Conveyance to joint purchasers requiring that any notice of severance be endorsed on conveyance – Notice of severance given but no endorsement made at time – Survivor contracting to sell at undervalue to relative with actual knowledge of notice – Endorsement effected before conveyance to relative – Whether notice effective to sever – Whether relative bought in good faith – Meaning of “purchaser” for purpose of Law of Property (Joint Tenants) Act 1964
The property in dispute was a house in Crescent Avenue, Coventry, title to which was at all material times unregistered. In May 1960 the house was acquired with the aid of a mortgage loan by two sisters, V and the first defendant, S. The conveyance recited that they took as “joint tenants beneficially”. The conveyance went on to declare that any notice of severance “shall be endorsed hereon or otherwise permanently annexed hereto [failing which] any purchaser from the survivors of the purchasers shall be entitled to assume that no such severance has been effected and accordingly such survivor shall as sole beneficial owner convey the property to any purchaser…”.
In May 1970 S went to live elsewhere. In July 1994 V, acting through solicitors, served a notice of severance on S, who acknowledged receipt in writing. No steps were taken at the time to endorse the notice on the conveyance. V died in March 1996 and in May 1996 probate of her estate was granted to the claimants. S then contracted to sell the house, then worth approximately £70,000, to her brother, B, for the sum of £600. In January 1997 the claimants arranged for the notice of severance to be endorsed on the 1960 conveyance. In April 1997 S conveyed the house to B pursuant to the contract of the previous December.
Responding to a claim by B that he alone was beneficially entitled to the house, the claimants sought a declaration that B held the house on trust for himself and the estate of V in equal shares. B died before the hearing and was substituted by his executors, the second and third defendants, who were content to allow S to argue in support of the claim that had been made by B.
At the trial, the claimants accepted that S alone had found the money for the 1960 purchase and for repaying the mortgage loan. The judge found as a fact (a pertinent admission having been made in the pleadings) that B had actual knowledge of the notice of severance before entering into his contract with S.
Held: Order that the house be sold and the proceeds divided in equal shares.
1. Contrary to the submission made by S, the failure to endorse the notice of severance at the time of service of the notice could not prevent it from operating between the co-owners as provided for by section 36 of the Law of Property Act 1925, it being plain from the wording of the 1960 conveyance that endorsement was required solely in order to enable purchasers to obtain good title. Nor could S claim to be solely entitled by way of a resulting trust based on her payment of the entire purchase price, as such a claim could not be made in the face of an express trust to the contrary: see Goodman v Gallant [1986] 1 All ER 311.
2. Since B had actual notice of the severance at all material times, he did not enjoy the protection otherwise given by equity to a purchaser of a legal estate. Nor was his case assisted by the provisions of section 1 of the Law of Property (Joint Tenants) Act 1964, as a “purchaser” for the purpose of that Act had to fall within the definition to be found in section 205 of the Law of Property Act 1925, which spoke of a purchaser “in good faith for valuable consideration”. Having regard to the actual notice possessed by B and the gross undervalue at which he had bought from S, it could only be inferred that the transaction was designed to defeat the interest asserted on behalf of V, and, accordingly, was not concluded in good faith. Actual notice was an essential but not exclusive element of good faith: see per Lord Wilberforce in Midland Bank Trust Co Ltd v Green [1981] AC 513 at p528.
3. Although not necessary to the decision, it appeared that the claimants had made good their alternative contention that B had incurred personal liability for having received trust property knowing that the transfer was being made in breach of trust.
Andrew Charman (instructed by Newsome Vaughan, of Coventry) appeared for the claimants; the defendants appeared in person.
Alan Cooklin, barrister
