Property – Legal title – Beneficial interest – Appellant holding legal title to property occupied by respondent – County court deciding that respondent entitled to hundred per cent beneficial interest in property – Appellant appealing – Whether judge erring in law in finding oral agreement gave rise to real property transfer of beneficial interest – Appeal dismissed
The respondent brought a claim for a declaration under section 14(2)(b) of the Trusts of Land and Appointment of Trustees Act 1996 that he held a one hundred per cent beneficial interest in a residential property at 3 Sutton Gardens, Luton, the legal title to which was held by the appellant and in which the respondent had resided with his family since the appellant purchased the property in 2006. The appellant brought a claim against the respondent seeking possession of the property for alleged non-payment of rent.
The respondent argued that, by an agreement made between the parties in 2006, it had been agreed that the appellant would secure a mortgage for the purchase of the property on behalf of the respondent; and that the respondent had undertaken to cover the appellant for the repayments under the mortgage. The respondent paid the deposit and made a number of contributions, including payments and building work, in relation to the property. The two claims were ordered to be linked.
The judge concluded that the parties had agreed that the appellant would purchase the property and hold its legal title for the benefit of the respondent, who was unable to purchase the property in his own name because of his immigration status, until it was possible to pass the legal title to the respondent. Furthermore, in reliance on the 2006 agreement, the respondent had acted to his detriment by meeting most of the monthly mortgage payments, applying for planning permission and converting the garage at the property to an office. The judge declared that: the respondent was entitled to a one hundred per cent beneficial interest in the property; the legal title to the property was held by the appellant in trust for the respondent; and the appellant was entitled to an account from the respondent for monthly mortgage payments from 2015 onwards, amounting to £16,257.15.
The judge dismissed the appellant’s related claim for possession of the property and ordered the appellant to pay two thirds of the costs of the action, subject to a detailed assessment if not agreed, with an appropriate adjustment to the costs to reflect the increase in the length of the trial. The appellant appealed.
Held: The appeal was dismissed.
(1) The present case was one in which the judge’s decision had turned heavily on his assessment of the relative credibility of each of the parties, which he had had to evaluate in the context of all of the evidence. The criticism of the judge’s assessment of the respondent’s evidence fell far short of establishing that the judge made findings of fact unsupported by the evidence or had reached a decision on the basis of the evidence that no reasonable judge could have reached. The judge had shown a clear awareness of the deficiencies of the respondent’s evidence but found that there was evidence that he was able to accept that supported the respondent’s case. There was no basis on which to disturb the judge’s primary findings of fact: London Borough of Haringey v Ahmed [2017] EWCA Civ 1861; [2017] PLSCS 208 applied.
(2) The judge had firmly before him the issue as to whether a resulting trust arose. Both parties agreed that the findings of the judge justified only a resulting trust in a situation where there was a gratuitous transfer of property. Where there was an agreement at the time of purchase of a property that a party would be responsible for mortgage instalments on terms that he should have a commensurate beneficial interest or in circumstances from which such an intention could be inferred, then such payments would confer a beneficial interest on the payer. The judge found such an agreement in the present case. He had no hesitation in finding that the appellant and the respondent reached an agreement in 2006 that the defendant would purchase the property and hold its legal title for the benefit of the claimant; and that the parties agreed that that would be a property belonging to the respondent in all but the legal title. It was clear that the judge found that there was to be no sharing of beneficial interest. The agreement was that the respondent would have the entire beneficial interest in the property. The judge could not have reached that conclusion unless he was satisfied that under the terms of the agreement, the respondent was obliged to indemnify the appellant in respect of his liabilities under the mortgage, although the judge made no explicit statement to that effect in his conclusions.
(3) The judge found that there was a trust. It did not matter that he did not use the term “resulting trust”, provided that his findings were consistent with a recognised form of trust. His conclusions were compatible with a resulting trust arising and the appellant, as trustee, was entitled to be indemnified out of the trust property for any expenses, such as mortgage repayments, incurred by him in respect of the trust property. However, the appellant’s agreement to incur the liability of the mortgage was not sufficient, in and of itself, to confer on him any beneficial interest in the property. Those conclusions disposed of the appellant’s argument that the respondent’s payments, corresponding to interest-only liabilities under the mortgage, should only be regarded as payment for his use and occupation of the property. As the owner of the entire beneficial interest in the property, any such payments would be owed to the appellant as trustee for the respondent’s own benefit; Re Share (Lorraine) [2002] 2 FLR 88 (Ch), Goodman v Carlton [2002] EWCA Civ 545, 2 FLR 259 and Barrett v Barrett [2008] EWHC 1061 (Ch); [2008] 2 EGLR 81 applied. Pallant v Morgan [1953] Ch 43, Leake (formerly Bruzzi) v Bruzzi [1974] 1 WLR 1528 and Suttill v Graham [1977] 1 WLR 819 distinguished.
(4) To avoid further litigation, the parties would be well advised to arrange for the legal title to be transferred from the appellant to the respondent, and for the mortgage to be novated from the appellant to the respondent subject to the consent of the mortgagee.
Conor Kennedy (instructed by Landmark Legal LLP) appeared for the appellant; Russell Wilcox (instructed by Allied Law Chambers Solicitors Ltd) appeared for the respondent.
Eileen O’Grady, barrister
