England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY
On appeal from District Judge Watkins

		Bristol Civil Justice Centre 2 Redcliff Street, Bristol, BS1 6GR
		05/07/2018

HHJ Paul Matthews :

Introduction

1. This is my judgment on two appeals (one by each appellant) from the decision of District Judge Watkins, handed down on 9 January 2018 but embodied in an order dated 23 January 2018. Both appellants' notices were filed on 12 February 2018. Permission to appeal was given by Birss J on 19 April 2018, not under CPR rule 52.6 (1)(a), ie that there was a real prospect of success, but instead under CPR rule 52.6 (1)(b), ie that there was some other compelling reason why an appeal should be heard. A respondent's notice was filed on 3 May 2018.
2. The decision of District Judge Watkins was one in proceedings brought under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. By his order, the judge directed that a freehold property known as Rock House, Newport, Wales, inherited by the parties from their parents, should be sold to the respondent at a price to be determined by a valuation exercise. The appellants agree that the property should be sold, but would prefer that the property be placed on the open market.

Background

3. Because the parties are members of the same family, many of them share a surname. For the sake of clarity therefore I shall, without intending any disrespect, refer to the parties by their given names. Sybil and John Chaston ("the parents") had 4 children: Christopher (the first appellant), Robert (the respondent), Judith (the second appellant) and Jane (who was the third defendant below, but has taken no part in the proceedings and is not a party to the appeal). The parents bought the property as beneficial joint tenants on 29 June 1979. On 19 October 1982 the beneficial joint tenancy was severed. On 27 October 2004 Sybil died. Legal title to the property passed to John absolutely by survivorship. Sybil's beneficial half share passed under her will, ultimately on discretionary trusts. On 20 July 2010 John died. Legal title to the property passed under his will to his executors. The will appointed all four children as executors. Three of the four proved the will, but the first appellant did not. John's beneficial half share in the property passed under his will directly to the four children in equal shares. In 2013, the trustees of Sybil's discretionary will trusts appointed her beneficial half share also to the four children equally. On 21 March 2014, Jane sold and transferred her one quarter beneficial interest in the property to the respondent. It was not formally in evidence before the court, but it appears that on 13 July 2017 the legal title to the property was vested by John's executors in the two appellants and the respondent as trustees. Hence the present position is that the appellants and the respondent hold the property on trust for themselves as to 50% for the respondent and as to 25% for each of the two appellants.

Procedure

4. The hearing before the district judge took place on the 21 July 2017. He then reserved judgment. But on 2 August 2017 the first appellant applied to adduce further evidence. This was evidence of an offer made to purchase the property by family friends, Lord and Lady Chadlington. The district judge was prepared to allow that further evidence in, and directed that written submissions on it be made by 24 August 2017, in order to avoid the cost of a further hearing. Unfortunately, he then did not deliver his judgment until 9 January 2018, more than four months later. Hence there is some delay in this matter. However, it is to be borne in mind that, pursuant to the direction of District Judge Rowe dated 5 May 2017, no oral evidence was adduced at the hearing. The case was therefore decided on written evidence and full written submissions, supplemented by oral submissions which on both sides lasted less than half a day. Mr Sahonte, for the first appellant, accepted that there was no oral submission of his, not found in the written submissions, which had not been dealt with by the district judge in his judgment. The second appellant, who appeared in person and who also addressed me, did not make any such complaint either.

Appeals

5. By virtue of CPR rule 52.21 (1), an appeal is limited to a review of the decision of the court below, unless the court considers that in the circumstances of a particular appeal it would be in the interests of justice to rehear the case: Audergon v La Baguette Ltd [2002] EWCA Civ 10, [83]. The important difference between a review and a rehearing is dealt with in Assicurazioni Generali SpA v Arab Insurance Group [2003] 1 WLR 577, CA; EI Du Pont Nemours and Co v ST Du Pont [2006] 1 WLR 2793, per May LJ. In my judgment, this case is one appropriate simply for a review, and no-one sought to argue the contrary.
6. Rule 52.21 (3) provides that the appeal court will allow the appeal where the decision was (a) wrong, or (b) unjust, because of serious procedural or other irregularity in the proceedings below. Here wrong means wrong in law, wrong in fact, or wrong in the exercise of discretion. But the test is different for each of these. The court must distinguish between a finding of primary fact on oral evidence where credibility is in issue, the evaluation of facts by a judge, and the exercise of discretion by the judge. In the present case none of the findings of fact by the judge was seriously challenged. I must therefore proceed on the basis of the facts stated in the judgment.
7. If it is the question of the exercise of discretion that is challenged, then

"Before the court can interfere it must be shown that the judge has either erred in principle in his approach, or has left out of account, or taken into account, some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale": Roache v News Group Newspapers Ltd [1998] EMLR 161, 172, cited by Lord Woolf MR in AEI Rediffusion Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507, 1523C–D; and see also Ashany v Eco-Bat Technologies Ltd [2018] EWCA Civ 1066, [13].

It has also been said that the court can interfere only where the exercise of discretion

"exceeded that generous ambit within which reasonable disagreement is possible": Tanfern v Cameron McDonald [2000] 1 WLR 1311, [32].

8. The court below must give reasons for its decisions: Flannery v Haifax Estate Agencies Ltd [2000] 1 WLR 371; English v Emery Reimbold and Strick Ltd [2002] 1 WLR 2409; Bassano v Battista [2007] EWCA Civ 370. The district judge has done so here. But the judge's reasons must be read on the assumption that the judge knew how to perform the judicial functions and the matters which had to be taken into account: Piglowska v Piglowska [1999] 1 WLR 1360, 1372, per Lord Hoffmann. Moreover, specific findings of fact are inherently an incomplete statement of the impression which was made upon the judge by the primary evidence. Expressed findings are always surrounded by a penumbra of imprecision which may still play an important part in the judge's overall evaluation: Biogen Inc v Medeva plc [1997] RPC 1, 45, per Hoffmann LJ.

Delay

9. As I have said, there was some delay in producing a judgment in this case. In relation to the question of the effect of such a delay, I was referred to the decision of the Court of Appeal in Bond v Dunster Properties Ltd [2011] EWCA Civ 455. That was a case where the judge hearing a commercial case involving oral evidence of fact took some 22 months to hand down judgment after the conclusion of the hearing. Arden LJ (with whom Lord Neuberger MR and Longmore LJ agreed) said:

"7. … Findings of fact are not automatically to be set aside because a judgment was seriously delayed. As in any appeal on fact, the court has to ask whether the judge was plainly wrong. This high test takes account of the fact that trial judges normally have a special advantage in fact-finding, derived from their having seen the witnesses give their evidence. However there is an additional test in the case of a seriously delayed judgment. If the reviewing court finds that the judge's recollection of the evidence is at fault on any material point, then (unless the error could not be due to the delay in the delivery of judgment) it will order a retrial if, having regard to the diminished importance in those circumstances of the special advantage of the trial judge in the interpretation of evidence, it cannot be satisfied that the judge came to the right conclusion. This is the keystone of the additional standard of review on appeal against findings of fact in this situation. To go further would be likely to be unfair to the winning party. That party might have been the winning party even if judgment had not been delayed."

10. The Court of Appeal looked carefully and critically at the judgment under appeal. In the event, the three judges of that court concluded that the long delay in producing the judgment was not a good ground for allowing any appeal, and that there was no other basis for challenging the judge's conclusion. The appeal was therefore dismissed.
11. In the present case, there was no oral evidence given at the hearing, the oral submissions made were in fact merely supplements to the full written submissions, and no complaint has been made that any oral submission not replicated in the written submissions has not been properly dealt with. The delay itself is also only a fraction of the delay in Dunster. Mr Sahonte for the first appellant argued that the impact of the oral arguments may have faded during the four months. I accept that there may have been some such fading, but most of this will have occurred in the days following the hearing, and the judge's notes and the written submissions will not have faded at all. In my judgment Mr Walsh for the respondent was right to submit that there was no scope for, and no evidence of, any prejudice arising to the parties as a result of the delay in handing down judgment, frustrating though that must indeed have been for both the parties and their lawyers. Accordingly, insofar as this appeal is based upon delay, I reject it.

Bagum v Hafiz

12. I turn therefore to consider more substantive challenges to the decision of the judge. In this connection I was referred to the decision of the Court of Appeal in Bagum v Hafiz [2016] Ch 241. In that case, following the death of her husband, the claimant became the sole registered proprietor of a residential property which had been acquired by the husband from the local authority under the right to buy legislation. The defendants were her two sons, each of whom had made financial contributions to the purchase. Each of them was married and their families lived together with the claimant in the property. The claimant and the defendants entered into a deed of declaration of trust under which the property was held on a trust of land for the three of them in equal shares absolutely.
13. Subsequently, the second defendant and his family moved out of the property, relations between his wife and that of the first defendant having broken down. The claimant sought an order from the court under section 14 of the 1996 Act that the second defendant sell and transfer his one third beneficial interest in the property to the first defendant. At first instance, the judge held that the court had no jurisdiction under section 14 to make an order that the second defendant sell his interest under the trust, but made an order that the property should be sold and that the first defendant should have the opportunity to purchase it, failing which the property was to be sold on the open market with liberty to all parties to bid. The decision was appealed to the Court of Appeal.
14. In the Court of Appeal, Briggs LJ (with whom Lord Dyson MR and Bean LJ agreed) held that the judge below had been right to decide that the court had no jurisdiction under section 14 to make an order that the second defendant sell his interest under the trust. This was because (at [17]) it was

"no part of the functions of trustees of land to deal with or dispose of beneficial interests under the trust, whether by sale or otherwise…"

He then went on to say (at [23]) that

"the clear object and effect of sections 14 and 15 is to confer on the court a substantially wider discretion, exercised on the basis of wider considerations, than might be enjoyed by the trustees themselves, acting without either the consent of their beneficiaries or an order of the court. … [T]his departs from the general rule of equity which requires the trustees single-mindedly to advance the interests of the beneficiaries as a class, without preferring some of them over others."

Significantly for this case, the judge went on to say that

"24. None of this means, of course, that the court will act unfairly, unjustly or capriciously as between beneficiaries in giving directions to trustees under section 14 (2). …"

15. The second defendant in that case also argued that the order made was not a proper exercise of the judge's discretion. In particular, the judge's order was in conflict with the established equitable rules about obtaining the best price for all the beneficiaries, and avoiding the preferring of the interests of one beneficiary over another. In dealing with this submission, Briggs LJ said that on an appeal, the court

"is concerned not with the question whether … the judge reached the right solution, but whether her order fell within the broad confines of the statutory discretion conferred on the court. For that purpose the burden lies on [the second defendant] to show either that she took into account irrelevant matters, omitted to consider relevant matters, or that her decision was one which could not reasonably flow from an appropriate analysis of the relevant considerations."

16. Briggs LJ concluded that

"the judge's order is unchallengeable. I acknowledge at once that it is an unusual form of order, and that, in many similar cases, the court has ordered a sale of the trust property, with liberty to all beneficiaries to bid, thereby maximising the prospects of the achievement of best value."

However, it is clear that the Court of Appeal considered that the judge at first instance had taken into account all the relevant considerations, had provided clear and cogent reasons, and that, accordingly, the appeal should be dismissed.

Collins v Collins (No 2)

17. I was also referred to paragraph [87] of the judgment of Mr Edward Bartley-Jones QC, sitting as a deputy High Court judge in Collins v Collins (No 2) [2016] 2 P & CR 6, where he referred to the decision in Bagum v Hafiz and said this:

"[T]he Court of Appeal indicated (see [23] and [24] of the judgment of Briggs LJ) that the object and effect of sections 14 and 15 of TOLATA was to confer upon the court a substantially wider discretion, exercised upon the basis of wider considerations, that might be enjoyed by the trustees themselves. Thus the court is not rigidly constrained by those 'rules' of equity which may, pursuant to section 6 (6) of TOLATA, constrain the trustees themselves. I am not, therefore, necessarily mandated to obtain the best price for the beneficiaries as a whole. However, and conversely, I should bear clearly in mind in the exercise of my discretion the need to obtain the best price for the beneficiaries as a whole (which would be the overriding duty of a pure trustee). And, as this is the working out of an order under section 14, it seems to me that I must, in the exercise of my discretion, again bear in mind the matters which are referred to in section 15 (1) and (3) of TOLATA."

Substantive challenges: first appellant

No power under section 14

18. In the present case, first of all, Mr Sahonte argued that the facts were not such as to permit the court to exercise the power under section 14 of the 1996 Act so as to direct the sale of the property to one only of the beneficiaries. He accepted that the decision in Bagum v Hafiz was to the effect that section 14 extended to making such a direction in an appropriate case. But he said that (unlike that case) a case where there was no underlying purpose of the trust still to be performed did not justify the exercise of the power. In the present case no one was currently living in the property and the trust concerned had not been created by these beneficiaries. So it had simply not been open to the district judge to give the direction which he did.
19. In my judgment, there is nothing in this point. The fact that no one is currently living in the property does not mean that the court has no power to direct the sale of the property to one only of the beneficiaries. The parents bought this house as a family home, and (as found by the judge) so that if any of their children wished it, it could be kept within the family. Nor does it matter that the trust concerned had not been created by these beneficiaries. The direction given by the court in Bagum v Hafiz is one which can be given whenever it is appropriate. The facts do not have to be identical to that case for the jurisdiction to arise.

Relevance of agreement in principle to sell to respondent

20. Secondly, Mr Sahonte argued that the district judge had been wrong to take into account the fact that (as he found) the respondent and the appellants, together with their sister Jane, had earlier reached an agreement in principle that the respondent would buy the property at a value to be agreed, and that the respondent had relied upon that agreement by selling his own property and putting his furniture into storage. Mr Sahonte said that if that allegation had been pursued as part of the litigation it would have been contested, as would the question whether any detriment had been incurred on the faith of it. But in any event it would be simply a personal right that the respondent had acquired, and this would have nothing to do with the trust of land. Accordingly, the court should not have taken this into account. He accepted, however, that if the parties had reached an actually enforceable agreement, but for some reason no proceedings had been taken on that agreement, it would have been possible for the court to take such agreement into account in deciding whether to make a direction under section 14.
21. I reject this argument. The fact (as found by the district judge, and not effectively challenged on appeal) that the four children reached an agreement in principle that the property would be sold to the respondent is a matter of some significance, and was properly taken into account by the district judge. The weight that he gave it was of course a matter for him. In my judgment it was relevant, not only because it was an aspect of the wishes of the beneficiaries of the trust of land, but also because, on the facts found, it raised an equity in favour of the respondent. In the present context, I do not understand the distinction drawn by Mr Sahonte between a legally enforceable agreement and one which falls short of that (or which is enforceable only as a proprietary estoppel equity). And a proprietary estoppel equity in the context of an existing trust of land can be given effect to by modifying the existing trusts. Contrary to Mr Sahonte's submission, it may have a proprietary and not merely a personal effect.

Relevance of intention of those creating trust

22. Mr Sahonte also submitted that the intentions of those creating the trust should not be taken into account in so far as they could only be ascertained from a letter of wishes, rather than from a trust document. I am afraid that I do not understand this, either. There is nothing in the 1996 Act which restricts the court's finding of the intentions of those creating the trust to trust documents, or documents other than letters of wishes. On the contrary, in my judgment there is nothing to prevent the court from taking account of matters expressed in a letter of wishes by a person creating a trust as part of the intention of that person as a creator of the trust.

Relevance of wishes of beneficiaries

23. Mr Sahonte next turned his attention to the question of taking into account the wishes of the beneficiaries. He had two points. As I understood his argument, his first point was that the district judge should not have paid any attention to the wishes of the beneficiaries in this case, since none of them had the right to occupy the land in question, no right of possession being given to any of them. Thus they could not be beneficiaries of full age entitled to an interest in possession to the land. Mr Sahonte's second point was that the court could only take into account the wishes of the beneficiaries as trustees.
24. As to the first point, in my judgment it confuses (i) the question whether a beneficiary has an interest in the land which is in possession (so that he or she has the current right to enjoy the property or receive its rents and profits, if any, and no other person has a prior such right) with (ii) the quite separate question whether the beneficiary is actually entitled as against the trustees to occupy the land. The first is a measure of the right which the beneficiary has. The second is an example of how that right may be enjoyed in practice. It is simply not necessary to be entitled to occupy the land in order to have an interest in possession.
25. On the second point, I asked Mr Sahonte what basis he had for asserting that the wishes could of the beneficiaries could only be taken into account to the extent that they were trustees. In the 1996 Act, for example, s 15(3), so far as material, states that

"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)."

There is no requirement there that the beneficiaries have to be trustees as well before their wishes are taken into account. Mr Sahonte was unable to point to any decision or other authority for so asserting. In my judgment the submission in wrong in principle and I reject it.

26. Moreover, and as it happens, two of the three remaining beneficiaries of this trust of land (the second appellant and the respondent) were from the beginning personal representatives of their father John, the surviving trustee at the time of his death in 2010. The third personal representative was the third defendant below, a beneficiary herself until she sold her share in the property to the respondent in 2014. And, in fact, shortly before the hearing before the district judge in July 2017, the three remaining beneficiaries (the two appellants and the respondent) all became trustees of the legal estate in the land. So even if Mr Sahonte had been right about the law, on the facts themselves there would still have been nothing in this point, as all the relevant beneficiaries were in fact trustees.

Going behind findings of fact

27. Mr Sahonte further argued that the appellants had always wanted the land to be sold on the open market. I pointed out that this was inconsistent with the findings of the district judge, who had held on the evidence (inter alia) that:

"The parties reached agreement in 2010 that the Claimant would buy Rock House for a price not then agreed" (at [59](d)).

Since the appellants were not challenging this (and related) findings, I could not go behind the judge's decision and substitute a finding in the terms sought by Mr Sahonte. I must therefore proceed on the basis of the facts as found.

28. Lastly, Mr Sahonte argued that any incidental benefits accruing to the trust by reason of a sale to one beneficiary (such as speed, lower sale costs, etc) had to be balanced against the advantages of an open market sale, ie that this would realise the true, and potentially a higher, market price. I accept that there is a balance to be struck. But in exercising its powers under section 14, it is a matter for the court to strike that balance, and to make the ultimate decision. Since this is a matter of judicial discretion, it is not open to challenge on appeal merely on the basis that another judge might or would reach a different conclusion as a result of the exercise of the same discretion. As has been said, it is necessary to show either that some matter has been taken into account which should not have been, or some matter which should have been taken into account was not taken into account, or that the decision was wholly wrong because the judge has not balanced the various factors fairly in the scale. In the present case, none of these has been shown.

Substantive challenges: second appellant

29. The second appellant addressed me separately. She first made the point that she was not only a beneficiary but also a trustee. She accordingly argued that therefore she was bound to obtain the best price for the sale of the trust asset. In her submission, this could only be done by putting the property on the open market, because valuations were always lower than what was obtained in the market. Secondly, she argued that the property was in a unique location, and the market price could not be adequately ascertained by valuation.

Duty to obtain best price

30. As to the first submission, it is not in fact quite right to say that a trustee is always bound to obtain the best possible price for an asset on sale. The duty is to obtain the best price reasonably obtainable in the circumstances, which may not be the same: see eg Buttle v Saunders [1950] 2 All ER 193. So it is not the absolute duty painted by the second appellant. Elements of a duty of care may also play a part.
31. But in any event this is a trust with (now) only three beneficiaries, all of full capacity. If they all agree on a private sale to one of themselves for a given price (even a known undervalue) no-one can complain. In effect, any possible breach of trustee duty is licensed: cf Saunders v Vautier (1841) Cr & Ph 240. As for the proposition that "valuations were always lower than what was obtained in the market", this is not self-evidently true, and no evidence was adduced in support of it. Indeed, most property lawyers of any experience will know of cases where valuations of property were obtained which exceeded the price obtained on a subsequent sale.
32. In fact, there is an even more fundamental problem with the submission made by Mrs Arnold. It is that the decision to sell to one of the beneficiaries is not being taken by the trustees at all, but instead by the court. As the Court of Appeal pointed out in Bagum v Hafiz [2016] Ch 241, [21]-[24], under the 1996 Act the court in giving its direction is entitled to take into account a wider range of matters than the trustees themselves. So the court may well reach a decision not open to the trustees on the material available to it. The court then directs the trustees what to do. Accordingly, the trustees cannot be in breach of duty in selling at the direction of the court.

Ascertainment of market price by valuation

33. As to the second point, the problem is that the district judge made this finding:

"66. I do not see that there is an issue as to the absence of comparable properties. There have been numerous valuations of the property; none of the valuers seems to have been unable to determine the market because there is not a comparable."

No proper basis for challenging that finding was put before me, and I cannot go behind it. In any event, every immovable property is unique, because every location is different from every other. What changes is the degree of difference between one property and another. Valuers work by looking at comparable transactions and adjusting for the differences. In the present case the valuers will be able – as the district judge himself said – to take full account of the offer made by Lord Chadlington. They will of course bear in mind the circumstances in which it was made, including that Lord Chadlington had not seen the interior of the property for some years, nor had the benefit of a survey at that time.

34. It was also argued that the district judge held that the valuers should fix a 'fair' price rather than the 'market' price for the sale to the respondent. Reliance was placed on paragraph [64] of his judgment, where he said:

"Making an order that allows the claimant to purchase [the] property subject to a valuation (by agreement, or court order if there is a dispute) is not to 'act in any manner that is unfair, unjust or capricious as between beneficiaries' because it provides a mechanism that meets the aims and wishes of those creating the trust, and provides a fair price for their interest."

35. In my judgment this criticism is misplaced. At [64], the district judge was keen to emphasise that by making his direction the court would not be acting in the way that Briggs LJ in Bagum warned (at [24]) that it should not:

"act unfairly, unjustly or capriciously as between beneficiaries in giving directions to trustees."

The reference to a 'fair' price in paragraph [64] of the judgment under appeal follows the phrase 'act in any manner that is unfair, unjust or capricious as between beneficiaries', which is based on the dictum of Briggs LJ in Bagum v Hafiz, and in that context is plainly a reference to not acting unfairly in the sense meant by Briggs LJ.

36. Moreover, the district judge, only three paragraphs earlier, had said (at [61](e)):

"There is no unfairness to the Defendants in allowing the Claimant to buy the property at a value fixed by a court appointed expert, as they will receive the figure that the court determines is the true market value…" (emphasis supplied).

So it is clear that the judge intended the valuer to value the market price rather than a fair price. In my judgment there is nothing in this point either.

Conclusion

37. Overall, for the reasons set out above, I am satisfied that the district judge did not make any errors of law, nor act unjustly in the procedure that he followed. I am further satisfied that, in exercising the discretion under section 14 of the 1996 Act, he took into account all the matters which he should have taken into account, did not take into account anything which he should not have taken into account, and that his decision cannot be stigmatised as "wholly wrong", so as to enable the court to set it aside. On the contrary, in my judgment it falls well within

"that generous ambit within which reasonable disagreement is possible" (Tanfern, [32]).

The appeal is accordingly dismissed.