Ali v Khatib & ors [2022] WTLR 811

Analysis

Title to a property (the property) passed on the death of Mohammed Ali in 2003 to his wife Fateh Bibi (Mrs Bibi). Mrs Bibi died on 11 July 2006, having made a will dated 7 January 1997 (the 1997 will). Under the 1997 will, Mrs Bibi left her residuary estate in equal shares to her children: Farzand Ali, Mohammed Ramzan, Mohammed Iqbal and Parveen Iqbal. In probate proceedings brought in 2012 by Farzand in relation to Mrs Bibi’s estate, an order pronouncing in favour of the 1997 will was made on 24 January 2014 (the 2014 order). The 2014 order also pronounced against a document dated 2 October 2003 (the 2003 will), which purported to be a will made by Mrs Bibi, and which would have bequeathed and devised the property to Mohammed Ramzan absolutely. Probate of the 1997 will was granted to Mr Laith Khatib in March 2017. After Mrs Bibi’s death, Mohammed Ramzan, his wife Shanaz and his family lived in the property. In May 2011, Mohammed Ramzan was registered as proprietor of the property. He died in 2013.

In January 2020, Farzand commenced Part 8 proceedings seeking, among other things, an order for the sale of the property with vacant possession. He also sought orders that Shanaz, as the personal representative of her husband’s estate and personally, give up possession for the sale and account to Mr Khatib, as Mrs Bibi’s personal representative, in respect of the occupation of the property by Mohammed Ramzan and herself from the date of Mrs Bibi’s death until vacant possession was delivered up.

Part of the claim was settled soon afterwards on terms of a Memorandum of Agreement under which Farzand would receive the sum of £80,000 from Shanaz, Mohammed Iqbal and Parveen to compromise his capital claim in respect of the property, but it was stated that the payment would not prejudice his beneficial entitlement to occupation rent (‘if any’) owed to the estate. The terms of the Agreement were set out in the schedule to a consent order, in which Shanaz acknowledged a liability to account, in an amount to be determined by the court, and the parties agreed to instruct a single joint expert to determine the level of occupation rent payable.

At the hearing, the judge concluded that:

1. (1) occupation rent was a form of equitable accounting;
2. (2) at common law, one tenant in common was not entitled to rent as against the other unless there had been an ouster;
3. (3) a court of equity would order an enquiry and payment of occupation rent, not only where a co-owner had been ousted, but also in any case in which it was necessary to do equity between the parties; and
4. (4) the default position was that occupation rent was not payable and, accordingly, there should have been some conduct by the occupying party, or feature relating to them, which made it fair to depart from the default position.

The judge held that no occupation rent, or statutory compensation under the provisions of the Trusts of Land and Appointment of Trustees Act 1996 (the 1996 Act), was payable. Mrs Bibi had intended that Shanaz and Mohammed Ramzan should live in the property until its sale and the house was intended to be a home for their minor children. There was no conduct on their part to justify an award of occupation rent, nor any exclusion or restriction of the right of Farzand to the property so as to give rise to statutory compensation. When analysing the £80,000 received by Farzand for his quarter interest in the property, even if the question of occupation rent or statutory compensation arose, making an award would be to overcompensate Farzand and not to do ‘broad justice’.

Farzand died in March 2020 and his personal representative appealed.

Held:

The appeal was dismissed. Five grounds of appeal were pursued:

1. (1) The first ground was that the judge proceeded on the wrong basis. It was argued on appeal that, as neither Shanaz nor Mohammed Ramzan was a co-owner of the property for the purposes of the 1996 Act, or in equity, neither of them had enjoyed a right of occupation of the property after Mrs Bibi’s death. Shanaz had no entitlement and Mohammed Ramzan was, until the residue was ascertained, entitled only to a share of Mrs Bibi’s estate and not to a share of the property. They were therefore liable for their occupation. This raised a point that had not been pursued before the first instance judge. Although there was no general rule that a case needed to be exceptional before a new point would be allowed on appeal, relevant factors had to be considered, including the nature of the proceedings in the lower court and any prejudice to the opposing party if the point were allowed to be taken. It was held that allowing the new point would require a complete recasting of the claim, with the amendment of the pleadings and a retrial, to a claim for damages in trespass rather than for an account. The appellant was not permitted to proceed with this ground of appeal.
2. (2) The second ground of appeal was that, by the terms of the Memorandum of Agreement and the consent order, Shanaz had agreed to pay for her use and occupation, or the terms gave rise to an evidential estoppel; the only issue before the court was quantum. The court held that the judge was entitled to approach this matter as one of construction of the Memorandum of Agreement and the consent order and his conclusion was that the words ‘if any’ meant that there might be no liability.
3. (3) The third ground of appeal was that the judge was wrong to find that there was no exclusion. The court found that neither Shanaz nor Mohammed Ramzan had been involved in the making of the 2003 will and Farzand did not know of it until 2012, when it was pleaded in the defence in his probate claim, so this could not have affected Farzand’s ability to realise his legacy. Mohammed Ramzan’s registration as proprietor was based erroneously on the 2003 will and meant that he held the legal title on trust for himself and his siblings, so it was not inevitable that there was an exclusion. In addition, the findings of the judge that it was unrealistic for Farzand to occupy the property as his own family home and that he was not satisfied Farzand intended to live there or would have done so but for Shanaz and Mohammed Ramzan’s presence (which were not appealed) justified the approach of the judge in relation to exclusion.
4. (4) Fourthly, it was argued that the judge was wrong not to make an order for occupation rent, given the other features of the case:
   1. (a) Other features were that Farzand had not been in a position to apply for an order for the sale of the property during the relevant period and was obliged to bring a probate action and then wait for a reasonable period for Mr Khatib to act. It was therefore unjust for him not to recover an occupation rent having succeeded in the probate proceedings. Even though the inability to sell the property had not been raised before the judge, the court held that the judge had already taken this matter into account in exercising his discretion as to whether to award an occupation rent.
   2. (b) Another factor was the rise in value of the property and the effect that had on the settlement sum. It was held that this argument was not open to be argued as it was not mentioned in any of the grounds of appeal. In any event, there was no rule that a co-owner must be awarded occupation rent in addition to the benefit they might receive from an increase in the capital value of a property. It depended upon the relevant circumstances and what would be fair. The judge was entitled to take a broad view of the case and to conclude that he would not exercise his discretion to award occupation rent.
5. (5) The fifth ground of appeal was that the judge was wrong not to award occupation rent because it was invariably awarded in the case of trustees in bankruptcy. It was argued that Farzand’s position was analogous to that of a trustee in bankruptcy who did not enjoy a right to occupy property jointly owned by the bankrupt and, in such a case, there was a presumption that occupation rent would be payable. It was held that the judge was exercising a broad equitable jurisdiction to do justice between co-owners, while also taking the statutory provisions of the 1996 Act into account and on the facts of the case was entitled to decide as he did. The presumption was that an occupation rent was not payable.

JUDGMENT LADY JUSTICE ASPLIN: [1] This appeal raises issues in relation to when occupation rent is payable and the circumstances in which new points can be argued on appeal. Background [2] The issues arise in the context of a long-running family dispute about the administration of the estate of Mrs Fateh Bibi (‘Mrs Bibi’) and, …

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