Agricultural land – Partnership assets – Proprietary estoppel – Appellant carrying on farming business in partnership with parents – Appellant and parents acquiring freehold – Following death of parents, appellant claiming ownership of farm and business – High Court dismissing appellant’s claims – Whether freehold acquired by appellant and parents as joint beneficial tenants or as beneficial tenants in common in equal shares – Appeal dismissed
The appellant’s parents held the tenancy of a 144-acre farm at Cefn Coed, Neath, and adjoining accommodation land of about 50 acres at Crythan. The appellant had also farmed there since leaving school. In 1986, the freehold of Cefn Coed was acquired in the joint names of the appellant and his parents. In 1991, Crythan was vested in the second respondent.
The mother died in 2013 and left her estate to the father who died in 2018. Three of their four children (the appellant and the first and second respondents) were in dispute as to the ownership of the farm and the partnership business. The third respondents were the professional executors and administrators of the father’s estate.
Under his will, the father’s interest in the two farmhouses at Cefn Coed were left to the first and second respondents in equal shares. His interests in the remainder of Cefn Coed and the partnership were left to the first respondent.
The appellant argued that both farms were assets of the farming business under a deed of partnership between himself and his parents, and that following their deaths, those assets vested in him. Alternatively, he relied on proprietary estoppel based on promises allegedly made by his parents. The High Court dismissed the appellant’s claims: [2022] EWHC 1717 (Ch); [2022] PLSCS 111.
The appellant appealed. The question was whether the freehold was acquired by the appellant and his parents for themselves as joint beneficial tenants or as beneficial tenants in common in equal shares.
Held: The appeal was dismissed.
(1) The principle in Stack v Dowden [2007] 2 AC 432, reiterated in Jones v Kernott [2011] UKSC 53; [2011] PLSCS 264; [2012] 1 AC 77 that, if joint transferees did not expressly declare what the beneficial ownership was, then equity followed the law and the onus was on the person seeking to show that the beneficial ownership was different from the legal ownership, was not confined to the domestic context.
In general, the legal owner of any property, real or personal, was prima facie also the beneficial owner, and so was both legally and beneficially entitled unless there was some reason for concluding otherwise. And since it was normally for the person asserting something to establish it, it was for a person asserting that the legal owner of property was not also the beneficial owner to make out their case that the beneficial ownership was different.
(2) In a joint names case, the question was not whether the legal owners were trustees or not; but what trusts were to be deduced in the circumstances.
In the majority of joint name cases, there was no dispute that the legal owners were also the beneficial owners. The fact that the property was acquired in joint names was a powerful indication that the parties were each intended to have beneficial interests in it. The question therefore was how their beneficial interests were shared, and how that was to be determined in the absence of an express declaration of trust or an express agreement between them.
In the present case, it was common ground that the parties were intended to be equal co-owners, the only issue being whether that was a joint tenancy or a tenancy in common in equal shares. In practice, the significant distinction was the right of survivorship. Most such disputes were between two co-owners who were still alive and whose relationship had broken down. In such circumstances, if there was any possibility of a beneficial joint tenancy one of the parties was likely to be advised to serve a notice to sever any joint tenancy that existed, which could be done very simply. Therefore, the dispute would almost always be about whether their shares were equal or not.
(3) Cefn Coed was a farm. It provided a home for the family but it was also, and primarily, a business which provided their livelihood. Unlike a married (or unmarried) couple the parties were obliged by the partnership deed to account to each other meticulously. It was the farm business which effectively paid for the acquisition of Cefn Coed by making the mortgage payments. The purchase was something which the appellant urged on his parents as a commercial decision for the benefit of the partnership business by replacing the uncertainties of rent and other obligations owed to a landlord with the greater predictability of mortgage payments.
There was no dispute that the appellant and his parents were intended to be equal co-owners, given that the purchase was taken in the names of the three of them and that the entirety of the purchase price was raised on mortgage which would have to be repaid from the profits of the business in which they were equal partners. The sole issue was whether they should also be taken as intending that their co-ownership should be joint, with the right of survivorship, or a tenancy in common in equal shares. There was a very longstanding and well-established principle that equity would usually assume that co-owners acquiring property for business purposes did not intend survivorship. Unlike the common law, equity did not favour a joint tenancy: see Megarry & Wade, The Law of Real Property (9th edn, 2019), at §12-21.
(4) On the findings of the judge the present was not a case where partners acquired land as part of their partnership assets, but it was a case where land was acquired for business purposes. Where a property was acquired for business purposes, the court would very readily assume that survivorship, and hence joint tenancy, was not intended.
Like other evaluative decisions based on the facts, the conclusion reached by the judge could not be overturned on appeal unless it was one that was not open to him. In this case, there was nothing to suggest that the judge erred at all, let alone reached a decision that was not open to him.
Accordingly, the judge had not made any error in holding that Cefn Coed was acquired by the appellant and his parents as beneficial tenants in common in equal shares.
Guy Adams (instructed by Redkite LLP) appeared for the appellant; James Pearce-Smith (instructed by Michelmores LLP) appeared for the first and second respondents; the third respondents did not appear and were not represented.
Eileen O’Grady, barrister
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