Disputes Over Sale

Question 1

Trust of sale

Answer 1

• Before the trust of land, there was the trust of sale, which imposed upon the legal owners an immediate and binding duty to sell
  
  • Because there was a duty to sell and only a power to postpone sale, even if a minority of trustees wanted to sell, a sell would be ordered by the court. A single trustee of 4 could enforce a sale [Re Mayo] because the primary purpose as legislation saw was to sell the property and realise its value (property seen as an investment)
• It was unclear whether the beneficiaries’ rights were in the land or in the proceeds of future sale
  
  • Doctrine of conversion before TLATA – immediately the property was bought, the beneficiary’s interests were in the notional proceeds of a future sale – Flegg
  • Lord Wilberforce in Boland said that to describe it as an interest in the proceeds of a future sale was unrealistic
• Thus, it was unclear whether the beneficiaries’ had the right to occupy the property
  
  • If the doctrine of conversion was correct, the beneficiary did not have a right to occupy
  • Lord Denning in Bull v Bull ruled that a beneficiary in occupation had a right in land
• The beneficiaries themselves had limited recourse to the courts
  
  • Under s30 of the old LPA could apply to court for an order for sale
  • Difficult in cases where there was a single trustee, they could sell the land without the consent of the beneficiaries

Question 2

Main changes that came with the Trust of Land and Appointment of Trustees Act

Answer 2

• s3: doctrine of conversion abolished, so no duty to sell
  
  • Boland vindicated- the beneficiaries rights under a trust are in the land itself and not in the proceeds of a future sale
• s10: the trustee must obtain the consent of the beneficiary to sell the property
  
  • This can only prevent sale where a restriction is entered on the register
  • Overreaching can still occur
  • Sale can still happen against the wishes of the beneficiary
• s11: trustee has a statutory duty to consult the beneficiary about the use of the property (sale, etc)
  
  • Only a qualified duty to consult ‘so far as if practicable’
  • There is no duty to act on the beneficiary’s instructions
• s12: the beneficiary has a statutory right to occupy the premises (no need to resort to Bull v Bull)
  
  • Only a qualified right to occupy: the land must be held by trustees for the purpose of occupation by the beneficiary and must be available
  • If it was a buy-to-let, the beneficiary cannot occupy
• s14: either party may apply to the court for an order for sale or an order to postpone sale
  
  • A wider set of people who can apply the court
• s15: if an applicant comes to the court applying for an order, the court must consider the position of the party resisting sale
  
  • Only of limited use to party seeking to postpone sale if the other party is a creditor
  • Cannot prevent overreaching
• Tried to improve the situation by abolishing conversion, imposing duties on the trustee and giving the beneficiary rights to occupy, and any party can apply for an order, and the court must consider the position of the parties under s15

Question 3

Qualified right to occupy in TLATA

Answer 3

• s13(6): if one co-owner is excluded, the other may be required to pay occupation rent to the excluded party
• Dennis v MacDonald: co-owner was involuntarily excluded by partner’s violence. Violent co-owner required to pay occupation rent
  
  • If a co-owner is excluded against their will, they can get an exclusion rent
  • If the violent party was excluded by a court order, the remaining (innocent) party is not required to pay

Question 4

Disputes as to sale between co-owners

Answer 4

• In the old trust for sale, the courts developed case law to override the duty to sell, and came up with the collateral purpose case law
  
  • Will resort to this when dealing with s14 and s15 TLATA disputes
  • To prevent the minority trustee from forcing a sale
• To prevent minority trustee from forcing a sale, the court would look at ‘secondary’ or ‘collateral’ purpose for which property was purchased (the primary purpose being sale, under the old trust for sale)

Question 5

Re Buchanan-Wollaston’s Conveyance

FACTS

Answer 5

• Several neighbours with houses facing the sea joined to buy the property in front to prevent development from disrupting their view. One later moved and wished to sell against the wishes of the others

Question 6

Re Buchanan-Wollaston’s Conveyance

HELD

Answer 6

• The court used its discretion under s30 not to grant the order, because here the co-owners had entered into a contract to restrict their powers; one of the purposes of the trust was to preserve the sea view which was still capable of fulfilment
• Where there was a secondary purpose that was capable of fulfilment, the court will not make an order of sale

Question 7

Jones v Challenger

FACTS

Answer 7

• H & W had divorced and W had moved out. Sought order for sale. The house had been ought as a matrimonial home, but as the marriage was over, there was no other purpose than sale

Question 8

Jones v Challenger

HELD

Answer 8

• per Lord Devlin: the duty to sell “cannot prevail where the trust itself or the circumstances in which it was made show that there was a secondary or collateral object besides that of sale. In [Re Buchanan-Wollaston’s Conveyance] this purpose was expressed… in the other three cases the object of the joint tenancy was clear from the circumstances in which it was created. I see no inconsistency between [this case] and In re Mayo, in which no collateral purpose was manifest. There is, as I have said, some- thing akin to mala fides if one trustee tries to defeat a collateral object in the trust by arbitrarily insisting on the duty of sale**”
• The secondary purpose (the marriage) was over, and thus the duty to sell prevailed

Question 9

Re Ever’s Trust

FACTS

Answer 9

• Co-habiting couple bought house and then had children. M left and sought to sell house

Question 10

Re Ever’s Trust

HELD

Answer 10

• per Ormerod LJ: “The irresistible inference from these facts is that… they purchased this property as a family home for themselves and the three children… The underlying purpose of the trust was, therefore, to provide a home for all five of them for the indefinite future.” Since the children still lived there, the home could not be sold as the secondary or collateral purpose was still capable of fulfillment”
• The mere presence of children does not mean a sale will not be ordered [Re Citro]
  
  • see s15(1c) TLATA: they are considered separately from the question of whether the purpose of the trust was to provide them with a home

Question 11

Disputes as to sale between a co-owner and a creditor

Answer 11

• These disputes are between a creditor of one co-owner and the ‘innocent’ co-owner
  
  • i.e. one who is not under a contractual obligation to the creditor and whose interest takes priority over the creditor’s (e.g. Mrs Boland)
• The debtor co-owner cannot resist a sale
• Under the old trust for sale, 9 times out of 10, the courts would find for the creditor
  
  • There was a duty to sell
  • The courts did not want to create precedent where the creditor was likely to not get their money or realise their security because that would make banks too cautious about lending

Question 12

Bank of Baroda v Dhillon

FACTS

Answer 12

• H sole trustee holding on trust for self and wife. Granted mortgage to bank without W’s knowledge, arrears, bank applies under s 30 LPA 1925 for sale. W opposes because OI under s 70(1)(g) LRA 1925

Question 13

Bank of Baroda v Dhillon

HELD

Answer 13

• Court agrees that she has an OI, but sees the needs of the bank as more pressing since there is no likelihood of it ever receiving the money owing. Court has wide discretion to order sale and it can mean that in some circumstances they can defeat OIs
• If it looks like the only way for the bank to get its money is to force a sale, they will enforce it notwithstanding has priority and is in actual occupation
• When the home is sold, the innocent party gets their share of the proceeds
• The creditor usually prevails

Question 14

Abbey National v Moss

FACTS

Answer 14

• Widowed mother (M) owned home and daughter (D) persuaded her to put it into both her and D’s names so that it would be easier for D to inherit. M agreed only on condition that home not be sold during her lifetime. D then forged M’s signature on mortgage agreement for £30K, then left the country

Question 15

Abbey National v Moss

HELD

Answer 15

• per Peter Gibson LJ: “it seems to me plain that the most important consideration is the continuing collateral purpose, particularly when viewed against the background of how it came about that [D] acquired any interest at all… To order a sale seems to me not to be right and proper but to be grossly inequitable”
• Where there is fraud, the court may lean more favourable towards the innocent co-owner

Question 16

Application of old case law to TLATA

Answer 16

• The law commission report which led to the drafting of TLATA, there was emphasis put on that the needs of the co-owners and the creditors should start out evenly balanced, and the court should not have from the outset a preference for one party
  
  • Lord Neuberger in Mortgage Corporation v Shaire said that s15 has changed the law, not merely consolidated existing law. “As a result of s15, the court has greater flexibility than heretofore, as to how it exercises its jurisdiction on an application for an order for sale”
• But, in Bank of Ireland v Bell, Peter Gibson LJ ruled that “a powerful consideration is and ought to be whether the creditor is receiving proper recompense for being kept out of his money, repayment of which is overdue”
  
  • Mrs Bell could not repay the loan, so she had to sell, whilst in Mortgage Corp v Shaire, the innocent party could pay off the loan and it was not that high
• If somebody is in arrears, this does not necessarily mean they are bankrupt

Question 17

Application of old case law to TLATA

s14 + s15

Answer 17

• s14: a person with any interest in the property may apply to the court for an order may apply to the court for an order, either seeking sale or a declaration of interests under the trust
  
  • Any co-owner or secured creditor
• s15: the matter to which the court must have regard in determining an application under s14 include (not an exhaustive list):
  
  • The intention of the who created the trust
  • The purpose for which the trust property is held
  • The welfare of any minor
  • The interests of any secured creditor of a beneficiary

Question 18

Alliance & Leicester v Slayford

FACTS

Answer 18

• Mr S had bought home in his name and Mrs S (who had beneficial interest) had consented to it. Mr S had defaulted on loan. A & L claimed possession against Mr & Mrs S. Mrs S claimed priority for undue influence (her consent was set aside by court and she was in AO). Order for sale therefore normally sought under s15 TLATA 1996. A&L began debt proceedings intended to push Mr S into bankruptcy (bankruptcy claims are weighted in favour of creditors). Ss argued that such proceedings were an abuse of process.
• When H defaulted, bank, instead of applying for order for sale under s15, A&L sued H for arrears, thereby bankrupting him with a view to applying for sale under the more generous provisions of s 335A IA 1986. This was held not to be an abuse of process

Question 19

Alliance & Leicester v Slayford

HELD

Answer 19

• There was no abuse of process in a mortgagee because the bank had a right to exercise their debt right against Mr S, who cannot obtain possession as a result of successful assertion of an equitable interest by the mortgagor’s wife, then choosing to pursue its rights as an unsecured creditor of the mortgagor with a view to bankruptcy.
• LJ Peter Gibson – had sympathy for Ss but they had not been unfairly prejudiced by Bank – default had gone on for more than ten years during which time they kept living in the house without paying

Question 20

Disputes as to sale between a co-owner and a trustee in bankruptcy

Hope for Bankrupts Family

Answer 20

• s283 IA introduced by the Enterprise Act 2002 à the use it or lose it provision
  
  • “If, after 3 years from date of bankruptcy, the TB has not realised his interest in the ‘interest of the bankrupt in any dwelling house’ which, at fate of bankruptcy was the main residence of the family, that asset ceases to be part of the bankrupts estate”
• Avis v Turner: TB held the property for 16 years while innocent co-owner lived under the shadow of the trustee’s interest. TBs can no longer do this

Question 21

Disputes as to sale between a co-owner and a trustee in bankruptcy

Realisation under s283(A) IA

Answer 21

• Lewis v Met Property Realisations: the day before 3-year deadline, TB sold the interest to MPR for £1 plus the promise that MPR would give them 25% of net realisation of future sale
• HELD: Court rejected the transfer of interest MPS as constituting a realisation of the trustee’s interest since they would only have been paid in the future
  
  • Property had been re-vested in Mr L

Question 22

Re Citro

Answer 22

• Two brothers were joint tenants with their respective wives of the family homes. Both went bankrupt, trustee in bankruptcy sought sale under s 30 LPA 1925 (Insolvency Act 1986 was not yet in force at the time of the facts). Here, it was held that the trustee in bankruptcy should prevail
  
  • One of the wives and one of the children were very ill
• Held, per Nourse LJ: “As the cases show, it is not uncommon for a wife with young children to be faced with eviction in circumstances where the realisation of her beneficial interest will not produce enough to buy a comparable home in the same…Such circumstances, while engendering a natural sympathy in all who hear of them, _cannot be described as exceptional_. They are the melancholy consequences of debt and improvidence with which every civilised society has been familiar”
  
  • Hardship itself as a result of bankruptcy is not an exceptional circumstance

Question 23

Judd v Brown

Answer 23

• the sale was not ordered because moving would affect the innocent co-owner’s cancer treatment
  
  • Where it would negatively impact the health of the innocent co-owner, the sale will not be ordered (but, Re Citro)

Question 24

Claughton v Charambalous

Answer 24

• The house was specifically adapted to accommodate the needs of a severely disabled innocent co-owner who had not long left to live, and so order was not given
  
  • Disability alone is not sufficient

Question 25

Nicholls v Lan

Answer 25

• Wife’s disability (schizophrenia) not exceptional since she owned other property to which she could move. It is not the condition in itself which is exceptional, but the additional suffering that being forced to move would cause

Question 26

Re Bremner

Answer 26

• sale was postponed until three months after the anticipated death of the bankrupt who was terminally ill: here, the exceptional circumstance was not the condition of the bankrupt but that of the innocent co-owner, his wife, who was his only carer and who needed to stay in the property to care for him properly

Question 27

Test for exceptional circumstances

Answer 27

• Re Bremner: whether the problems that would arise following
  
  • Is the hardship caused by the bankruptcy or a chronic illness / severe disability?
  • Unclear – Re Citro v Re Bremner

Question 28

Problems with the test for exceptional circumstances

Answer 28

• This test is impossible to apply: all problems arising from having to give up the property follow from the process of bankruptcy – there is no difference between Mrs Citro’s homelessness or Mrs Bremner’s inability to care for her husband à both are results of bankruptcy and consequent realisation of bankrupt’s assets
• Barca v Mears: J Strauss QC: “In particular, it may be incompatible with Convention rights to follow the approach taken by the majority in Re Citro, in drawing a distinction between what is exceptional, in the sense of being unusual, and what Nourse L.J. refers to as the “usual melancholy consequences” of a bankruptcy. This approach leads to the conclusion that, however disastrous the consequences may be to family life, if they are of the usual kind then they cannot be relied on under section 335A; they will qualify as ‘exceptional’ only if they are of an unusual kind, for example where a terminal illness is involved”
  
  • Usually the creditors interests will prevail

Question 29

Type of lease, formality and protection

Answer 29

TYPE OF LEASE

FORMALITY

PROTECTION

3 years or fewer in possession

None: s54(2) LPA

Can be oral

No registration: OI sch3 p1 LRA

Because under 7 years

3 years of fewer not in possession

(reversionary)

Deed: ss52 & 54(2) LPA

Because not obvious

Registration: s27(2b) ii LRA

Because not in possession

More than 3 years but less than 7 or in possession

• not in possession

Deed: s52 LPA

Because over 3 years

Deed: s52 LPA

Because oer 3 years

OI sch3 p1 LRA

Because under 7 years

More than 7 years

Deed: s52 LRA

Because over 3 years

Registration: s27(2b) LRA

Because over 7 years

• 3 years only refers to the formality requirements in creating the interest in the first place
• 7 years refers only to the register
  
  • over 7 years – must be registered
  • under – overriding interest