Bagum v Hafiz & anr [2015] EWCA Civ 801

WTLR Issue: October 2015 # 153

BAGUM

V

HAFIZ

HAI

Analysis

The claimant and two of her sons, the first and second defendants, were trustees of a residential property in Copenhagen Street, Islington which they held on trust for themselves as tenants in common in equal shares. The parties had all contributed financially to the purchase of the property, in which they lived for some time along with the claimant’s other children. The crowded conditions led to tensions, and to the second defendant leaving the property.

The claimant issued proceedings seeking an order obliging the second defendant to sell his interest in the property to the first defendant, or alternatively an order for sale of the property. In his defence the second defendant agreed that the Property should be sold.

Directions were given for the trial, as a preliminary issue, of the claimant’s claim for an order that the second defendant sell and transfer his interest in the Property to the first defendant. Her Honour Judge May QC decided that she had no jurisdiction to make such an order, but ordered that the Property should be sold on terms that the first defendant should have the opportunity to purchase the Property at a price to be determined by the court. In default of the first defendant completing the purchase within six weeks of the court’s determination of the price, the Property should be sold on the open market by private treaty with liberty to all parties to bid.

The second defendant appealed against the Judge’s decision, arguing that she had no jurisdiction to make such an order and secondly, if she did, that it was not a proper exercise of her jurisdiction under the Trusts of Land and Appointment of Trustees Act 1996. By her respondent’s notice (supported by the first defendant) the claimant submitted that the judge did have jurisdiction to make the order that the second defendant should sell his interest in the property to the first defendant.

Held (dismissing the appeal and the cross-appeal):

  1. 1) The court does not have the power under s14 of the Trusts of Land and Appointment of Trustees Act 1996 to order or direct that one beneficiary under a trust of land should sell or transfer their beneficial interest to another beneficiary. Section 14(2) provides that, ‘The court may make any such order – … relating to the exercise by the trustees of any of their functions … as the court thinks fit.’ It is no part of the functions of trustees of land to deal with or dispose of beneficial interests under the trust, whether by sale of otherwise, at least not directly.
  2. 2) The court does have the power under s14 of the Trusts of Land and Appointment of Trustees Act 1996 to direct trustees of land to sell the trust property to particular beneficiaries without the consent of the beneficiary or beneficiaries to whom the land is not being sold. A sale of the trust property to particular beneficiaries is one example of the trustees’ undoubted power of sale.
  3. 3) In exercising its powers in circumstances where, necessarily, the beneficiaries will be in dispute with each other about what should be done with the trust property, the court is not rigidly constrained by those rules of equity which may, pursuant to s6(6) of the Trusts of Land and Appointment of Trustees Act 1996, constrain the trustees themselves. The clear object and effect of ss14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996 is to confer upon the court a substantially wider discretion, exercised upon the basis of wider considerations, than might be enjoyed by the trustees themselves, acting without either the consent of their beneficiaries or an order of the court.
  4. 4) The challenge to the judge’s order on the ground that it was not a proper exercise of her discretion must fail. On appeal the court is not concerned with the question whether, in its view, the Judge reached the right solution, but whether her order fell within the broad confines of the statutory discretion conferred upon the court. The order was unusual and in many similar cases the court has ordered a sale of the trust property with liberty to all beneficiaries to bid, thereby maximising the prospects of the achievement of the best value. But the judge was plainly aware of this and she carefully analysed the intentions of the persons creating the trust, and the purposes for which the trust had been created, namely to secure the continued availability of the Property as a home for the claimant, the first defendant and their families, and to secure a financial interest in the property for the second defendant. The order was calculated to minimise the risks that the interests of the claimant and the first defendant and their families in continued occupation, and the interests of the second defendant in obtaining a payment representing the proper value of his interest, might be materially compromised.
JUDGMENT BRIGGS LJ: Introduction [1] This appeal and cross-appeal against the order of HHJ May QC made in the Central London County Court on 9 September 2014 raises (so we were told by counsel) for the first time in this Court questions as to the discretionary power of the court to make orders under s14 …
This content is only available to members.

Counsel Details

Mr Nigel Woodhouse (42 Bedford Row Chambers, 42 Bedford Row, London WC1R 4LL, tel 020 7831 0222, e-mail clerks@42br.com) instructed by Benchmark Solicitors (Benchmark Solicitors, 143 Temple Chambers, 3-7 Temple Avenue, London EC4Y 0DA, tel 020 3405 4540, e-mail info@benchmark-solicitors.co.uk) for the appellant.

Mr Andrew Skelly (Hardwicke, Hardwicke Building, New Square, Lincoln’s Inn, London WC2A 3SB, tel 020 7242 2523, e-mail enquiries@hardwicke.co.uk) instructed by Osbornes Solicitors LLP (Livery House, 9 Pratt Street, London NW1 0AE, tel 020 7485 8811, e-mail enquiries@osbornes.net) for the first respondent.

Mr Richard Owen-Thomas (3 Paper Buildings, 3 Paper Buildings, Temple Ln, London EC4Y 7EU, tel 020 7583 8055, e-mail clerks.london@3pb.co.uk) instructed by Public Access for the second respondent.

Cases Referenced

Legislation Referenced

  • Law of Property Act 1925, s30
  • Trusts of Land and Appointment of Trustees Act 1996, ss 1, 6, 7, 14, 15