Trustees of land, or anyone with an interest in property subject to a trust of land, can apply to the court for an order under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA).
Many such applications require the court to decide whether the land in question should be sold. Kingsley v Kingsley [2020] EWCA Civ 297 (Ch); [2020] PLSCS 35 underlines the breadth of the court’s discretion in such circumstances.
The dispute arose after the death of one of two siblings, a brother and sister, who had owned farmland beneficially in equal shares. When the brother died, his family asked the court to make an order for the sale of the land on the open market pursuant to section 14. But the sister wanted to buy the land herself so that she could continue farming there. As the widow’s interest in the land was purely financial and the trust existed to enable the siblings to farm the land, the High Court made an order enabling the sister to purchase the land at a price fixed by the court within a two-month period (after which the land was to be offered for sale on the open market).
Would such a sale contravene the well-established principle that a court cannot order one beneficiary to sell his or her interest in land to another? The Court of Appeal accepted that the order might have the effect that the surviving sibling would be entitled, in substance, to acquire her deceased brother’s beneficial interest in the farmland. But that would be the effect, as opposed to the legal reality, of the order, which technically, and in substance, would be an order for the sale of the whole legal and beneficial interest in the land (as opposed to a sale of the deceased’s executors’ beneficial interest in it).
Was the court able to make an order providing for a sale to a beneficiary at a price fixed by the court (based on valuation evidence), as opposed to ordering an open market sale? The Court of Appeal decision in Bagum v Hafiz [2016] Ch 241; [2015] PLSCS 230 confirmed that the court can indeed make such an order. But the deceased’s executors argued that such an order can be justified only where there is a low risk of an undervaluation – and suggested that there was a perceptible risk of an undervaluation in this case.
However, Mann J, who spoke for the Court of Appeal in Kingsley, explained that Bagum confirmed that TOLATA permits the court to allow trustees to do things that they would be unable to do without its blessing – for example, to effect a transaction that might not necessarily secure the best price, or to advance the interests of one or more beneficiaries over the interests of the beneficiaries as a class – without setting the threshold that the executors were promoting.
This did not mean that the court will act unfairly, unjustly or capriciously as between beneficiaries when giving directions to trustees. And the risk that a property might be sold at an undervalue is a factor that the court must take into account when exercising its discretion. But, in exercising its powers in circumstances where, necessarily, beneficiaries are in dispute with each other about what should be done with trust property, the court is not rigidly constrained by the rules of equity that constrain the trustees themselves.
Allyson Colby, property law consultant
