her own house.

The case is also significant in that much the larger part of her award was quantified not on what she spent on the Droitwich house but on what she had spent on the Manchester house, they not cohabited in, and that she had given up.

On top of her spending on her old home that she had given up, she had spent £4,000 – £5,000 as her contribution to setting up the new house with the Appellant. The Respondent had been relieved of her liability to pay rent in Manchester and had lived rent-free in Droitwich but her practical support had assisted him to increase his earnings by at least one major career promotion. The value of the new house had increased from £240,000 to £320,000. Allowing for inflation £20,000 was adjusted to the £28,500 she was awarded. That figure reflected the prejudice she had been subjected to by the Appellant not fulfilling his promise and should allow her to get back to her 2002 position.

The detriment to the Respondent had not been that she embarked upon a relationship with the Appellant but that she had abandoned her secure home in which she had invested, and she had then invested what little else she had in the Droitwich home even though she had no legal title to it.

It was that detrimental reliance which made the Appellant’s promise irrevocable and led to the conclusion that he could not conscionably go back on the assurance about her having a long term secure home.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Circumstances of unlawful killing did not displace Forfeiture Rule’s application to Joint Property

Where a person is a beneficial joint tenant of a property, or the beneficiary to that property under the owner’s will, it will normally pass to them by “survivorship” or under that will on the death of the other joint tenant or of the owner.

However under the common law “Forfeiture Rule” a person who has unlawfully killed another is barred out from acquiring a benefit as a result of the killing. This is subject to the Court’s power under the Forfeiture Act 1982 to modify the application of the Rule in individual cases.

In the recent High Court case of Chadwick v Collinson & Ors [2014] the Claimant and the Deceased had been beneficial joint tenants of a house at Bolton-le-Sands, Lancashire (“the Property”).

The Deceased had made a will in which the Claimant was the residuary beneficiary. The net value of her estate was £79,098.87. £60,000 of this had been referable to the Deceased’s interest in the Property.

The Claimant had been referred for a mental health assessment after describing feelings of paranoia and hearing voices. In the early morning just prior to the scheduled assessment, the Claimant stabbed the Deceased and their six year old son repeatedly killing them both. The Claimant was arrested and charged with murder. His guilty plea to manslaughter on grounds of diminished responsibility was accepted and he was detained under a Hospital Order under Section 37 of the Mental Health Act 1983.

But for the Deceased’s killing, the Deceased’s interest in the Property would normally have passed to the Claimant on the Deceased’s death under the beneficial joint tenancy.

The issues here were:

i) Did the Forfeiture Rule apply in the circumstances of this case; and

ii) If it did, did the justice of this case require the effect of the Rule to be modified?

On point i) the Claimant said the Forfeiture Rule did not apply to some cases of manslaughter and that it ought not to apply here because of the mental health of the Claimant.

The Court said the Rule might be disapplied where the crime involved such a low degree of culpability or such a high degree of mitigation that the sanction of forfeiture would have been contrary to the public interest. But here whilst the mental disorder might have significantly reduced the degree of culpability it had not been eliminated or reduced to such a low level that to give effect to the Forfeiture Rule would be contrary to the public interest.

Under the partial defence of diminished responsibility the “abnormality of mind” merely impacted on the Claimant’s capacity to form a rational judgment and, reduced, but did not eliminate, his ability to control his behaviour. These did not derogate from the fact that the Claimant had decided to kill his partner and son, knew that it was wrong and had some residual self control.

Apart from the question of culpability, which was sufficient to justify the application of the Forfeiture Rule, the nature and gravity of the offence also weighed, with the Judge, against disapplying of the Forfeiture Rule. Included were (a) the number of fatal and non fatal wounds inflicted by the Claimant and (b) the number of times he returned to attack each victim.

The evidence also lacked anything that could begin to explain what occurred.

The conduct of the victim might have militated against the rule applying had they subjected the assailant to years of intolerable physical or mental abuse. In fact the couple’s relationship seemed entirely stable, loving and long lasting. The deceased’s will had been consistent with this since she left him the entirety of her estate and only to her children if he did not survive her more than 28 days.

Another factor substantially against disapplying the Forfeiture Rule was that most if not all her interest (and the Claimant’s interest) in the Property had been funded by inheritance from the Deceased’s late mother.

On the Claimant’s attempt to modify the application of the rule mentioned at ii) above:

The financial position of the Claimant was also relevant. He would still have his share of the Property but it may be difficult for him to again earn his living as a self employed gardener whenever he was released. This factor favoured modifying the effect of the Forfeiture Rule but was outweighed by the other factors militating against such modification.

Another factor to be borne in mind was that those who would benefit under the Forfeiture Rule were largely aunts and cousins of the Deceased who she did not intend to benefit in the event of her death. That weighed against applying the Forfeiture Rule but not heavily. That factor, whether alone, or in combination with the Claimant’s future financial position, was outweighted by the other factors referred to above. So the application of the Forfeiture Rule should not be modified in the circumstances of this case.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Way assets organised prevented offshoring of property income

Tax legislation deals with schemes that have, as their object, the shelter, from UK tax, of income arising in the UK.

Section 739 of the Income and Corporation Taxes Act 1988 (“ICTA”) says in effect………

(3) Where before or after any [relevant] asset transfer an individual [in question] receives or is entitled to receive any “capital sum”
THEN:
any income that accrues directly, or through “associated operations”, as a result of that transfer to a person resident or domiciled outside the United Kingdom, is to be attributed to that individual for UK tax purposes.

By subsection (4) “capital sum” includes…

(a) any sum paid or payable by way of loan or repayment of a loan.

And under section 742 (1) “an associated operation” includes an operation of any kind effected by any person in relation to any of … the income arising from any such assets…”

And under section 742(2) an individual is deemed to have power to enjoy income of a person resident outside the United Kingdom [including] if… the receipt or accrual of the income operates to increase the value to the individual of any assets held by him or for his benefit.

In the First-tier Tribunal (Tax) case of Seesurrun & Anor v Revenue & Customs [2014] various residential homes had been divided between offshore companies Calinda and Mannville and leased to the operating companies. At times the rents collected were above the rates specified in the leases.

Mr and Mrs Seesurrun were creditors of Calinda in different amounts from the sales of Manor Court and Drake Court to Calinda and an advance made by Mr Seesurrun to Calinda to enable it to purchase Goldthorn Court. This otherwise arose from the Seesurrun’s allowing much of the sale price to remain unpaid and outstanding on interest free unsecured terms. The terms on which Mr and Mrs Seesurrun transferred Churchill to Mannville were uncertain. Any such transfer might have caused Mr and Mrs Seesurrun to become creditors of Mannville.

The shares of two of the operating companies Manor and Ashleigh were held by Calinda.

The shares of Calinda and Mannville were owned by the RS Settlement and the GS Settlement, the respective interest in possession settlements of Mr Seesurrun and his wife.

MML were the professional trustees of the RS and GS Settlements and held the shares in Calinda and Mannville for those settlements respectively.

HM Revenue & Customs (“HMRC”) said Mr Seesurrun had received a capital sum within section 739(3) ICTA, so that income of Calinda (a person resident outside the United Kingdom) was to be deemed to be Mr Seesurrun’s income.

Mr Seesurrun owed the Trust/Calinda £2,705,589 and HMRC said this was evidence of the receipt by him of a capital sum of that amount within section 739(3) ICTA.

HMRC made particular reference to a dividend of £110,000 declared by Manor to Calinda and the dividend of £240,000 declared by Ashleigh to Calinda being applied to reduce Mr Seesurrun’s indebtedness. This showed that Mr Seesurrun had not only had power to enjoy the income of Calinda but had actually received and enjoyed the funds.

Mr and Mrs Seesurrun’s entitlements as beneficiaries under either of the RS or GS Settlements had been excluded by the execution of deeds of variation.

All the same, the Tribunal said the debts owed to Mr and Mrs Seesurrun by Calinda, were unsecured, interest free and payable on demand, and therefore such that the receipt of income by Calinda ‘operated to increase the value to [Mr and Mrs Seesurrun] of [the debts] held by [them]’ (section 742(2)(b) ICTA). So, for the purposes of section 739 ICTA, Mr and Mrs Seesurrun had power to enjoy the rental income received by Calinda (as well as the dividends declared by Manor and Ashleigh).

Therefore Mr and Mrs Seesurrun had a liability to income tax under section 739(2) ICTA.

Mr and Mrs Seesurrun had received “capital sums” whose payment was connected with the transfers of assets and associated operations. This meant that Mr and Mrs Seesurrun also had a liability to income tax under section 739(3) ICTA.

The “capital sums” were as follows.

1. Calinda and/or the RS Settlement and/or the GS Settlement lending Mr Seesurrun £2,705,589.

2. Loans of £1,183,094, as at 5 April 2005, and £959,794, as at 5 April 2006, due to Calinda from Mr and Mrs Seesurrun.

3. Loans of £1,529,872, as at 5 April 2006, due to Mannville from Mr Seesurrun. Though this could not cause the capital gain realised by Mannville to be chargeable to income tax in Mr Seesurran’s hands.

Of course, that did not cause the same income to be taxed under both section 739(2) and section 739(3).

In conclusion, even if the Seesurruns were effectively excluded from any possibility of benefit under the RS Settlement and the GS Settlement by the later deed of variation, the income of the offshore structure, was nevertheless deemed to be their income, for income tax purposes under section 739(2) and (3) ICTA, because of their effective power to enjoy it and/or their receipt of, or entitlement to receive, capital sums from the structure.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Bankrupt son’s assets not shielded from creditors by trust

Property held by a bankrupt on trust for another person does not form part of the bankrupt’s assets that can be seized and sold by their trustee in bankruptcy for creditors.

In the absence of evidence to show a different interest, the starting point is that the beneficial interest in the assets is the same as the legal interest. The onus is on the person asserting the separation of legal and beneficial interests to prove it by convincing evidence.

If it’s alleged that the interest arises by way of a common intention trust, the whole of the circumstances must be looked at to determine whether such an interest exists, and (if relevant) the extent of it.

The necessary intention may be found from express words spoken or written, or by inference from the actions of the parties (as in the case of a resulting trust found on the basis of contribution to the purchase price).

But in deciding what inferences are to be drawn from conduct, the court must look at the relevant conduct as a whole.

In the High Court case of Thandi v Sands & Ors [2014] a son had become bankrupt in 2011. His father now alleged that the properties he owned were held by that son on bare trust for the father and so did not form part of the assets owned by the son beneficially as well as legally.

The father said that the son had executed a declaration of trust in his favour in 2003 to that effect.

Whilst the court accepted that the father had provided all or substantially all the finance for buying the initial properties, the court found that the declaration of trust had only been executed in 2006.

The court was wary of the parties’ evidence of their intentions as given in court regarding it as self serving evidence of subjective intention to substantiate a trust that they thought would assist them to keep the family assets away from the son’s creditors.

The most reliable evidence of the father and son’s actual intentions was what could be inferred from what they actually did. Whilst the father chose to have the properties all transferred to, or purchased in the name of his son, the son holding them on trust was by no means the only possible intention, particularly in the context of the acquisition and management of family assets and family wealth.

It was equally possible that the father had intended to build up a portfolio of assets that his son would own, or that would be regarded as assets of the family to be dealt with in future as they might agree or as the father might secure using his influence as head of the household.

Neither such arrangement would have given rise to a trust in the father’s favour.

The contemporary objective evidence clearly showed that all the properties were, from purchase, treated as belonging to the son beneficially.

They were presented in that way to third parties whenever the true beneficial ownership might be relevant. Those third parties included various mortgage companies he applied to with statements of his assets, income or status as a sole trader. In particular, the major applications to Mortgage Express and Nationwide were on that basis. Also his tax returns were consistent only with his being the beneficial owner of the income arising from those properties, and therefore with him and not his father being the beneficial owner of those properties.

No trust was recorded on the title of any of the properties, nor was there any evidence that any of the solicitors were told of any trust at the time they were bought.

So the assets were not held on trust for the father and were owned by the son beneficially as well as legally. As such they vested in the trustee in bankruptcy and were available to that trustee to sell to pay the proceeds to the secured and unsecured creditors respectively.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

No preventative representations could get round failure to execute deeds properly

Where documents were not in fact executed in accordance with the Law of Property (Miscellaneous Provisions) Act 1989 (“the 1989 Act”), does the fact that documents were described as deeds and meant to be such prevent (“estop”) the signatories from denying that the defective deeds were validly executed?

Briggs & Ors v Gleeds (Head Office) & Ors [2014] concerned a pension scheme (“the Scheme”) for employees of partnerships and companies within the Gleeds group (“Gleeds”).

As will be seen later the case is an important one on the 1989 Act and estoppel and deeds – all of which play an important role in property law.

The Scheme’s case that the signatories could be prevented (estopped) from denying that the defective pension deeds were validly executed failed on factual and legal grounds.

The Facts

Gleeds argued that:

1. By supplying the draft deeds and, perhaps, instructions as to how they should be executed, the Scheme’s Pension Adviser (“Aon”) impliedly represented to Gleeds and Scheme members that, legally speaking, execution in the manner indicated by the drafts would suffice; and

2. Gleeds and Scheme members relied on the representations to their detriment; and

3. Aon were acting on instructions from the Scheme trustees at the relevant times and so the representations should be attributed to the trustees; and

4. In the circumstances, an estoppel had arisen precluding both the trustees and Gleeds and Scheme members from challenging how the deeds were executed.

Fatally to Gleeds case the court found that Aon could not be said to have made such representations for the trustees, or on the trustees’ behalf, to the Gleeds and Scheme members in relation to the execution of the defective deeds.

Main Legal issue

The main legal issue was “how far could the principle of estoppel be invoked to prevent a party from asserting that the statutory requirements for a deed (under the 1989 Act) have not been satisfied?”

The court concluded that estoppel cannot be invoked where a document does not even appear to comply with the 1989 Act on its face or, in any event, could not be so invoked in the particular circumstances of that case. For the following reasons:

i) Parliament had imposed the evidential requirement that an individual must sign “in the presence of a witness who attests the signature” otherwise his deed was not validly executed as such; and

ii) The “deeds” at issue here were not “apparently valid”. It could be seen from each document that it had not been executed in accordance with the 1989 Act.

Had it been otherwise a person can sometimes be estopped (or prevented) from denying due attestation.

But if estoppel could be invoked in relation to documents that were not “apparently valid” people would not know where they stood with them and there would be uncertainty. The validity of a deed may remain important for many years. In relation to older “deeds” people without personal knowledge of the circumstances in which they were executed would not know whether they were valid or not.

A party to a “deed”, who had not himself executed the document in compliance with the 1989 Act, would have an election as to whether the document should be regarded as valid. If the document turned out inconvenient to him he could deny its status as a deed. But if it proved advantageous he could invoke estoppel.

So, if a “deed” provided for a pension scheme to change to money purchase instead of a final salary scheme, an employer who had not had his signature to the document witnessed could wait and see whether the change had actually been favourable to him; and

iii) if estoppel could be invoked in circumstances such as these Parliament’s and the Law Commission’s aims, behind the 1989 Act, to address those kinds of issues would be seriously undermined.

So, the members of the Scheme were not estopped (prevented) from refuting that the defective deeds had been validly executed since (a) Aon could not be said to have made representations on the Scheme trustees’ behalf to Gleeds or Gleeds Scheme members as to the execution of the defective deeds; and (b) estoppel could not be invoked to get around the 1989 Act in circumstances where it was quite apparent that the documents were not validly executed as deeds.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Parents’ Council House Discount highlights need for comprehensive trust deeds on joint property purchases

Where property is bought by more than one person, and they are not husband and wife, it is important to have a trust deed setting out (or providing for) the shares the property will be held in and how the income (usually any rent) and outgoings (including mortgage payments, maintenance costs and council tax) will be shared between the parties and reflected in those shares.

In the Court of Appeal case of Richards v Wood (2014) Mr Richards’ parents in law (the respondents) did not have enough money to buy their council house so Mr Richards agreed to provide a large chunk of the purchase price.

At the time of the purchase Mr and Mrs Woods’ long tenancy of the house had qualified them for a significant statutory discount.

There was a trust deed which said the parties would be entitled to share in the house in proportion to their contributions.

It said:

“3. At the date of the said transfer the market value of the property agreed with the Oldham Borough Council was £23,500. The agreed discount to which the purchasers were entitled was £14,100 and the purchase price paid by the purchasers to the council was therefore £9,400. Part of the said purchase price of £5,000 has been provided by Mr Richards and the balance of £4,400 by the purchasers.”

Clause B of the trust deed said that on the sale of the property the proceeds would be divided:

“on the basis of the initial respective contributions set out in clause 3 above provided always that if the purchasers or Mr Richards shall expend further monies on the property by way of improvement such monies shall be regarded as an increase in the interest of the person so providing the same and shall be taken into account in any division of the proceeds of sale.”

In fact Mr Richards provided the whole of the £9,400.

Between August 1989 and October 1990 Mr and Mrs Wood paid for double glazing to be installed at a cost to them of £3,878.

In 2006 the house was valued with a view to it being sold and the Mr Richards beng paid out. The agent said a reasonable asking price would be £114,950 but that they would be “happy to ask slightly higher if you wish.” Their marketing fee would have been 1.5 per cent of the price achieved.

But Mr and Mrs Wood did not place the property for sale on the open market. Instead, Mr and Mrs Wood sold the house to their son, Michael and his wife Janet. The sale price was £102,000.

Mr and Mrs Wood and Mr Richards fell out over the valuation and how the proceeds were to be shared.

Mr Richards’ valuer arrived at a value of £111,000 and Mr and Mrs Woods’ arrived at a value of £105,000. However, they agreed that “the difference between their valuations was within an acceptable range of tolerance” as between chartered surveyors’ valuations and that since the sale did not involve an estate agent and deduction of their commission charges the agreed price was within a reasonable negotiation range of the market value.

So the court dismissed Mr Richards’ undervalue claim.

The question also arose whether Mr Richards was entitled to share in the statutory discount or whether it was to be treated as part of Mr and Mrs Woods’ contribution augmenting their own share in the house.

If there is no express provision in the trust deed that deals with the way in which an entitlement to statutory discount is to be treated, the courts have usually held that it is to be treated as a contribution in monies’ worth to the purchase price and here the court found that the discount was to be treated as a contribution by Mr and Mrs Wood.

This aspect of the litigation could have been avoided had the attribution of the discount been expressly covered in the trust deed.

Mr Richards argued that the expenditure on double glazing was only to be taken into account in any division of the sale proceeds and only to the extent that it added value at the time of the sale, and, that it was a repair, rather than an improvement to be credited to Mr and Mrs Wood.

But the court rejected this because the trust deed directed the spender’s increased interest in the property to be geared to the monies spent, not the value added. So the historic cost of the double glazing had been correctly deducted from what would otherwise have been Mr Richards’ share of the proceeds of sale.

Also it was an improvement because Mr and Mrs Wood had cared for the previous windows and they had not needed repairing.

This blog has been posted as a matter of general interest.It does not remove the need get bespoke legal advice in individual cases.

Failed Construction Assignment Might Work as Declaration of Trust for Lender

Where a contract prohibits assignment without consent, the contract cannot be effectively assigned without the consent of the other party.

In any event the other party should be given written notice of any assignment to perfect it in the legal sense.

In Stopjoin Projects Ltd v Balfour Beatty Engineering Services (HY) Ltd [2014] a struggling sub contractor Brunel had assigned the benefit of its debts to a lender. The main contractor, then called Haden Young, was now applying to get the lender’s claim against it, under the sub contract, ruled out summarily on the basis the lender had no arguable claim for any debt.

The court found that HY had never waived the prohibition against the benefit of the sub contract being assigned. Firstly it had written taking issue with the lender’s position as a stranger (i.e. non party) to the construction sub contract. Secondly HY had never thereafter paid the lender or corresponded with it.

So the lender argued that Brunel held the benefit of the sub contract on trust for the lender.

The court appeared unconvinced by the idea that a failed assignment could amount to a declaration of trust of the sub contract benefits it was supposed to have assigned legally. After all trying to assign your legal rights to something is hardly a promising basis for later holding those same benefits on trust for the intended assignee of those legal rights. The two things are mutually inconsistent. An assignment of a legal right is an attempt to clothe the assignee with legal ownership of that right and entirely at variance with a trust where the person making the disposition retains legal ownership of the contract and merely clothes the other person with the right of enjoyment i.e. beneficial ownership.

The court also pointed out that the assignment clause might expressly or impliedly prevent the benefit of the sub contract being held on trust.

However the court thought that the lender’s argument was sufficiently arguable to refuse HY (since renamed Balfour Beatty) summary judgement leaving the issue to go to a full hearing.

This blog is posted out of general interest. It does not replace the need to get proper legal advice in individual cases.