Sale of land – Partnership – Dissolution – Termination of farming partnership on death of sibling partner – Interest of deceased passing to widow – Appellant executors seeking order for open market sale of farm – Respondent co-owner seeking to acquire deceased’s interest – Court ordering sale of land at specified value prior to sale on open market – Appellants appealing – Whether court should have made order for sale on open market – Whether respondent should pay occupation rent – Appeal allowed in part
Until his death in June 2015, the deceased and the respondent (brother and sister) farmed land at Lodge Farm, Cottered, Nr Buntingford, Hertfordshire in partnership. The principal land on which they farmed was owned by them beneficially in equal shares, but it was not held as a partnership asset. The profits were shared two-thirds to the deceased and one-third to the respondent. No rent was treated as payable by the partnership to the landowners, whether in the partnership accounts or otherwise.
When the deceased died, his widow (the first appellant) and the second appellant became executors of his will. The respondent remained in occupation and continued the farming business. The appellants commenced proceedings claiming dissolution of the partnership and an order for sale of the farm under the Trusts of Land and Appointment of Trustees Act 1996.
The deputy judge determined that there should be a sale within two months with the respondent having the opportunity to purchase it at a price of £3,245,000; if at the end of that period the sale had not been completed, the land would be put up for sale on the open market. The appellant executors appealed.
The principal issue was whether the court should have made an order for a sale on the open market, giving the respondent the right to bid with others. The appellants contended that article 1 of the First Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms (A1P1) required the court to remove the risk of an undervalue in its valuation assessment to preserve full value when exercising its discretion under section 15 of the 1996 Act to make an order for sale. There was a further question whether the respondent should pay an occupation rent in respect of her occupation since the death.
Held: The appeal was allowed in part.
(1) It was clear that the order was for sale of the whole legal and beneficial interest, which was within the court’s powers under the 1996 Act. A mechanism followed under which the respondent discharged the price by paying only half of it to the executors. That did not make it any less a sale of the legal estate carrying the beneficial interest. As a matter of conveyancing, the order technically, and in substance, was an order for the sale of the whole property and not just the appellant executors’ beneficial interest. The economic effect of the order did not affect that conclusion. On its true construction the judge’s order was for the sale by the trustees of trust property. Unlike a trustee, the court was not required to get the best price for the property.
(2) From the decision in Bagum v Hafiz [2016] Ch 241; [2015] PLSCS 230, the appellants had argued that an order for sale at a price assessed by the court could only be justified if there was a low risk of the beneficiaries receiving less than on the open market. The judgment in Bagum reflected the fact that the existence of a low risk of undervalue was significant in considering the discretionary factors to be borne in mind. It was not authority for the proposition that there was some sort of valuation threshold to be overcome. It was authority for the proposition that valuation, and the risk that the court-assessed value would not necessarily be the same as the price in an open market sale, was a discretionary matter.
(3) Where it was engaged, by and large, compliance with section 15 of the 1996 Act would satisfy A1P1. In the present case there was, on the judge’s findings, no breach because there was no deprivation of the executors’ property. They would receive value as determined by the court in a proper and fair manner. There was nothing in A1P1 which drove the court to require full market testing in cases where the discretion under section 15 was being exercised; or to require that any exercise of discretion had indisputably to preserve full value.
(4) The judge had all the relevant factors in mind and concluded that he could arrive at a price with sufficient accuracy to reduce the risks of the first appellant not receiving proper value for her interest in the land. His conclusion, in its context, was sufficiently clear and one that he was entitled to reach on the basis of the other terms of his judgment. There was no basis for challenging it, particularly bearing in mind his erring in favour of the executors on certain disputed matters.
(5) The trial judge had erred in his conclusion that an occupation rent was not payable by the respondent. The root error was a failure to consider the real question of fact as to whether she was occupying in order to wind up the partnership, or whether she was occupying in her own right. An implied licence was available to one co-owner as against another when the former was winding up the affairs of the partnership: Lie v Mohile [2014] EWHC 3709 (Ch) applied. However, it did not follow that the availability of a licence meant that the respondent was inevitably occupying under such a licence contrary to the apparent finding of the judge. There was no indication that the judge considered that question of fact, and no indication that any particular evidence was directed to it.
It was clear from the evidence that the respondent was not disputing her occupation for her own benefit since the death of the deceased. It followed that the deputy judge’s determination in relation to an occupation rent could not stand. On the material available to the appeal court, it was plain that the respondent was occupying the land in her own right in circumstances under which she was obliged to pay an occupation rent. The respondent accepted a liability to pay and should be held to that admission.
Clifford Darton QC and Christopher Burrows (instructed by Edward Harte (Brighton) Ltd) appeared for the appellants; Caroline Shea QC and Catherine Taskis (instructed by Pellys, of Hitchin) appeared for the respondent.
Eileen O’Grady, barrister
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