Trust of land – Trust deed providing that property held by deceased and claimant as beneficial tenants in common in unequal shares with absolute entitlement to survivor in event of death before sale of property – Whether claimant entitled to entire proceeds of sale after death of deceased – Whether survivorship clause invalid as impermissible restraint on absolute interests – Whether defendant wife of deceased having interest in own right by virtue of contributions – Whether entitled to inquiry and account of proceeds of second property – Claim allowed – Counter-claim allowed
The claimant and her brother were joint legal owners of a property until the brother’s death in 2004. The defendant was the deceased’s wife and sole executrix and beneficiary under his will. Following her brother’s death, the claimant sent a letter to the defendant purporting to terminate her licence to remain at the property, claiming that, on the death of her brother, she had become solely beneficially entitled to the property. She relied upon the terms of the trust deed upon which the property had been held. These provided for the deceased and her to hold the net proceeds of sale as tenants in common in the proportions 75% and 25% respectively. Clause 4 of the deed provided that: “Upon the death before sale of either… the trustees shall hold the property upon trust for the survivor… who shall thereupon be entitled to the whole proceeds of sale absolutely”.
The claimant subsequently brought possession proceedings against the defendant, in which she claimed mesne profits from the defendant as a trespasser. The defendant argued that: (i) the estate was entitled to a 75% beneficial interest in the property, either on the true interpretation of the trust deed or by its rectification; or, alternatively; (ii) by virtue of constructive trust or proprietary estoppel, she was entitled to a share of the proceeds of sale in her own right corresponding to her direct and indirect financial contributions while living at the property. With regard to the trust deed, she argued that: (i) clause 4 was inconsistent with and repugnant to the earlier provision for beneficial entitlement in the proportions 75% and 25%, as an impermissible restraint on absolute interests; or (ii) it was in the nature of a testamentary disposition, which was invalid because it failed to comply with the formalities of the Wills Act 1837. By a counter-claim, she also sought an inquiry and account of profits in respect of the net proceeds of sale of a second property previously held by the deceased and the claimant as joint legal owners. In 2008, the first property was sold and the net proceeds of £341,846 were transferred to an interest-bearing account pending the outcome of the proceedings.
Held: The claim was allowed; the counter-claim was allowed.
(1) The courts should try to give effect to every part of an agreement or instrument that has bee freely negotiated and entered into between parties, rather than rejecting part of it outright as having no legal effect. It was possible to interpret the trust deed in a manner that gave effect to clause 4. Although the deed did not expressly state that it conferred an interest for life in the property and its income during the joint lives of the claimant and the deceased, such an interpretation was not inconsistent with the express provisions. The tenancy in common and its income did not give rise to any legal or conceptual difficulty during the joint lives of the deceased and the claimant or until the sale of the property before either’s death. The sale of the property during the joint lives would have had a significant dispositive effect, terminating the joint lives tenancy in common and cross-remainders, and would have resulted in an immediate absolute beneficial entitlement of the deceased and the claimant to capital as tenants in common in the proportions 75% and 25% respectively. Such an interpretation was not an impermissible restriction on alienation since the deceased and the claimant were free to transfer or deal with their interests during their joint lifetime. Although those interests were limited, in that they would pass to the survivor in the event of death before the sale of the property, until that event they and their successor would be entitled to their respective proportionate shares of any income and profits from the property and could given notice requiring its sale: Re Dugdale (1888) LR 38 Ch D 176 and Re Brown [1954] Ch 39 distinguished. Nor was clause 4 invalid as a testamentary disposition. It merely provided, in a conventional way, for cross-remainders after the termination of a life interest; moreover, its provisions were not revocable during the joint lives. The evidence did not show that clause 4 had been included by mistake; thus, the case for rectification had not been made out. Clause 4 was valid and operated according to its terms. The claimant was entitled to the entire proceeds of sale of the property.
(2) The defendant had not acquired a beneficial interest in her own right by virtue of her contributions. There was no evidence to indicate a common intention shared by the legal owners that the defendant should have a beneficial interest such as to give rise to a constructive trust, or any case for proprietary estoppel on the facts. It followed that, since the letter terminating her licence to occupy, the defendant’s occupation of the property had been as a trespasser and the claimant was entitled to recover damages to be calculated, in the absence of any special features, according to the ordinary letting value of the property.
(3) The claimant had not rebutted the presumption that, as joint legal owners of the second property, she and the deceased were equally entitled to the beneficial interest. She had not established, on a balance of probabilities, that she was beneficially entitled to more than a 50% in the property. Accordingly, the defendant was entitled to an inquiry and account on that basis in respect of the property.
Mark Warwick (instructed by Rochman Landau) appeared for the claimant; Josephine Hayes (instructed by Hugh Cartwright & Amin) appeared for the defendant.
Sally Dobson, barrister
