B e f o r e :
|In the matter of:|
|Application for a declaration of a trust|
|FAIZ ULHASAN FAIZI||1ST CLAIMANT|
|OAKWOOD HOMELOANS LIMITED||2ND CLAIMANT|
Mr Connor Kennedy counsel for the Defendant instructed by Landmark LLP
Date of the hearing:
17, 18 & 19 December 2018
and 14 March 2019
Crown Copyright ©
His Honour Judge Moradifar:
(1) Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section.
(2) On an application for an order under this section the court may make any such order—
(a) relating to the exercise by the trustees of any of their functions (including an order relieving them of any obligation to obtain the consent of, or to consult, any person in connection with the exercise of any of their functions), or
(b) declaring the nature or extent of a person's interest in property subject to the trust as the court thinks fit.
(3) The court may not under this section make any order as to the appointment or removal of trustees.
(4) The powers conferred on the court by this section are exercisable on an application whether it is made before or after the commencement of this Act.
(1) The matters to which the court is to have regard in determining an application for an order under section 14 include—
(a) the intentions of the person or persons (if any) who created the trust,
(b) ) the purposes for which the property subject to the trust is held
(c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and
(d) the interests of any secured creditor of any beneficiary.
(2) In the case of an application relating to the exercise in relation to any land of the powers conferred on the trustees by section 13, the matters to which the court is to have regard also include the circumstances and wishes of each of the beneficiaries who is (or apart from any previous exercise by the trustees of those powers would be) entitled to occupy the land under section 12.
(3) In the case of any other application, other than one relating to the exercise of the power mentioned in section 6(2), the matters to which the court is to have regard also include the circumstances and wishes of any beneficiaries of full age and entitled to an interest in possession in property subject to the trust or (in case of dispute) of the majority (according to the value of their combined interests).
(4) This section does not apply to an application if section 335A of the M1Insolvency Act 1986 (which is inserted by Schedule 3 and relates to applications by a trustee of a bankrupt) applies to it."
"Equity has traditionally been a system which matches established principle to the demands of social change. The mass diffusion of home ownership has been one of the most striking social changes of our own time. The present case is typical of hundreds, perhaps even thousands, of others. When people, especially young people, agree to share their lives in joint homes they do so on a basis of mutual trust and in the expectation that their relationship will endure. Despite the efforts that have been made by many responsible bodies to counsel prospective cohabitants as to the risks of taking shared interests in property without legal advice, it is unrealistic to expect that advice to be followed on a universal scale. For a couple embarking on a serious relationship, discussion of the terms to apply at parting is almost a contradiction of the shared hopes that have brought them together. There will inevitably be numerous couples, married or unmarried, who have no discussion about ownership and who, perhaps advisedly, make no agreement about it. It would be anomalous, against that background, to create a range of home-buyers who were beyond the pale of equity's assistance in formulating a fair presumed basis for the sharing of beneficial title, simply because they had been honest enough to admit that they never gave ownership a thought or reached any agreement about it."
"The time has come to make it clear, in line with Stack v Dowden (see also Abbott v Abbott  UKPC 53,  2 All ER 432), that in the case of the purchase of a house or flat in joint names for joint occupation by a married or unmarried couple, where both are responsible for any mortgage, there is no presumption of a resulting trust arising from their having contributed to the deposit (or indeed the rest of the purchase) in unequal shares. The presumption is that the parties intended a joint tenancy both in law and in equity. But that presumption can of course be rebutted by evidence of a contrary intention, which may more readily be shown where the parties did not share their financial resource."
"… the search is primarily to ascertain the parties' actual shared intentions, whether expressed or to be inferred from their conduct. However, there are at least two exceptions. The first, which is not this case, is where the classic resulting trust presumption applies. Indeed, this would be rare in a domestic context, but might perhaps arise where domestic partners were also business partners: see Stack v Dowden, para 32. The second, which for reasons which will appear later is in our view also not this case but will arise much more frequently, is where it is clear that the beneficial interests are to be shared, but it is impossible to divine a common intention as to the proportions in which they are to be shared. In those two situations, the court is driven to impute an intention to the parties which they may never have had."
"51. In summary, therefore, the following are the principles applicable in a case such as this, where a family home is bought in the joint names of a cohabiting couple who are both responsible for any mortgage, but without any express declaration of their beneficial interests.
(1) The starting point is that equity follows the law and they are joint tenants both in law and in equity.
(2) That presumption can be displaced by showing (a) that the parties had a different common intention at the time when they acquired the home, or (b) that they later formed the common intention that their respective shares would change.
(3) Their common intention is to be deduced objectively from their conduct: "the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party" (Lord Diplock in Gissing v Gissing  AC 886, 906). Examples of the sort of evidence which might be relevant to drawing such inferences are given in Stack v Dowden, at para 69.
(4) In those cases where it is clear either (a) that the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property, "the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property": Chadwick LJ in Oxley v Hiscock  Fam 211, para 69. In our judgment, "the whole course of dealing … in relation to the property" should be given a broad meaning, enabling a similar range of factors to be taken into account as may be relevant to ascertaining the parties' actual intentions.
(5) Each case will turn on its own facts. Financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended (as in case (3)) or fair (as in case (4)).
52. This case is not concerned with a family home which is put into the name of one party only. The starting point is different. The first issue is whether it was intended that the other party have any beneficial interest in the property at all. If he does, the second issue is what that interest is. There is no presumption of joint beneficial ownership. But their common intention has once again to be deduced objectively from their conduct. If the evidence shows a common intention to share beneficial ownership but does not show what shares were intended, the court will have to proceed as at para 51(4) and (5) above.
53. The assumptions as to human motivation, which led the courts to impute particular intentions by way of the resulting trust, are not appropriate to the ascertainment of beneficial interests in a family home. Whether they remain appropriate in other contexts is not the issue in this case."
12. The contrast in approach by the court in cases of commercial enterprise is clearly illustrated by the decision of the Court of Appeal in Generator Development Limited v Lidl UK GmbH  EWCA Civ 396 where Lewison LJ (paras 78 to 85) stated that:
"78… this was a case of commercial parties, advised by lawyers, working at arms' length towards the conclusion of an agreement for a purely commercial enterprise…The application of the principles underpinning the Pallant v Morgan equity, in so far as they rest on the doctrine of common intention constructive trust, operate quite differently in a commercial context from the way in which they operate in a domestic context…But we have seen from Cobbe that the House of Lords firmly denied the applicability of proprietary estoppel in a commercial case like this one where each party knows that they are not legally bound. In this case, as in Cobbe, there can have been no expectation on either side that the parties were legally bound to each other. If the principles underpinning the Pallant v Morgan equity are the same as those underpinning proprietary estoppel (as Chadwick LJ considered them to be) it follows logically that if a proprietary estoppel claim cannot succeed, nor can a claim based on the Pallant v Morgan equity.
79. the proposed "joint venture" (if such it was) was expressly made "subject to contract"… As Lord Walker stressed in Cobbe, equity will not intervene in a case where the parties expressly agree that a putative agreement is binding in honour only. Likewise, in the Hong Kong case the Privy Council recognised that the use of the "subject to contract" formula means that the parties are not committed either in law or in equity… The mere fact that parties have agreed to engage in good faith negotiations for the making of a joint venture agreement is insufficient to support a constructive trust: Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd  EWCA Civ 1355 at  and .
82. … there is some significance in the fact that (to the knowledge of Generator) Lidl's board had not approved the joint venture. In order to be able to invoke the Pallant v Morgan equity it must in my judgment be possible to say that the agreement or understanding in question is one which has been assented to by a person capable of binding the party in question; or who at least has ostensible authority to do so.
85. … it cannot be unconscionable to exercise a right which has been expressly reserved to both parties by means of the "subject to contract" formula; and which Generator had even more clearly reserved to itself in the draft lock-out agreement. As Lord Walker said in Cobbe (and as Arden LJ said in Crossco), it cannot be unconscionable for one party to follow a course which the other party has insisted was open to itself."
"… proprietary claim based on constructive trust and what I may call its sister claim in proprietary estoppel ..",
[further (at paras 22-24)] that:
"First, although the agreement between the parties requires less than contractual certainty (for otherwise a constructive trust would not be necessary) it is not engaged with anything less than an express accord between the parties…
Secondly, while unconscionable behaviour is a necessary condition for relief by way of constructive trust, it is insufficient by itself … the court should have two aims: one is to recognise and prevent unconscionable conduct, but the other is to protect people from unintended legal consequences resulting from informal relationships … What does seem to me to be plain as a matter of law is that in order to be enforced there must be a clear agreement on the basic details of the arrangement without difference of principle.
Thirdly, in order to succeed, the claimants have to show that they relied on the alleged agreement, arrangement or understanding.
"The Property which is the subject of the present proceedings was purchased in the name of the Defendant:
(a) With deposit and completion monies provided exclusively by the Claimant;
(b) Together with an interest only mortgage secured on behalf of the Claimant in the name of Defendant, the Claimant being unable to secure a mortgage on his own behalf at that time.
The intention of the parties at the point of purchase was clear and is demonstrated both by powerful contemporary documentary evidence in the form of payments and audit trails and the clear oral evidence of a third party witness.
It is also demonstrated by the on-going mortgage repayments made by the Claimant and refurbishment/extension works he subsequently undertook.
As such the Property was purchased by the Defendant upon behalf of the Claimant such that it was held on resulting trust in its entirety for the Claimant.
It is accepted that the Claimant must account to the Defendant as trustee for the monies paid towards servicing the mortgage by the Defendant between April 2015 and December 2017.
The question of equitable accounting, however, does not arise in the circumstances of this case as there was no joint beneficial interest in the Property. The payments by the Claimant towards the servicing of the interest only mortgage cannot, therefore, be accounted as occupation rent.
Should the Defendant enjoy any additional benefit from the Property, this would offend against the long established prohibition upon trustees enjoying unauthorised benefit from property they hold on trust"
"These written submissions address the court's questions as to whether (in the event that the court accepts the Claimant's evidence that he paid the deposit and made subsequent mortgage payments) i.) the payment of the deposit gives rise to a resulting or a constructive trust; and ii) the effect of any subsequent payments made by the Claimant to the mortgage lender.
It will be submitted that in relation to the first question, there would only be a presumed resulting trust because there was no clear agreement between the parties and no commitment from the Claimant to contribute to the purchase price (above the amount provided for the deposit). In relation to the second question, it will be submitted that there should be no presumption of a resulting trust because payment of the modest sums in question to the legal owner (and majority beneficial owner at equity) by a claimant in occupation would not be prima facie gratuitous transfers/apparent gifts such as would give rise to a resulting trust. Further, there can be no question that any constructive trust arises from these payments because there was no clear agreement that they should give the Claimant any rights in the property, and the Claimant cannot argue that the Defendant has acted unconscionably because he has had the use and occupation of a 5 bedroom house in Luton for over 10 years without reducing the principal mortgage loan and having only made payments which amount to less than market rent for that period."
(a) I declare that the legal title of the property which is vested in the defendant is held by him on trust for the claimant.
(b) The claimant is entitled to one hundred percent share of the beneficial title in the property subject to
(i) Paying back to the defendant all the sums that were paid in respect of the monthly mortgage payments by the defendant from 2015 onwards within three months of this judgment being handed down, or
(ii) The total sums stated above are secured against the property until they are fully discharged by the claimant.
(c) The defendant having accepted that my declarations detailed above are fatal to his action for possession against the claimant, I dismiss his claim.