ToLATA Claims : review of how the Courts determine an individual’s (beneficial) interest in land (part 1)

Trusts of Land and Appointment of Trustees Act 1996 (ToLATA) Claims: review of how the Courts determine an individual’s (beneficial) interest in land 

Where there is a dispute about the extent of an individual’s interest in (real) property there are the usual causes of action available to them under the Matrimonial Causes Act 1973 or the Inheritance Provision for Family and Dependants Act 1975 should they qualify to bring such a claim. The alternative is a claim under ToLATA.

Abha has recently advised on two very similar ToLATA claims. They both concerned declarations of trust made some time ago but where nonetheless a dispute concerning beneficial interests was now brewing following the end of personal and business relationships.

This article is the first in a series of three about claims to determine the beneficial interest in a property. This article focuses on the validity of Declarations of Trust, the next on the options when there is no such declaration, and finally a third which discusses other matters such as evidence and why there is so much confusion nonetheless in this area of law.

Part 1 Declaration of Trusts

Determining the Beneficial Interest in a Property under a ToLATA claim

The relevant case law to such claims are grounded in the law of equity. Those cases in which the parties were co-habiting, married or in civil partnership still dominate the case law. The leading case remains Jones v Kernott [2011] UKSC 53.

Jones v Kernott sets out a list of enquiry which will assist the court in identifying the beneficial interests:

1. If there is an express declaration of the parties interests (a declaration of trust) that is the end of the matter unless it can be said to have been entered into due to fraud or mistake, or there has been a variation to that declaration with the agreement of the parties;
2. If there is no such express declaration, what was the understanding between the parties;
3. Where there is no evidence of any understanding between the parties, the Court can then turn to presumptions e.g. the equitable title follows the legal title; however presumptions are just presumptions and are rebuttable;
4. There is then the resulting trust approach (what each party put in reflects what they get out) but this is not of much relevance today;
5. The actual facts as these may reveal that following the relevant presumption may lead to an unfair outcome.

Declarations of Trust

An express declaration of trust will be the final word on beneficial interests. It will not be possible to assert a resulting or constructive trust, unless the declaration of trust was entered into by mistake or through fraud, or the declaration of trust was varied by subsequent agreement of the parties.

There is also the possibility that subsequent ownership of the property and management of expenses leads to any agreement between the parties which gives rise to claim for proprietary estoppel e.g. I (A) cannot afford to pay for the new roof but if you (B) do, I will give you part of my beneficial interest in the property. B pays for the new roof.

It is a requirement under section 53(1)(b) that a declaration of trust must be in writing and indeed any disposition of a beneficial interest must be in writing (section 53(1)(c)).

In Pettitt v Pettitt  [1970] AC 777, the legal title to the property was in the wife’s name only and only she had made contributions to its purchase but the husband claimed for a share on the basis that he had undertaken work on the property. This was a case before the Matrimonial Causes Act 1973 and of course before ToLATA.

The claim was instead brought under the Married Woman’s Property Act 1882. The applicant husband had succeeded in his application for a share of the property however the House of Lords held that a discretion to determine the beneficial interest in the way exercised in the courts below had not in fact been conferred by Parliament under the 1882 Act.

Lord Diplock  at page 821, paragraph F states:

“Ever since 1882 husband and wife have had the legal capacity to enter into transactions with each other such as… declarations of trust so as to create legally enforceable rights and obligations… Where spouses have done so, the court has no power to ignore or alter the rights and obligations so created”.

Thus, the declaration of trust, if there has been one made by the parties determines the beneficial interests, subject to fraud, mistake or a variation by agreement of all the parties.

This was affirmed in Goodman v Gallant [1986] 1 FLR 106 where the express declaration of trust in the conveyancing documentation set out that the parties owned the properties as joint tenants, with the effect that the severance of the tenancy entitled them to 50% each of the sale proceeds (at page 117 C-D).

The more recent case of Pankhania v Chandegra [2012] EWCA Civ 1438 reiterates that the declaration of trust will determine the beneficial interests unless there is fraud, mistake or a variation of the agreement.

One of the side effects of rising house prices in the last 25 years or so has been the rise in the number of people seeking to purchase properties together for affordability reasons. This has correspondingly led, rightly, to a more proactive approach by some conveyancing solicitors in advising their clients to make formal declarations of trust.

If you are jointly purchasing a property with anyone, you ought to execute a declaration of trust. You should also review and update that document regularly in case your arrangements change.

If you are the lawyer acting on the purchase of the property, you ought to advise your client to enter into a declaration of trust and make a clear note that you have done so, as well as noting any instructions as regards the beneficial interests in the property.

Part 2 of this article series explores the court’s approach where no such express declaration of trust has been made and will be made available in early 2021.

Read more about Abha’s expertise and how to instruct her here.