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Co-ownership and Relationship Breakdown

These are the notes of a talk given to the Norfolk & Norwich Law Society on 18 June 2015 as part of a seminar given by EA Law - East Anglian Chambers entitled “Family Finance”
Co-ownership and Relationship Breakdown Simon Redmayne
“Judges must be aware of hard constructions and strained inferences, for there is no worse torture than the torture of laws.”
Sir Francis Bacon
 
1. In its recent statistical bulletin “Families and Households, 2014” the Office for National Statistics reported that:
(1) There are 3.06m cohabiting couple families in the UK (ie.  6.12m cohabitees); and those families account for 16.4% of all families in the UK;

(2) Cohabiting couple families are the fastest growing family type, having grown by 29.7% in the 10 year period 2004 to 2014; and,

(3) 51% of respondents to a British Social Attitudes Survey in 2008 thought that unmarried couples who live together for some time had a “common law marriage” which gave them the same legal rights as married couples.

2. Whilst many cohabiting couples get married - in 2012 80% of people marrying had lived together before marriage - there appears to be a general recognition by government and other agencies that cohabiting couples are substantially more likely to split up than married couples.

3 Of course, not all cohabiting couples own property together, but many do.

4. Despite recommendations from the Law Commission and encouragement from the Supreme Court there remains a reluctance to introduce legislation providing for the redistribution of property upon the breakdown of non-married/civil partnership relationships.  Thus, upon relationship breakdown, it is the general law of property and trusts which governs the ownership of property as between cohabiting couples.  In the absence of legislative reform judges have responded by simply adjusting the rules to meet the circumstances. This has been achieved in two significant ways: (a) by altering the equitable presumptions; (b) by use of the evidential tool of objectively deducing parties’ intentions from their conduct (eg. inferring parties’ intentions from their conduct, or as final resort, by imputing to the parties intentions which they did not know they held).

(A) The applicable principles

5. What matters to the separating parties, of course, is not the strict legal ownership of property but instead their respective beneficial interests, ie. their respective entitlements to the proceeds of sale.  Essentially, in the case of cohabiting couples, beneficial interests in property may arise in three different ways:
(1) By way of an express declaration of trust;

(2) By way of a “common intention” constructive trust;

(3) By way of the doctrine of proprietary estoppel (which in turn will normally give rise to a constructive trust).

6. In addition, for married couples, civil partners and engaged couples, a beneficial interest may be acquired in property, or a beneficial share increased, upon its improvement, in accordance with section 37 of the Matrimonial Proceedings and Property Act 1970.

7. Following relationship breakdown: (a) the continued occupation by one party or the other may become an issue and (b) the principles of equitable accounting may cause the parties’ entitlements to the proceeds of sale to be adjusted.

(1) Express declaration of trust

8. By an “express declaration of trust” is meant a declaration of trust complying with section 53(1)(b) of the Law of Property Act 1925, being a declaration:
(1) in writing; and,

(2) signed by the person who is able to declare the trust.

9. The impact of a valid declaration of trust is straightforward and significant: an express declaration of trust is conclusive unless varied by subsequent agreement or affected by proprietary estoppel - Goodman v Gallant [1986] Fam 106, duly affirmed at para 49 of Stack v Dowden [2002] 2 AC 432.

10. However, that is not to say that an express declaration of trust, as with any other instrument: (a)  cannot be rectified pursuant to the principles concerning rectification; or, (b) cannot be attacked as being void or voidable on the grounds of fraud, mistake, misrepresentation or undue influence.

11. As to variation of an express declaration of trust by “subsequent agreement”, such a variation would amount to a “disposition of an equitable interest or trust subsisting at the time of the disposition” within the meaning of section 53(1)(c) of the 1925 Act, and thus is required to be:  (a) in writing, (b) signed by the person disposing of the same, or by his lawfully authorised agent.  However, section 53(2) of the 1925 Act provides that the section “does not affect the creation or operation of resulting, implied or constructive trusts” and thus, as discussed below, the question arises whether, apart from proprietary estoppel, an express declaration of trust can subsequently be varied by a “common intention” constructive trust.

12. Thus, in any case concerning the question of beneficial interests in a property an early enquiry (if not the first enquiry) must be whether there exists an express declaration of trust.  As to this:
(1) If one exists, it is normally found in (or perhaps referred to at) box 10 of the modern Land Registry forms TR1 or TP1 (previously box 11 in the older form of Transfer);

(2) However:
(a) completion of box 10 is not compulsory and it is intended to apply only in the case of joint proprietors; and,

(b) in the case of both joint proprietorship and sole proprietorship, an express declaration of trust can, and in many cases should, be provided for in a document separate from the transfer itself.

13. Since 1 January 1997 all co-ownership of real property gives rise to a trust of land. Essentially there are two forms of co-ownership:
(1) joint tenancy;

(2) tenancy in common.
Since 1925 joint tenancy has been the only form of co-ownership of a legal estate; and legal joint tenancy cannot be severed. 

14. As to the world joint tenants are in the position of a single owner, although as between themselves they can have separate rights. For practical purposes, the two important features of a beneficial joint tenancy (ie.  where the co-owners are both legal and beneficial joint joints) are:
(1) The right of survivorship:  A joint tenancy cannot pass under a will (and cannot be severed by a will)  or on intestacy and on the death passes to the other joint tenant(s) by the right of survivorship.

(2) Equality of interest: The interest of each joint tenant is the same in extent nature and interest, ie. there is an equal entitlement to the beneficial interest.

15. For tenants in common: (a) there is no right of survivorship, ie.  each owner’s separate beneficial interest forms part of his/her estate and can be transferred under a will and/or will pass on intestacy; and (b) they hold the beneficial interest in such shares as they choose (or is subsequently imputed to them).

16. It is now settled that severance of a joint tenancy results in a beneficial tenancy in common in equal shares - also Goodman v Gallant, duly affirmed at para 49 of Stack v Dowden.

17. As to an express declaration being contained in the Transfer itself, the three options offered at box 10 of TR1/TP1 are:
“The transferee is more than one person and:
  • they are to hold the property on trust for themselves as joint tenants
  • they are to hold the property on trust for themselves as tenants in common in equal shares
  • they are to hold the property on trust:....”
18. Of course, in some transfers it is not necessary for the transferees to execute the Transfer (ie. where the Transfer does not contain covenants or declarations). Thus, the situation can arise where box 10 is completed (say, by the transferees’s conveyancer), but the Transfer is not executed by the transferees.  In such a case the completed declaration at box 10 fails as an express declaration of trust for lack of compliance with section 53(1)(b); but is otherwise potentially good evidence of the parties’ intentions.

19. Finally, it is also settled that a declaration in a Transfer/conveyance that the survivor “can give a valid receipt for capital money arising on disposition” of the property does not, in itself, amount to an express declaration of trust - see Stack v Dowden para 51.

(2) “Common intention” constructive trust

(a) Joint names

20. All joint legal owners hold the property on trust, by way of a trust of land.

21. Thus, in the absence of an express declaration of trust the question is: on what trusts do they hold the property?

22. The answer to that question is wholly dependent on the context, viz.  “in law, “context is everything” and the domestic context is very different from the commercial world” - Baroness Hale, para 69 of Stack.

23. In short, on the basis of Stack and Kernot -v- Jones [2012] 1 AC 776, in the domestic cohabitation context, the answer to that question is arrived at by the application of the following principles:
(1) The starting point is the application of a new equitable presumption, applicable in the domestic consumer context, that a transfer into joint names indicates both legal and beneficial joint tenancy;

(2) That presumption can be displaced (said to be a “heavy burden”) by showing:
(a) that the parties had a different “common intention” at the time when they acquired the home; and/or
(b) that they later formed the “common intention” that their respective shares would change;

(3) The parties “common intention” is to be deduced objectively from their conduct.

(4) In those cases where it is clear that: (a) the parties did not intend joint tenancy at the outset, or (b) had changed their original intention, but it is not possible to ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own the property “the answer is that each in entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property”.

(5) Each case will turn on its own facts.  Financial contributions are relevant but there are many other factors which enable the court to decide what shares were either intended (as in (3) above) or fair (as in (4) above.

24. In the majority of cases the new equitable presumption of equitable joint tenancy is likely to be determinative - there being an absence of sufficient, or sufficiently cogent, evidence from which it can be deduced objectively that the parties held, at the time of transfer, or subsequently formed, a different “common intention”, ie.  that together they held/subsequently formed an intention that their beneficial interests would be unequal.

25. Of course, in both Stack and Kernott having emphasised the applicability and importance of the new equitable presumption of joint tenancy, in each case, on the facts, the House of Lords/Supreme Court upheld the first instance court’s findings that the presumption was displaced by a differently held/formed “common intention”. In Stack of course the different common intention was found to have been held at the time of acquisition; in Kernot the different common intention was held to have been  formed subsequently when the defendant moved out of the property and bought somewhere else.

26. In Kernott Lord Walker and Baroness Hale adopted Lord Diplock’s description, in Gissing v Gissing [1971] 2 AC 886 (at 906B), of the task of objectively deducing the parties’ common intention from their conduct:
“...the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words and conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.”

27. Much of the judgments of Lords Kerr, Wilson and Collins concerned the conceptual difference between inferring and imputing the parties’ intentions.  However, on the basis of the five principles set out above (drawn from the joint judgment of Lord Walker and Baroness Hale) it would appear the court only ought to resort to imputing the parties’ intentions in circumstances where it is clear (on the basis of direct evidence of the parties’ intentions or inferentially on the basis of their conduct) that the parties did not intend their share to be equal, but that it is not possible to discern what their intention was as to the shares they would hold.  It is only then that the court resorts to imputing the parties’ intentions by deciding what is “fair”; and fairness is to be arrived as from considering the whole course of dealing in relation to the property - a concept introduced by Chadwick LJ in 2005 and with which practitioners and courts are now well familiar.

28. Conceptually it would appear that there is no reason why an express declaration of trust cannot be varied by “subsequent agreement” arising by way of a subsequently formed “common intention” constructive trust that the parties’ respective shares should be altered. As stated above, by section 53(1)(c) of the Law of Property Act 1925 an agreement to vary an express declaration of trust is required to be:  (a) in writing, (b) signed by the person disposing of the same, or by his lawfully authorised agent.  However, section 53(2) of the 1925 Act provides that the section “does not affect the creation or operation of resulting, implied or constructive trusts”.  In these circumstances it would appear possible that a subsequently formed common intention, similar to that in Kernot, could give rise to a constructive trust which would have the effect of varying the express declaration of trust.  In practice it might be expected that the cogency of the evidence going to show such a common intention had indeed arisen in the absence of a written/signed variation would need to be greater - the parties having been careful to express their interests in writing, generally speaking, they could be expected to set out any changes in writing.

(b) Sole name

28. In joint names’ cases, a trust automatically arises and essentially all the court is doing is ascertaining the parties’ intentions in relation that terms of that trust, ie.  in what proportions the beneficial interests are held.

30. However, where property is held in a party’s sole name no trust of land automatically arises and the starting point is different. The first question is whether it was intended that the other party would have any beneficial interest in the property as all.  Of course, this can be deduced objectively from the parties’ conduct.

31. However, intention alone is not sufficient.  Despite the absence of comment in Kernott on the need for detrimental reliance, where the property is registered in the sole name of one of the parties, it remains the case that for a “common intention” constructive trust to arise two separate factors are required:
(1) Common intention: a common intention that the other party should have a beneficial interest; and,

(2) Detrimental reliance: in addition, it remains necessary to establish detrimental reliance.  The other party must have acted to his/her detriment in reliance upon the parties’ common intention and in the reasonable expectation that he/she would acquire an interest in the property - Gissing v Gissing [1971] AC 886.
The burden of establishing both intention and detriment is upon the party claiming a share. 

32. The rules as to ascertainment of the parties’ common intention and quantifying the beneficial interests are the same as those in joint names’ cases and the principles set out at paragraph 20(3), (4) and (5) apply.  It is important to note that “intention” and “detriment” are interwoven and that acts of detriment (ie. paying for/contributing towards the purchase or subsequent improvements) can support an inference that the paying/contributing party was to have/acquire a share.

33. In sole name cases, a particular type of case where the Court will infer a “common intention” is an “excuse” case, where one party gives to the other an explanation (the “excuse”) why the property is not in joint names and/or cannot be transferred into joint names (eg. “too expensive”, “too much trouble”, “bank/building society won’t allow it”).  Generally speaking the Court will treat such an excuse as a clear inference of common intention that the other party should have an interest in the house - see Grant v Edwards [1986] Ch 639.

34. As to detrimental reliance, it is apparent from the speeches in Stack that the relatively high and narrow hurdles previously set by the courts are now to be both lowered and widened.  Thus, in relation to Lord Bridge’s dicta in Lloyds Bank v Rosset that, in cases where a “common intention” constructive trust only arose by inference, direct contributions to the purchase price (whether initially or by payment of mortgage instalments) were required and that it was “doubtful that anything less will do”, is no longer supported - “the law has moved on, and your Lordships should move it a little more in the same direction” Lord Walker in Stack at para 26. It is now difficult to set any clear rules, however, the basic requirement remains that there must be some sufficient connection between the claimant’s conduct and his/her belief that he has an interest in the property. Thus, even in the modern context it would seem that the performance of everyday domestic tasks (including maintenance and, perhaps even, minor works of improvement) will not suffice.  It remains preferable for the acts of detriment to be referable to the property in some way (ie. generally speaking its acquisition, preservation or improvement); however, even that is not a hard and fast rule. 

35. A useful recent example of a judge at first instance finding a common intention constructive trust between cohabitees where the property was in the sole name of one is Graham-York v York [2015] EWCA Civ 72. There the parties had lived together for 33 years. In finding that there was a common intention constructive trust the judge stated:
“Having found that her income did contribute to the family income before and at the time of the purchase of the property I can infer a common intention that she was to have a beneficial interest in the property.”
That finding was not appealed.  However, the Court of Appeal dismissed the successful claimant’s appeal against the judge’s decision that her interest was limited to 25%.  Their decision is usefully summarised in the Westlaw case summary as follows:
“The question was what amounted to a fair share having regard to the whole course of dealing between the couple in relation to the property. The judge had clearly focused on the relevant consideration, namely the extent of G’s financial and non-financial contributions, Jones v Kernott [2011] UKSC 53, [2012] 1 A.C. 776 followed. Where the property had been purchased in the name of one party only, there was no presumed starting point of equality of interests, and no presumption that equality was the only fair solution, Oxley v Hiscock [2004] EWCA Civ 546, [2005] Fam. 211 followed. Finally, non-financial contributions would normally be proportionately greater the longer the cohabitation. However, that had to be set against the judge's finding that G's financial contribution had been small.”

(3) Proprietary estoppel

36. Similar to common intention constructive trusts the doctrine of proprietary estoppel has been propelled forward in recent years - starting with the Court of Appeal in Gillett v Holt [2001] Ch 210 and more recently House of Lords decision in Thorner v Major [2009] 1 WLR 776.  Many of the cases following Thorner concern family farming businesses where a member of the next generation has been  persuaded to remain on the farm for many years on a low income with the that promise “one day it will be yours”.  However, the doctrine has important application in cohabitation cases.
 
37. The essential elements of the doctrine are: (a) a representation or assurance made to the claimant; (b) reliance thereon by the claimant; and (c) detriment to the claimant in consequence of his/her (reasonable) reliance.  However, these three elements are not to be treated as “watertight compartments”.  A useful summary of the applicable principles is set out in the judgment of Floyd LJ at paras 29 to 33 of Davies v Davies [2014] EWCA Civ 568.  The following principles apply:
(1) The fundamental principle that equity is concerned to prevent unconscionable conduct permeates all elements of the doctrine.  In the end the court must look at the matter in the round - Gillett.

(2) As to the assurance:
(a) The clarity of any particular representation or assurance, has to be judged in each particular context.  The question was whether the defendant’s assurances, objectively assessed in the context in which they were made, were assurances which one might reasonably expect to be taken seriously and relied upon by the claimant - Thorner at para 56.

(b) It was a necessary element of the doctrine that the assurances should relate to identified property (even if the extent of the property was liable to fluctuate, eg.  a farm) - Thorner at para 61.
 
(3) As to reliance: The reliance must be reasonable and in response to the assurance. Reliance and detriment are often intertwined and the quality of the relevant assurances may influence the issue of reliance - Gillett.

(4) As to detriment:
(a) the detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial.  The requirement for reliance must be approached as part of a broad enquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances - Gillett.

(b) whether the claimant has suffered detriment must be judged at the point where the person who gave the assurance seeks to go back on it - Davies at para 32.

(c) whether the detriment is sufficiently substantial must be judged by whether it would be unjust or inequitable to allow the assurance to be disregarded - Davies at para 32.

(d) whether there is detrimental reliance in any given case is an evaluative judgment, which normally lies within the exclusive province of the trial judge.
 
(5) The extent of the relief:
(a) the maximum extent of relief is to make good, so far as may fairly be done between the parties, the expectations of the claimant which the defendant has promised or encouraged;

(b) however the court must have in mind the principles of both: (i) unconscionability; and (ii) proportionality.  Thus when considering the extent of the relief to be granted the court must balance the assurances and the detriment and the interests of third parties.  Thus, in Jennings v Rice [2002] EWCA Civ 195 the court declined to award the claimant all of the  property he had been promised by the deceased and instead awarded him a lump sum in (generous) compensation for the care he had given to the deceased. 

(c) In this regard, the court must look at the circumstances in each case to decide in what way the equity can be satisfied.  The equity arises not from the claimant’s expectations alone, but from the combination of expectations, detrimental reliance, and the unconscionableness of allowing the defendant to go back on the assurances - see Jennings. 

38. A useful recent application of the proprietary estoppel doctrine in the context of cohabitation is the Court of Appeal decision in Southwell v Blackburn [2014] EWCA Civ 1347:
(1) There the judge found a proprietary estoppel in the claimant’s favour on the following basis: that before moving in together, into a house solely owned by the defendant, the defendant had assured the claimant that he was taking on a long-term commitment to provide her with a home.  In reliance on that assurance the claimant gave up her secure housing association tenancy and moved in to live with the defendant.

(2) The judge awarded the claimant £28,000 calculated as follows: (i) £15,00 for
the amount spent on the housing association house; (ii) £5,000 the claimant had contributed in setting up the new house; and (iii) an uplift to allow for inflation.

(3) The defendant appealed, inter alia, on the basis that the judge had failed to take account of the many benefits received by the claimant and her two daughters in living with the defendant.  Dismissing the appeal, Tomlinson LJ explained:
“[The appellant submits that since] the relationship had come to an end, during the course of which the appellant had provided for virtually all of the respondent’s essential financial needs, and those of her children, how could it be unconscionable for the appellant to require the respondent to leave the house? With respect, this misses the point and overlooks the judge’s explicit findings as to the nature of the appellant’s promise on the strength of which the respondent gave up her secure home. It focuses on the relationship, thereby losing sight of the nature of the promise and the detrimental reliance. The detriment to the respondent was not that she embarked upon a relationship with the appellant but that she abandoned her secure home in which she had invested and invested what little else she had in a home to which she had no legal title. It is the detrimental reliance which makes the promise irrevocable and leads to the conclusion, at the end of a broad enquiry, that repudiation of the assurance is unconscionable.”

(4) Section 37 of the Matrimonial Proceedings and Property Act 1970

39. Section 37 provides as follows:
“It is hereby declared that where a husband or wife contributes in money or money’s worth to the improvement of real or personal property in which or in the proceeds of sale of which either or both of them has or have a beneficial interest, the husband or wife so contributing shall, if the contribution is of a substantial nature and subject to any agreement between them to the contrary express or implied, be treated as having then acquired by virtue of his or her contribution a share or an enlarged share, as the case may be, in that beneficial interest of such an extent as may have been then agreed or, in default of such agreement, as may seem in all the circumstances just to any court before which the question of the existence or extent of the beneficial interest of the husband or wife arises (whether in proceedings between them or in any other proceedings).”

40. Thereby, where one spouse or civil partner has an interest in a property, upon contributing in money or money’s worth to the improvement of the property, the other may acquire a share or acquire an enlarged share in the property.

41. By reason of section 2 of the Law Reform (Miscellaneous Provisions) Act 1970 engaged couples have the same entitlement under section 37 as married couples and civil partners. 

(5) Post-breakdown occupation, exclusion and equitable accounting

42. The occupational rights of beneficiaries and the consequences of exclusion/restriction of those rights are now exhaustively set out in sections 12, 13, 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996.  That statutory regime replaces the old doctrines of equitable accounting in such circumstances (see Stack at paras 93-94 and Murphy v Gooch [2007] EWCA Civ 603).

43. Where a couple cohabits and each has a beneficial interest in the property, each will necessarily be “entitled to an interest in possession” and the purpose of the trust will inevitably include making the property available for each party’s occupation.  Thereby each will have an entitlement to occupy the property in accordance with section 12 of the Act.

44. Section 13:
(1) Makes provision for the trustees to impose reasonable conditions upon the occupation by a beneficiary, including the power to require the beneficiary:
(a) to pay any outgoings or expenses in respect of the property, or

(b) to assume any other obligation in relation to the property.

(2) Also makes provision for the exclusion/restriction by the trustees of a beneficiary’s right to occupy (subject to court approval where the beneficiary is already in occupation) and where that occurs, gives additional powers to the trustees to impose reasonable conditions upon the occupying beneficiary, including the power to require that beneficiary:
(a) to make payments by way of compensation to the beneficiary whose entitlement has been excluded or restricted, or

(b)  to forgo any payment or other benefit to which he would otherwise be entitled under the trust so as to benefit the excluded beneficiary.

45. Of course, during the relationship none of these provisions are of any concern or importance.  However, upon relationship breakdown one party may wish to exclude the other; or the party who leaves voluntarily may wish to ensure that the party remaining is solely responsible for the outgoings.  Section 13 provides for these eventualities.  Section 13 gives the power to the trustees, the cohabiting couple themselves or, in the case of a single registered proprietor, that person alone as a sole trustee.  Trustees must act unanimously, so unless they agree, application will need to be made to the Court to impose the particular condition required. As set out below, by way of section 14 the Court has power to make any such orders relating to the exercise of the trustees’ functions as it thinks fit, which will include the powers conferred by section 13; and in exercising those functions the Court must have regard to the matters set out at section 15.

46. Whilst section 13 gives power to the Court (in the absence of agreement between trustees) to deprive the beneficiary remaining in possession of his/her beneficial entitlement and/or to increase the beneficial entitlement of the excluded party, the situation also can arise where the party remaining in possession makes capital expenditure on the property (ie. capital repayments of the mortgage or expenditure on improvements to the property) and wants that recognised by way of a corresponding increased share in the proceeds of sale.

47. In such a case, the statutory regime does not displace the established equitable doctrines. The applicable principles in such a case, as set out in Wilcox v Tait [2006] EWCA Civ 1867 and Clarke v Harlow [2005] EWHC 3062, are as follows:
(1) In cohabitation cases, for equitable accounting to arise there must have been some departure by one co-owner from an arrangement or common understanding between the parties as to how the expenditure on outgoings or the improvements is to be borne between them;

(2) Thus, in the ordinary case of cohabitation while the relationship subsisted, and whilst the ordinary arrangements for the discharge of the outgoings subsisted, generally speaking there is unlikely to be a breach or failure by one party to honour any obligation owed to the other. Thus, generally speaking there was no room or reason for equitable accounting for the period during which the relationship subsisted;

(3) However, after the relationship ended and the parties separated, if one party bore a disproportionate share of capital expenditure or outgoings equitable accounting could arise.  Thereby, the parties’ respective beneficial interests are not adjusted; instead appropriate adjustment (by debiting and crediting each party’s entitlements as appropriate) is carried at the time of the final distribution of the net proceeds of sale.

(4) As a matter of practice it is preferable not to embark upon equitable accounting until the amount of net proceeds of sale is known.

(B) The Court’s powers

49. As referred to above, section 14 of the 1996 Act confers a power on the Court to make any such order:
(1) relating to the exercise by the trustees of any of their functions, or

(2) declaring the nature or extent of a person’s interest in property subject to a trust,
as the court thinks fit.

50. That power is sufficient to determine all matters arising under sections 12 and 13 and to decide if one party or another has a beneficial interest (whether by express declaration, constructive trust, proprietary estoppel or otherwise), to determine the extent of that interest and to determine any equitable accounting.

51. Also of course the power includes a power to order sale. 

52. However, in the absence of a power in the trust, one function which the Court has no power to exercise is the power to order one beneficiary to sell his/her share to the other. 

53. Judicial attempts can be made to overcome this absence of power by delaying/refusing an order of sale on terms that one party sells his/her interest to the other.  Further, of course, if the property is to be sold on the open-market either owner can seek permission to bid.  In such a case the other owner or a third party is likely to be given conduct of sale.

54. Section 15 provides that, in exercising its powers under section 14, the Court is to have regard to the following matters:
(1) the intentions of the person or persons (if any) who created the trust,

(2) the purposes for which the property subject to the trust is held,

(3)  the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and,

(4) the interests of any secured creditor of any beneficiary.

55. These considerations are of most relevance/importance in regards to sale.  Thus, in cases where the equity in the property is not sufficient to fund the purchase of two replacement properties, on relationship breakdown the Court will show a willingness to delay sale until any child in occupation reaches 18 or, perhaps, completes full-time education.

56. In cases of bankruptcy, even where young children are in occupation, sale is likely to be the eventual result - see Re Citro (a bankrupt) [1991] Ch 142, Turner v Davis [2009] 1 FLR 74 and in particular the provisions of section 335A of the Insolvency Act 1986.  By section 335A:
(1) the court having jurisdiction to hear a trustee in bankruptcy’s claim for sale under section 14 of the 1996 Act is the court having jurisdiction in relation to the bankruptcy; and,

(2) once a year has passed since the trustee in bankruptcy acquired his interest in the property: “the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt’s creditors outweigh all other considerations.”

(C) Practice and procedure
 
57. In a claim under the 1996 Act, the Civil Procedure Rules apply (and not the Family Procedure Rules).

58. Under the CPR, all proceedings are started by claim form. The procedure under CPR Part 8 will be appropriate where the court’s decision is sought on a question which is unlikely to involve a substantial dispute of fact. In all other cases, the procedure under CPR Part 7 should be used. The court may at any stage order a claim brought using the CPR Part 8 procedure to continue as if the claimant had not used that procedure and, if it does so, it will give such directions it considers appropriate.

59. Cost budgeting is likely to apply: either (a) automatically, ie. when a Part 7 claim is allocated to the multi-track (see CPR Part 3.12(1))) or (b) in regard to Part 8 claims, if the guidance at paragraphs 2 to 5 of Practice Direction 3E is followed.  Thus, issue by way of Part 8 will not necessarily avoid cost budgeting.

60. Despite such claims being governed by the CPR, there is evidence to suggest that in local county courts applications between cohabiting couples under section 14 of the 1996 Act, following relationship breakdown, are being listed for a PTR to be conducted in a manner similar to an FDA/FDR appointment in family proceedings.

Simon Redmayne

If you would like to be put in touch with Simon Redmayne, contact the clerking team at EA Law - East Anglian Chambers on 01473 214481.

Download the notes here
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William Roper:      So, now you give the Devil the benefit of law!
Sir Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?
William Roper:      Yes, I’d cut down every law in England to do that!
Sir Thomas More: Oh? And when the last law was down, and the Devil turned ’round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God’s! And if you cut them down, and you’re just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil benefit of law, for my own safety’s sake!
(A Man for All Seasons - Robert Bolt 1966)