Contract for sale and purchase of land – Contracts exchanged – First appellant acting as nominee for second appellant – Charging order on property in respect of costs orders made against first appellant – Whether charging order made against first appellant as trustee of a trust – Whether holding any interest as trustee – Section 2(1)(b)(i) of Charging Orders Act 1979 – Appeal dismissed
The respondent company agreed to sell a small building plot to the first appellant. After contracts were exchanged, the first appellant demanded that the property be transferred into the names of the second appellant and her daughter. The respondent refused and it served a formal notice to complete. Various proceedings ensued, resulting in an order for specific performance of the transfer and, when the first appellant failed to comply, in a direction that a master should sign the transfer on his behalf. Various costs orders were made against the first appellant. A non-party costs order was also made against the second appellant on the basis that she had provided the purchase price and that the first appellant was acting as her nominee.
At a subsequent hearing, an order was made for a charging order against the property in respect of the costs that the first appellant owed in respect of the earlier proceedings. At the date of that hearing, the transfer signed by the master had not yet been executed. The charging order was later upheld on the basis that the costs orders against the first appellant had been made against him as trustee for the second appellant, since he had not acted on his own account but had purchased as nominee for her, and the two had always acted in tandem for litigation purposes.
The appellants appealed against the charging order. They submitted that the first appellant had no beneficial interest in the property and that the order could not have been made against him as a trustee, under section 2(1)(b)(i) of the Charging Orders Act 1979, since: (i) upon payment of the purchase price, the respondent had held the property on a bare trust for the first appellant, with whom it had contracted; (ii) the first appellant, in turn, held that interest upon a bare trust for the second appellant; (iii) in those circumstances, the first appellant fell out of the equation and the respondent was to be regarded as holding on trust upon a bare trust directly for the second appellant; and (iv) accordingly, the first appellant held no interest as trustee.
Held: The appeal was dismissed.
The authorities established that a beneficiary with a vested and indefeasible interest could require a trustee to transfer trust property to him, and that, where the beneficiary himself made a declaration of trust, the practical effect was to terminate his intermediate equitable interest: Saunders v Vautier (1841) 4 Beav 115 and Grey v Inland Revenue Commissioners [1958] Ch 690 considered. However, those authorities established only that, in the case of a trust and sub-trust of personal property, the trustees might decide, as a matter of practicality, that it was more convenient to deal directly with the beneficiary of the sub-trust. They did not mean that an intermediate trustee ceased to be a trustee as a matter of law. Moreover, they did not apply to a case where the trust property was the purchaser’s interest in land created by an executory contract for sale and purchase.
The second appellant had not required the first appellant, as her nominee, to transfer to her his interest in the vendor/purchaser quasi-trust prior to the making of the charging orders. In the absence of any such direction, at the date of the charging order the first appellant continued to hold his beneficial interest under the quasi-trust on a bare trust for the second appellant. Consequently, the respondent held the beneficial interest in the property on trust for the first appellant, and he, in turn, held it on trust for the second appellant. In those circumstances, the first appellant held the interest in the property required by the 1979 Act.
The first appellant appeared in person; Geraint Jones QC (instructed by the General Council of the Bar Public Access Scheme) appeared for the second appellant; Sarah Richardson (instructed by Chadwick Lawrence, of Huddersfield) appeared for the respondent.
Sally Dobson, barrister
