Analysis
The deceased and the respondent were siblings who co-owned farmland in equal shares and used it in a partnership between them (though it was not a partnership asset). After the deceased died, the respondent remained in occupation and continued to farm the land. His executors (the appellants) therefore applied for an order for sale under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA).
The appellants also claimed an occupation rent, which the respondent admitted she was liable to pay. Before trial, the appellants sought and obtained an interim order for payment of an occupation rent.
The trial judge held that there should be a sale, but that the respondent should have an opportunity to purchase the land at a pre-determined price. In deciding to make the order, the judge recognised that the risk that the price might underestimate the land’s value was a ‘key matter’ but not a ‘threshold matter’. He also determined that, where the two expert valuers held justifiable but differing views, he should err on the side producing higher figures as this reduced the risk. He then went on to accept some but not all of the appellants’ expert’s valuation positions.
The judge also held that the occupation rent which had been paid by the respondent had been while she had been occupying on behalf of the partnership between the respondent and the deceased. He doubted whether the interim order for payment of an occupation rent had been properly made, but since the rent was paid by the partnership, it ought to be brought into the partnership’s dissolution accounts as a cost to the partnership.
The appellants appealed on four grounds:
- 1) that the order to sell to the respondent at a pre-determined price was outside the court’s jurisdiction because it was effectively an order that the appellants sell her their beneficial interest;
- 2) that the order to sell to the respondent at a pre-determined price was unlawful because the trial judge had not found that the risk of that price being below market value was ‘low’ or not ‘appreciable’;
- 3) that the judge had failed to take into account relevant factors and had taken into account irrelevant factors; and
- 4) that the judge should not have made the order concerning occupation rent.
Held (allowing the appeal on ground 4 only):
Ground 1: did the court’s order fall outside the s14 TOLATA jurisdiction because it was effectively an order requiring the appellants to sell their beneficial interests to the respondent?
The court is entitled to make an order under s14 TOLATA requiring the trustees to sell the trust property to a beneficiary. While this might have the same effect as an order requiring one beneficiary to sell the trust property to the other (which the court cannot do), this does not change the legal reality that the order is one requiring a sale by the trustees of the whole legal and beneficial interest which is within the court’s powers (applying Begum v Hafiz). The fact that the court used the mechanism of requiring the purchasing beneficiary to provide only half of the purchase price to the trustees did not make it any less a sale of the legal estate by the trustees. Ground 1 therefore failed.
Ground 2: did the court’s order fall outside its jurisdiction because the court did not find that the risk of the sale price being below market value was ‘low’ or that the risk was not ‘appreciable’?
To make an order requiring firstly the trustees to sell at a pre-determined price to a beneficiary, the court did not have to find that the risk of the assessed price being below market value was ‘low’ or that the risk was not ‘appreciable’. The risk of an undervalue will, however, be relevant in the exercise of the court’s discretion.
While Art 1 of the First Protocol of the European Convention on Human Rights is engaged on an application under s14 TOLATA, ‘by and large’ compliance with s15 TOLATA will satisfy Art 1 (applying National Westminster Bank plc v Rushmer). On the facts, there was no breach of Art 1 because there was no deprivation of the appellants’ property because they would receive value as determined by the court in a proper and fair manner. It was sufficient for this purpose that the state had put in place a system for providing proper value short of full market testing (James v United Kingdom applied). The fact that a threshold rule might lead to shorter trials was irrelevant. Ground 2 therefore failed.
Ground 3: did the judge fail to exercise his discretion properly due to taking irrelevant matters into account and leaving relevant matters out of account?
The judge did not err by failing to quantify the risk of the sale price being an undervalue either in percentage terms or in categories such as low/medium/high. He was plainly aware of the risk question and regarded it as a key matter, and both parties’ experts agreed that estimating hope value rather than taking the base value and adding an overage provision was an acceptable way of approaching valuation. Reading his judgment in context, it was clear enough that he was confident that he could get close enough to the true value so as not to cause injustice, and this was a conclusion he was entitled to reach bearing in mind that he erred in favour of the appellants on certain disputed matters.
The judge’s decision to adopt the approach of the respondent’s expert on one particular matter (budgeting £70,000 for a mains water supply rather than £20,000 for a borehole) was not inconsistent with his broader decision to err on the side of the appellants on questions of valuation. This was not a dispute about the valuation of works but about what a developer would likely require. Having concluded that a developer would not be content with a borehole and would want to pay as little as possible, then even applying the judge’s own guidelines he was entitled to make this finding and calculate value accordingly. In addition, the judge’s decision to favour the respondent’s expert’s evidence on a particular comparable did not contravene his own guidance where the appellant’s expert had not explained why the comparable was not a good one and had not addressed access issues in relation to the part of the land in question.
While the judge felt a ‘nagging doubt’ as to whether the respondent intended to continue farming the land ‘as it currently is’, he took this into account in exercising his discretion. This was not inconsistent with his finding that the order would enable the respondent to continue to farm the land since she could still farm part of the land.
The judge was not required to apply s39 Partnership Act 1890 (under which there was said to be a presumption in favour of sale in the open market (Benge v Benge) by analogy. The factors the court must take into account under s15 TOLATA are very different and in any event the land was not partnership property.
Ground 4: occupation rent
The judge’s decision was premised on his view that the respondent was occupying on behalf of the partnership for the purposes of winding it up rather than on her own behalf. However, her defence had admitted liability to pay an occupation rent, and this position was maintained on the interim application for payment of an occupation rent and in an open offer. There was therefore no evidence on the matter and it was unnecessary to consider the implied licence to a partnership in dissolution which may arise (Lie v Mohile). It was ‘plain enough’ that she was in fact occupying the land in her own right and therefore obliged to pay occupation rent. The appeal was therefore allowed on ground 4.
JUDGMENT MANN J: Introduction [1] Until his death on 27th June 2015 Roger and Sally Kingsley (who were brother and sister) farmed land at Lodge Farm, Cottered, Nr Buntingford, Hertfordshire in partnership. The principal land on which they farmed (which is the land in relation to which this appeal arises) was owned by them beneficially …Continue reading "Kingsley & anr v Kingsley [2020] WTLR 593"