Analysis
Three parcels of land known as Pleasant Rise and Pleasant Rise Farm were held on trust for the respondent and the four children of his late brother (the siblings, including the appellant). The respondent had a two-thirds interest in the largest parcel of land, a three-quarters interest in the second largest parcel of land, and a one-half interest in the smallest parcel of land. The remaining interests were held by the siblings. The properties included land upon which the appellant ran a business involving a campsite, a tennis court and other facilities.
An order for sale was sought at the instigation of the respondent’s ex-wife in financial remedy proceedings, but the beneficiaries could not agree between themselves how a sale should take place. The judge at first instance made an order that gave the appellant a right to buy out the respondent’s interest in the properties before they were offered for sale on the open market, at a price of £666,150.
Section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) provided the court with the power to make any order relating to the exercise by the trustees of any of their functions, including that of selling the property, ‘as the court thinks fit’. Section 15(1) provides that ‘[t]he matters to which the court is to have regard in determining an application for an order under section 14 include… [various matters]’. Section 15(3) then provides that in exercising such powers:
‘… the matters to which the court is to have regard… include the circumstances and wishes of any beneficiaries of full age and entitled to an interest in possession in property subject to the trust or (in case of dispute) of the majority (according to the value of their combined interests).’
The judgment of the district judge indicated that in deciding to make that order, he took account of the circumstances and wishes of the respondent, as majority beneficiary by value, whom he recorded also owned a piece of neighbouring land and wished to see the properties sold as a whole and to ‘move on with his life’.
The district judge also held that he was not prevented by s15(3) of TOLATA from having regard to the circumstances and wishes of the siblings, as minority beneficiaries. He recorded that the siblings supported the appellant being given a right of pre-emption over the land from which he conducted his business.
The core of the district judge’s reasoning in relation to s15(3) TOLATA was that the main discretion was conferred by s14, and s15 included only a non-exhaustive list of factors. He said that this indicated that although the court was obliged to take into account the factors in s15, it was not to be governed by them alone.
On appeal, the judge held that because there was a dispute between the beneficiaries, s15(3) precluded the court from having any regard to the circumstances and wishes of the siblings (as minority beneficiaries), and the only wishes and circumstances that could be taken into account were those of the respondent, as the majority beneficiary by value.
The judge reasoned specifically that once a particular factor was expressly stated to be required not to be taken into account, it was not a reasonable interpretation to state that such a factor could then be included within the factors that may be considered, and in consequence the wording of s15(3) must mean that once the parties are in dispute then the only wishes and circumstances that can be taken into account are those of the majority beneficiary. The appellant brought a second appeal.
Held:
The appeal would be allowed; s15(3) did not preclude the consideration of the wishes and circumstances of the minority beneficiaries.
The obvious starting point must be the provisions of s14 TOLATA, under which the court was given a broad discretion to make whatever order in relation to the relevant matters mentioned in s14(2) ‘as the court thinks fit’.
It was settled law that s15(1) is not exhaustive, and hence that even if a factor is not listed in s15(1) as one to which the court must have regard, then both as a matter of linguistics and also having regard to the context provided by s14, it must be permissible for the court to take it into account if it thinks fit, unless it is otherwise excluded by express words or necessary implication.
As a matter of linguistics, s15(3) therefore simply identified some additional matters to those listed in s15(1) that the court must take into account (‘is to have regard’) in the two specified cases. But like s15(1), there was no indication that these additional matters were intended in any way to be exhaustive. The difference which s15(3) made is that in the case of a dispute, there was no obligation upon the court to have regard to the circumstances and wishes of the minority.
The judge’s view – that as a matter of linguistics the only meaning of s15(3) that made grammatical sense was if, in the case of a dispute, the court ‘can only take’ one of the matters into account – was wrong. Nor was he correct in ruling that ‘once a particular factor is expressly stated that it should not be taken into account, then it is not a reasonable interpretation to state that such a factor could then be included within the factors that may be considered’. Section 15(3) did not expressly, or by implication, exclude the circumstances and wishes of the minority of beneficiaries by value from being taken into account by the court. It simply did not include these matters in the list of matters that must be considered.
This conclusion could be seen by considering a case in which the beneficial interest under a trust of land was divided equally between two people, A and B, who took different views as to what should happen to the land. If the judge’s construction was correct then since there was a dispute, the court would be prevented from taking the circumstances and wishes of either A or B into account, neither of them having the majority interest by value, and the circumstances and wishes of anyone else were necessarily excluded from being taken into account. That would be absurd.
Those conclusions, reached entirely by reference to the primary reference point of the statute itself, were supported and put beyond doubt when consideration was given to the secondary materials.
The introduction of ss14 and 15 TOLATA followed the work of the Law Commission in its 1985 working paper (No 94) entitled Trusts of Land and its 1989 report (No 181) entitled Transfer of Land, Trusts of Land, the latter of which had commented, among other things, that the guidelines to be provided to assist with the exercise of judicial discretion:
JUDGMENT SNOWDEN LJ: [1] This appeal raises a question of interpretation of s15(3) of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). The question is whether that section means that a court which is considering an application for an order under s14 of TOLATA where there is a dispute between the beneficiaries …‘… are not designed to restrict the exercise of judicial discretion by either narrowing it in breadth or giving certain interests formal priority over certain others. They are simply designed to indicate some of the more important factors to which the courts should have regard.’
Continue reading "Savage v Savage [2024] WTLR 725"