Success for William J Richardson in a TOLATA claim

William J Richardson was successful in a TOLATA claim on behalf of his client, Mr Amit Kailey in respect of a house jointly owned with his mother in East London.

Mr Kailey and his mother, Ms Sunita Bangar, jointly purchased a property in November 2012 without there being any express declaration of trust in respect of the beneficial ownership. Since shortly after purchase to date, the property has been let under a series of assured shorthold tenancies to the same tenant, who is still living in the property.

Mr Kailey sought a declaration that he and his mother were joint beneficial owners, an order for sale of the property, and an account of the rental income. Ms Bangar asserted in response that she was the sole beneficial owner, or a majority beneficial owner and sought an account of the sums paid towards the purchase and expended on the property.

HHJ Monty, sitting at Central London County Court, held that Mr Kailey should have a share of the beneficial interest in the property of almost 30%.

Background

Mr Kailey is the eldest of three children of Mrs Bangar and Mr H Kailey. In 2010, Ms Bangar and Mr H Kailey divorced and Ms Bangar received a lump sum payment of £103,000 from her share of the former matrimonial home. She and her children were living with her mother, so she decided to purchase a property which was funded from the divorce settlement and a mortgage. Mr Kailey was 20 at that time and working whilst his younger siblings were still at school. The property was purchased in the joint names of Mr Kailey and Ms Bangar but without an express declaration of trust in place – neither in section 10 of the TR1 or as a separate document. The mortgage was in joint names and life insurance was taken out in both names.

The property was then let to a tenant who remains in the property. Over time, the property was remortgaged on several occasions, with all mortgages in joint names. The tenant has paid rent regularly and the costs of running the property and paying the mortgage have been met from that rent. The mortgage account is up to date.

Mr Kailey’s claim was that he was a joint owner with his mother in equity, with each of them owning half of the property. He said that his mother was unable to raise a large enough mortgage on her own so she gifted half of the deposit to him, on the basis that they would be joint owners. He also said that it had been agreed that the property would be an investment so would be let to raise an income to cover the mortgage and expenses for the property, and that at such time he wanted to marry and buy his own home, the property would be sold and the proceeds and rental profit split 50:50.

Ms Bangar said that there were no discussions about owning the property jointly and that Mr Kailey was named as a purchaser because he agreed to put his name on the mortgage so that their combined incomes would be sufficient to get the mortgage needed. She asserted that the property was purchased as a home for her and the children, and that all of the money apart from the mortgage advance came from her. She also argued that Mr Kailey had not put anything towards the purchase price or the running of the property since the date of purchase.  

The law

HHJ Monty set out the legal context by reference to the four leading authorities in TOLATA cases:

Stack v Dowden [2007] 2 AC 432 established that where residential property is conveyed into the joint names of cohabitants, and there is no express declaration of trust, there is a presumption that equity follows the law, and the beneficial interests are the same as the legal interests. However, that presumption can be displaced if there was a common intention that the beneficial ownership should be different from the legal ownership. The burden of rebutting the presumption lies on the party asserting that the beneficial interests differ from the legal interests. The court must look for the intentions of the parties, not for a ‘fair’ outcome.

Jones v Kernott [2012] 1 AC 776, another cohabitation case, established that that the common intention may be determined either at the time of purchase or later if there was a common intention that the respective shares should change. Again, the emphasis is on the search for what the parties had actually intended. The common intention is to be deduced objectively from their words or their conduct which may not be an easy task.

Laskar v Laskar [2008] EWCA Civ 347 concerned an investment property and the Court of Appeal held that where there was a purchase primarily as an investment, even by members of the same family, the presumption of equity following the law (as set out in Stack) did not apply. Instead, Neuberger LJ applied a resulting trust analysis, the result of which was that it was held the property was owned beneficially according to the contributions each had made to the purchase price (in the absence of any express discussion or agreement to the contrary).

Marr v Collie [2017] UKPC 17, a decision of the Privy Council, held that Laskar was not authority for the proposition that the presumption in Stack, that equity follows the law, only applies in the domestic consumer context. It was not intended to provide such a stark demarcation between domestic property and investment property. The question was, as set out in Stack and Jones, what was the common intention of the parties.

The facts and the outcome

The Judge was not impressed with any of the witnesses who gave evidence, finding in the main that they could not accurately recall the discussions from 13 years earlier or that they had not provided the context to back up the statements they had made. His focus was therefore on the contemporaneous documentation.

At the date of purchase, the mortgage documentation showed that the mortgage was a residential one and both parties had ticked to say that they intended to live in the property. Annoyingly, the conveyancers did not seem to have got a response to the question about how the property was to be held (as tenants in common or joint tenants), and had not chased up the non-response (reflected by the “inexplicable and unfortunate failure to have ticked one of the boxes in Section 10 of the TR1”). Neither party suggested that they had been advised about beneficial ownership. The TR1 and purchase documents did not support either party’s version of events. The remortgage documentation provided no assistance.

The Judge found that the property had been purchased as an investment property as a matter of fact. He did not accept Ms Bangar’s version of events that she was planning to live there with her family, or that she had only decided to rent the property out after purchase.

He also found as a matter of fact that there had not been a gift of half of the deposit from Ms Bangar to Mr Kailey, especially as he found that Mr Kailey was working at the time, and Ms Bangar had two other children to consider. The presumption of advancement was rebutted. He also found that there were no discussions about Mr Kailey becoming a half-owner of the property. There were no discussions about the beneficial ownership of the property.

Having found that there was no common intention about the beneficial ownership of the property between the parties, HHJ Monty had to decide whether equity followed the law or whether there was a resulting trust. He found that this case was very similar to Laskar, and that a resulting trust analysis provided an answer in the absence of a common intention. The beneficial ownership therefore follows the parties’ contributions to the purchase price. The judge also held that even if he was wrong that there was a resulting trust here, the presumption in Stack (that equity follows the law) had been rebutted on the facts.

The next question then was, what had Mr Kailey contributed to the purchase price? Aside from the NatWest mortgage, all the money for the purchase, including the conveyancing costs and disbursements, came from Ms Bangar. The judge questioned whether the liability under a mortgage was equivalent to contributions to the purchase price and found, again following Laskar, that it was. As in Laskar, this was an investment property and Mr Kailey’s liability under the mortgage was his contribution to the purchase price. Following consideration of the purchase price and various costs, he found that Mr Kailey had a beneficial interest equivalent to 29.29% of the property.

Mr Kailey was therefore awarded a share of 29.29% of the property, and a share of 29.29% of the rental income which had been received over time. Ms Bangar argued that a number of costs should be deducted from Mr Kailey’s share. The judge ordered that some, but not all of these, should have been shared and that Mr Kailey should therefore bear 29.29% of those costs. For example, a payment of £2,100 which had been made by Ms Bangar for a window was evidenced by a receipt and ordered to be shared, whereas Council Tax payments (which were due to be paid by the tenant under the terms of the tenancy agreement) were not.

Mr Kailey was successful in claiming a share of the property, under a resulting trust analysis. The judge commented at the end of his judgment that this was a very sad case to try. It was not clear what had caused the parties to fall out, but it was clearly serious. The property is now likely to be sold in order to satisfy the judgment, although the judge did not order that but left the parties to try to reach agreement on the point.

William J Richardson is a civil barrister who has a lot of experience in Chancery and commercial cases. He is often instructed in TOLATA cases, and has a detailed knowledge and understanding of the law and relevant cases in the area.

In cases such as this one, mediation is often suggested as a way to try to resolve the matter outside Court. Michael Collard is a barrister and mediator who is particularly experienced in dealing with property cases.

To instruct William or Michael, please contact Rob Johnstone.

William J Richardson is a civil barrister who has a lot of experience in Chancery and commercial cases. He is often instructed in TOLATA cases, and has a detailed knowledge and understanding of the law and relevant cases in the area.

In cases such as this one, mediation is often suggested as a way to try to resolve the matter outside Court. Michael Collard is a barrister and mediator who is particularly experienced in dealing with property cases.

To instruct William or Michael, please contact Rob Johnstone.