Land – Beneficial ownership – Declaration of trust – Claimant and defendant purchasing land in joint names – Transfer document showing land held by parties as joint tenants – Claimant and defendant not signing Land Registry form – Claimant severing joint tenancy – Issue arising as to beneficial ownership of land – Whether declaration of trust in transfer document being valid – Judgment in favour of defendants
The claimant wished to purchase a small hotel and campsite known as the Innis Inn and Campsite in St Austell, Cornwall for £500,000. He persuaded the first defendant to contribute £100,000 to the purchase price in return for an interest in one half of the property and a job on the campsite. The claimant retained solicitors to deal with the conveyancing who were instructed to complete the relevant Land Registry form to show that the claimant and the defendant would hold the property on trust for themselves as joint tenants. The claimant and first defendant did not sign the executed version of the form but the vendors did.
The parties ran the business as a partnership, together with the first defendant’s wife (the second defendant) until the claimant gave a signed document to the first defendant headed: Notice of severance of joint tenancy” which purported to sever the joint tenancy in equity so that henceforth the property would be held by the claimant and the first defendant as tenants in common in equity in equal shares. The first defendant signed the notice as an acknowledgement of receipt and sent it back to the claimant’s solicitor.
The claimant subsequently commenced proceedings against the defendants seeking a declaration that the partnership previously carried on between the claimant and the two defendants had been dissolved, an order that the affairs of the partnership be wound up, all necessary accounts and enquiries taken and made and the appointment of a receiver.
An issue arose as to the beneficial ownership of the land. The claimant said that he was entitled to a four-fifths share. He contended, amongst other things, that the declaration of trust on the transfer form was invalid as he and the first defendant had not signed it and the declaration was required to be evidenced by signed writing in accordance with section 53(1)(b) of the Law of Property Act 1925. The defendants argued that each of the claimant and the first defendant was entitled to a half share.
Held: Judgment was given in favour of the defendants.
(1) At the time when the transferors signed the transfer form, they were the legal and beneficial owners of the property and well able to declare the trusts on which it was to be held. The fact that the effect of the contract was to pass the beneficial interest to the purchasers did not prevent the vendor from declaring a trust of the property that he was selling. To the extent that it was properly to be regarded as a trust at all, the constructive trust arising on a contract to purchase land was simply a form of equitable protection for the purchaser. It depended on the availability of specific performance of the contract. Essentially, it was a product of the contract. It anticipated the position on completion, on the footing that the purchaser was ready and willing to complete. The fact that A had contracted to sell a property to B on trust for C did not prevent A from declaring the trust on completion as by his contract he undertook to do. In the present case, the vendors were doing what they had contracted to do, which was to convey as directed by the purchasers. The purchasers’ direction was given to them by the purchasers’ solicitor who had taken instructions for that purpose. In drawing up the relevant Land Registry form, and submitting it to the vendors’ solicitors, he was giving that direction.
(2) Even if the signatures of the claimant and the first defendant were necessary, they would be provided by the notice of severance of joint tenancy. That was signed initially by the claimant alone and then subsequently by the first defendant. It stated that the property was to be held on trust for themselves in equal shares. Under section 53(1)(b) of the 1925 Act, it was not necessary that declaration of trust be made in writing. It was only necessary that it should be evidenced in writing. Accordingly, it was possible for an oral declaration of trust of land to be made on one day and evidenced by signed writing made on another. In such a case the oral declaration of trust was rendered enforceable from the beginning.
(3) In any event, there was ample evidence of an agreement between the claimant and first defendant that they should hold the property equally. The first defendant had entered into the transaction in reliance on that agreement. Their consent to the transaction was demonstrated by paying the money and then registering the transfer to them of the legal title. The presumption of resulting trust was excluded and a common intention constructive trust took effect which required no writing: section 53(2) of the 1925 Act.
Jonathan Edwards (instructed by Headleys Solicitors) appeared for the claimant; the defendants appeared in person.
Eileen O’Grady, barrister
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