TOLATA UPDATE Issuing a claim. Claims under the Trusts of Land and Appointment of Trustees Act 1996
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1 TOLATA UPDATE 2013 Issuing a claim Claims under the Trusts of Land and Appointment of Trustees Act 1996 A claim is normally brought under CPR Part 8 (short claim form and detailed witness statement in support). Proceedings should normally be issued in the County Court or the High Court Chancery Division. They have concurrent jurisdiction The appropriate county court is the court where the property is situated (unless there are pending divorce proceedings). 1. Claims under the Trusts of Land and Appointment of Trustees Act 1996 ( TLATA ) are invariably claims under section 14 of that Act for an order declaring the nature and extent of a person s interest in property subject to a trust of land (under section 14(2)(b)) and/or for an order for sale of the property (under section 14(2)(a)). 2. To have locus to bring a claim a party must, of course, establish that they are either a trustee of land or have an interest in the property subject to a trust of land. 3. Disputes in TLATA claims usually fall into one or more of the following classes: (i) Claims against the legal owner of property by a Claimant not named in the title documents at all. Disputes as to the quantum of beneficial ownership between joint legal owners where there is no declaration of trust. (ii) Claims that a declaration of trust that appears to regulate ownership should be disregarded. (iii) Disputes between former cohabitees (usually where they have children) as to whether a property should be sold at the breakdown of their relationship. (iv) Detailed assessment as to financial contributions disputes (whether one or other party is entitled to recover contributions made before or after the breakdown of a relationship). 1
2 Burden of Proof 4. The burden of proof in all cases is the civil standard (balance of probabilities) and depending upon the nature of the claim the following applies; i. If a property is registered in the sole name of one party the burden is on the party asserting joint ownership, ii. Thus in cases of sole legal ownership the burden is on the party claiming the beneficial ownership differs from the legal ownership, iii. In matters of joint ownership it is incumbent upon the party who asserts an interest other than that of a joint beneficial interest. Powers of the Court 5. The typical application is for a declaration as to the ownership of the shares within a property and as such regulation as to how such shares are held as between the parties. 6. Typically a client wants; i. A sale of a property so as to obtain equity, ii. The ability to buy the shares held by the other party so as to own the property outright, iii. Payment from the other party to reflect the contributions the client asserts they have made to the property and lifestyle of the parties. Procedural Checklist The Claim Form should be submitted using Form N1. The content of the Claim Form must comply with CPR 16.2, this requires a concise statement of both the nature of the claim and the remedy that the claimant seeks; 2
3 The Particulars of Claim must be contained in or served with the Claim Form CPR Rule 7.4(1)(a)); If not, then it must be served within 14 days after service of the Claim Form. In addition to this, the claimant must state on the Claim Form that the particulars of claim 'will follow'. The content of the Particulars of Claim must comply with the requirements set out in CPR 16.4 which requires both a concise statement of the facts upon which the applicant relies and a statement of the interest that the applicant seeks to assert; Who may apply? Section 14 of the 1996 Act Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section. On an application for an order under this section the court may make any such order; (a) relating to the exercise by the trustees of any of their functions (including an order relieving them of any obligation to obtain the consent of, or to consult, any person in connection with the exercise of any of their functions), or (b) declaring the nature or extent of a person s interest in property subject to the trust,as the court thinks fit. The court may not under this section make any order as to the appointment or removal of trustees. Section 15 of the 1996 Act The matters to which the court is to have regard in determining an application for an order under section 14 include; (a) the intentions of the person or persons (if any) who created the trust, (b )the purposes for which the property subject to the trust is held, (c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and (d) the interests of any secured creditor of any beneficiary. 3
4 Evidence Required It is of the utmost importance to meet with the client as soon as is possible so as to ascertain key fundamental facts that is likely to determine the outcome of a claim. 1. Obtain the conveyancing file. Conveyancing solicitors can be reluctant/slow to release the full file and a request must be made as soon as is possible. Once the file is produced look for; i. Is there a deed of trust or any documentation detailing the parties intentions at the time of purchase? ii. The mortgage application form. Who took the lead in sourcing the mortgage? What information was given by the parties to the lender at the date of application? iii. iv. A copy of the completion statement. The file note detailing the advice given to the parties as to the type of tenancy they would hold or any other legal advice as to the extent of their respective beneficial ownership. v. A solicitor s client care letter summarising the solicitor s instructions and thus intention of the parties. vi. vii. Did a conflict arise as between the parties? Did both parties engage and attend with the solicitor? Legal Advice given to the parties at the point of purchase Was the nature of a joint tenancy properly explained to the parties? Did the parties receive advice as to severing the tenancy? Is there an action against the conveyancing solicitor? 4
5 Financial Cost and contributions towards purchase 2. How was the purchase funded? How did the parties meet the mortgage? Any payments made towards buildings works/renovations? Was there a right to buy discount? Did either party make a particular contribution post purchase? Did the payments towards mortgage/bills reflect the ratio of purchase price? Case Law Update Geary v Rankine 2012 EWCA Civ 555 Facts: Mr Rankine and Mrs Geary entered into a relationship in They had one child, born in In 1996 Mr Rankine purchased a guesthouse ("Castle View") with 61,000, without mortgage, entirely with his own funds. It was originally intended that it would be run by a manager rather than either of the parties, but in due course Mr Rankine managed the business himself and Mrs Geary also became involved in the business. The parties separated in Mrs Geary claimed (1) that she had acquired a beneficial interest in the Castle View property and (2) that she and Mr Rankine had been partners in the guest house business. At first instance the Circuit Judge had rejected both claims. Court of Appeal Mrs Geary appealed to the Court of Appeal. Lewison LJ gave the main judgment in the Court of Appeal, with which Etherton and Thorpe LLJ agreed. On the partnership claim, Lewison LJ accepted submissions made on behalf of Mrs Geary that a family or quasi- family relationship was not incompatible with the 5
6 relationship of business partners and that a partnership can be founded on an agreement inferred from conduct. However he held that the Circuit Judge had been correct to find that Mrs Geary had not become a partner. In support of this conclusion he referred to the fact that the business accounts were drawn on the basis that Mr Rankine was a sole trader, they showed no evidence of sharing of profits, there was no evidence of Mrs Geary being held out as a partner to the outside world, there was no joint bank account and the business had carried on for a period of many months when the parties had separated. Additionally, even on Mrs Geary's evidence, Mr Rankine had been controlling and angry when she had asked him for money and he had kept the business in her sole name to protect her from potential bankruptcy should the business fail, both of which factors Lewison LJ took to contradict the notion that she became a partner. Lewison LJ held that perhaps in an extreme case conduct could override express intention, but he did not find the conduct in this case to override the parties' express intention. In any event, he further held that the freehold property was not necessarily property of the partnership. Lewison LJ then addressed Mrs Geary's TOLATA claim, i.e. that she held a beneficial interest in the property under a constructive trust, created by the parties' common intention. Mrs Geary accepted that at the time of the purchase of the guest house there was no common intention that she should have a share, however she claimed that the parties' common intention had changed, so as to give her an interest in the property. Common Intention Lewison LJ observed that the burden which fell on Mrs Geary, of establishing a "common intention constructive trust" was more difficult to discharge where the property was an investment rather than a home. He reviewed the relevant paragraphs of the Supreme Court decision in Jones v Kernott [2011] UKSC 53, quoting in particular paragraphs 51 and 52. He observed that the search is to ascertain the parties' actual shared intentions, whether express or to be inferred from their conduct. To this rule two exceptions exist: (1) where there is a presumption of resulting trust, which may arise where the partners are business partners as well as domestic partners and (2) where it is clear that the beneficial interests are to be shared but it is impossible to divine a common intention as to the proportions in which they are to be shared, in which case "each is entitled to that share which the court considers fair having regard to the whole course of dealing between them in relation to the property" (Oxley v Hiscock [2005] Fam 211 para 69). Resulting trust Lewison LJ held the presumption of resulting trust would work against Mrs Geary since Mr Rankine had put up all the money for the business. In this case, as the property was registered in Mr Rankine's sole name, there was a two stage test: firstly the claimant has to demonstrate that she should have any interest in the property at all and if she succeeded in that, the level of that interest then fell to be determined. Lewison LJ stressed that a common intention had to be common to both parties, so Mrs Rankine had to demonstrate that Mr Rankine had intended that she had a beneficial interest in the property, either expressly 6
7 or from his conduct. Lewison LJ rejected Mrs Rankine's challenge to the Circuit Judge's finding that Mr Rankine had not changed his intention so as to intend that she should have an interest. Mrs Geary's own evidence had been that Mr Rankine refused to "recognise her" until she divorced her previous husband (which she only did in 2002) and she had accepted that when she asked Mr Rankine what security there would be for her, he was either non committal or had said the business should remain in his sole name. Mrs Geary's case, in Lewison LJ's view, had amounted to saying that there was a common intention that the business be run together, but it was an "impermissibly leap" (paragraph 22) to go from that to a common intention that the property in which the business was run would belong to both parties. Thompson v Hurst 2012 EWCA Civ 1752 Facts: Ms Hurst ("Ms H") entered into occupation of the property in question ("the property") as a tenant of the local authority in In 1985 Mr Thompson ("Mr T") joined her and they lived there as a couple. In 2001 Ms H purchased the property at a discount under the right- to- buy scheme. They had two children. The relationship broke down in 2005 but because Mr T had nowhere else to go he remained in the property until At first instance the District Judge made findings of fact including, in summary, that: Mr T worked in various jobs throughout the relationship. There were periods when he was out of work. When in work he sometimes contributed as much as 100 per week, when out of work sometimes less. The money went on housekeeping, keeping the children, treating the children and occasional extras. Ms H was "running the home show" throughout. She had two jobs to pay the rent and subsequent mortgage payments. Her name alone was on the rent account and subsequent mortgage account, the electricity and the gas. She had sole responsibility for all the outgoings from the beginning to 7
8 the end of the relationship save for council tax (put into joint names in 2003). Both Mr T and Ms H wanted to purchase the property to provide something for the children their express agreed purpose. They both consulted a mortgage adviser but due to Mr T not having been in work for a continuous period of 6 months he was considered unsuitable. The mortgage was therefore made in Ms H's sole name and the property purchased in her sole name. At first instance the District Judge declared that Mr T had a 10% beneficial interest and Ms H 90%. She said the case was unusual, particularly in the way the parties kept their finances entirely separate. She was satisfied there was a common intention that Mr T was to have a beneficial share in the property. She found that there was no common intention about the beneficial aspect because neither of them thought about it. In reaching her conclusion that a 10% beneficial interest to Mr T would be fair she was guided by: 1. The only person who brought any financial contribution to the table of the purchase was Ms H. She had acquired the right to the discount by virtue of her occupation and consistent payment of rent before Mr T took up occupation. She arranged the mortgage, spoke to different potential lenders and worked out how much she could afford as the only reliable earner. She alone paid the mortgage. 2. The only subsequent major capital contribution when they were together in the property was 8000 received by Ms H from an Equal Pay award, largely applied in improvements to the property. 3. Mr T's contributions towards housekeeping were "perfectly reasonable amounts" and he also contributed to the council tax from 2003: "...the reality is that the basics and the ability to keep their house and live in their house was provided by [Ms H's] jobs and her financial discipline and order." 4. They were both responsible for improvements, repairs and renewals. She took into account three specific items on which Mr T relied. The District Judge found that Mr T did not really mind that his name was not on the deeds and that, once purchased, it was never discussed and never seriously taken as something that would happen by Ms H. Mr T made no contribution after Court of Appeal Mr T appealed on the grounds that the District Judge at first instance made errors of law in her approach to the quantification of his beneficial interest (it was submitted that if parties intend to purchase a property in joint names for their occupation as a couple but fail to do so only as a result of "external factors" then the court should proceed on the basis of what would have occurred if the parties had succeeded in that intention) and that her finding of a 10% beneficial interest was plainly wrong on the evidence. Mr T claimed he should have been entitled to 50%. The Court of Appeal (Etherton, Lewison and Thorpe LJJ) dismissed Mr T's appeal. 8
9 Judgment Mr T's starting point was not accepted. The transfer was not into joint names. There was therefore no scope for a legal presumption that the parties intended a joint tenancy in law and equity. Counsel for Mr T's argument amounted to a submission that there should be a legal presumption of joint beneficial ownership not merely where the parties are indeed joint legal owners but where there is evidence that they would have liked to be but for one reason or another that was not practical or desirable. Neither Stack nor Jones nor any other case was authority for such a proposition. The proposition was neither consistent with principle nor sound policy. In any event it was unrealistic to make the assumption that had matters proceeded as the parties intended, inevitably they would have been joint legal owners without any express declaration as to the trusts on which they held it. It cannot be assumed they would have agreed they were to be joint beneficial owners as well as joint legal owners bearing in mind the facts of this particular case. Having reached the conclusion that there was a common intention that Mr T was to have a beneficial interest (in respect of which he had some difficulty in understanding but there was no cross- appeal on that aspect) but that there was no common intention, express or inferred, about what the respective beneficial interests should be, the District Judge carried out the task of determining what would be fair having regard to the whole course of dealing between them in relation to the property in a careful and exemplary fashion. It was quite impossible to say any error of principle was made or she was plainly wrong. Chapman v Jaume 2012 EWCA Civ 476 Facts The Court of Appeal heard the appeal by the claimant for repayment of 162, being money he claimed to have lent to the defendant during their cohabitation. The claimant also sought interest on the sum and stated that the monies had been used to pay for refurbishment of the defendant's property including new fireplaces, bathrooms and general renovation. The claimant asserted that the parties had agreed that the sums were repayable upon the defendant selling her property or her youngest child reaching the age of 18. The defendant claimed that the claimant's contributions were in fact in lieu of his contributions to the running costs of the home they shared. The claimant initially sought to recover his monies by asserting a beneficial interest in the property but when his attempts at registering such interest with the Land Registry failed he abandoned that assertion. 9
10 Before His Honour Judge Hand QC, the claimant was unsuccessful because despite finding that there had been some sort of agreement, the judge held that the claimant had failed to prove the precise conditions about the time at which the money would be repaid and thus his claim failed in its entirety. Court of Appeal The Court of Appeal allowed the appeal because on the facts found by the judge, an inference should have been drawn that the money was repayable within a reasonable period of time. As to what a reasonable period of time might be, would it was held, depend on the facts in the case but in the present case a reasonable time would have been at the time the house was sold. Appeal allowed and the case would be remitted to the County Court to determine issues of quantum. A Sale of the Property 1. Clients often assume that once a beneficial interest is established it secures an order for sale. 2. It does not inevitably follow that by establishing a beneficial interest, a party will go on to secure an order for sale. 3. Section 14 of the act affords the trial judge with discretion as to whether an order for sale should be made. 4. Section 15(1) illustrates the criteria; The matters to which the court is to have regard in determining an application for an order under section 14 include: (a) the intentions of the person or persons (if any) who created the trust; (b) the purposes for which the property subject to the trust is held; 10
11 (c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home; and (d) the interests of any secured creditor of any beneficiary. 5. It follows applications for orders for sale will now often involve a detailed analysis of the personal circumstances of each family member with details of any health or welfare issues and the aspects of their life that will be affected by the loss of their home and potentially the need to move to another area. 6. There is no provision under the act that affords a party an automatic right to buy out the share of the other. It is permissible for a party to seek an order placing the property on the open market for sale so as to test the market and ascertain its true sale price. Occupation Rent 1. In Stack the House of Lords was unanimously of the view that the court s power to order payment to a co- owner of an occupation rent was no longer governed by the doctrine of equitable accounting but was instead governed by sections 12 to 15 of the Trusts of Land and Appointment of Trustees Act It was stated, however, that it would be a rare case in which the new principles would produce a different result. 2. The Court of Appeal have since applied Stack in Murphy v Gooch ([2007] EWCA Civ) adding: 3. [14] Under the previous equitable doctrine the court was concerned only with considerations relevant to achieving a just result between the parties. The statutory innovation is section 15, which requires the court in determining applications for an order under section 14 to include [the matters listed in the statute] The wider ambit of relevant considerations means the task of the court must now be, not merely to do justice between the parties, but to do justice between the parties with due regard to the relevant statutory considerations and in particular (where applicable) the 11
12 welfare of the minor, the interests of secured creditors and the circumstances and wishes of the beneficiaries specified. 4. As stated above, in Stack v Dowden it had been stated that the statutory powers in the 1996 Act had replaced the old doctrine of equitable accounting under which a beneficiary who remained in occupation might be required to pay an occupation rent to a beneficiary who was excluded from the property. Stack was, however, a case in which both parties had a right of occupation. 5. The facts and decision of Stack v Dowden suggests that the requirement to consider the welfare of minors may tip the balance against the award of an occupation in more than the rare case. The court made an order for sale but the mother who occupied the property with her four children was not required to pay an occupational rent down to the date of sale because both parents were responsible for providing the children with a home. 6. In Byford v Butler [2003] EWHC 1267 (Ch), [2004] 1 FLR 56, there had been no ouster or exclusion at all. Following the husband's bankruptcy, the trustee in bankruptcy simply failed to bring proceedings in respect of the matrimonial home for many years. The husband lived at the home until his death. Despite the court noting that in "the typical case an occupation rent has been charged where the party in occupation has actually or constructively excluded the other party from occupation the widow still had to pay an occupation rent. The court emphasised the words of Millet J, in Re Pavlou, that the finding of ouster or forcible exclusion were "far from conclusive". The court was exercising discretion 12
13 to bring justice and equity to the parties. The widow had benefited for many years from the half share vested in the trustee in bankruptcy, who was not able to occupy the property for the benefit of the creditors. Costs 1. Whether the claim is commenced under Part 7 or Part 8, the provisions of CPR 44.3 lie at the heart of the Court s discretionary powers on costs; 2. The court has discretion as to i. Whether costs are payable by one party to another; ii. iii. The amount of those costs; and When they are to be paid. iv. If the court decides to make an order about costs (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order, v. The court has the power to take into account pre- action conduct in making any order for costs and in determining the quantum of those costs whether or not there is a pre- action protocol in respect of those proceedings, vi. Under CPR r.36.2(2), the offer must: be in writing, vii. State that it is intended to have the consequences of Part 36, viii. ix. Specify a period of not less than 21 days within which the Defendant will be liable to pay the Claimant s costs if the offer is accepted, An offer may not be withdrawn or reduced within this period without the permission of the court r.36.3(5), x. Specify that it relates to the whole of the claim or which part of the claim or which issue it relates to and whether it relates to any counterclaim. Neil Montaldo St Johns Buildings
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