Land – Trust – Beneficial tenants in common – Trust deed providing that property held by deceased and respondent in unequal shares with absolute entitlement to survivor in event of death before sale of property – Whether respondent entitled to entire proceeds of sale after death of deceased – Whether each party acquiring absolute title in deceased’s proportion of proceeds of sale – Whether each party acquiring joint lives interest in proportion to be enlarged into absolute interest upon sale of property during joint lives – Appeal dismissed
The respondent and her brother were joint legal owners of a property until the brother’s death in 2004. The appellant was the deceased’s wife and the sole executrix and beneficiary under his will. Following her brother’s death, the respondent wrote to the appellant 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. Clause 1 of the deed 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 respondent subsequently brought possession proceedings against the appellant, in which she claimed mesne profits from the appellant as a trespasser. The appellant 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, inter alia, that 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.
The High Court held that the trust deed had to be interpreted to give effect to clause 4 so that under clause 1, the respondent and the deceased had acquired a joint lives interest in the deceased’s proportion of the proceeds of sale that would be enlarged into an absolute interest upon a sale of the property: see [2008] EWHC 1715 (Ch); [2008] PLSCS 213. The appellant appealed. She contended that clause 1 gave the deceased an absolute interest in his share of the property and the proceeds of sale and that clause 4 should be rejected as being repugnant to that disposition.
Held: The appeal was dismissed.
The court was entitled to interpret the trust deed so as to give effect to clause 4, which was a provision that the parties had deliberately included and that provided that if the property was unsold at the death of the first tenant in common to die, it should belong to the survivor absolutely. The inference was that it reflected what the respondent and the deceased had intended.
The parties had not intended that clause 4 should be rejected. In interpreting the deed, the court could have regard to the fact that it was unlikely that the parties had intended clause 4 to be ineffective. If the house had not been sold during their joint lives, they intended that it should belong to both during their joint lives and to the survivor absolutely upon the death of the first to die.
That was the only way in which full effect could be given to clauses 1 and 4 when read together as part of the deed as a whole and the judge had been right to interpret the deed in this way.
Josephine Hayes (instructed by Hugh Cartwright & Amin) appeared for the appellant; Mark Warwick (instructed by Rochman Landau) appeared for the respondent.
Eileen O’Grady, barrister
