MOCK EXAM CRIB (TUESDAY)

LAND LAW REVISION LECTURE 2014-15(SUGGESTED APPROACH TO ANSWERING QUESTIONS)

Part A

The statutory provisions under s15 of the Trusts of Land and Appointment of Trustees Act 1996 and s335A of the Insolvency Act 1986 are considered by the court when ordering the sale of a family home. When would each provision be used and what factors would the court take into account?

1. Explain what the question means

The question here relates to the power of the court to order the sale of a family home under s.14 TLATA 1996. The court has power on the application by any trustee, beneficiary or secured creditor of a beneficiary to make such order as it thinks fit. However, depending on the circumstances it must take into account the provisions of s15 of the Trusts of Land and Appointment of Trustees Act 1996 (s15) and s335A of the Insolvency Act 1986 respectively (s335A). For instance, s.15 is used by the court when there are co-owners who are not bankrupt and s.335A when there is a bankrupt co-owner. 2. Give definitions if necessary

S.15) Applicant is co-owner Under s.15(1), the matters to which the court is to have regard...include

(a) the intentions of the person(s) who created the trust

(b) the purposes for which the property...is held

(c) the welfare of any minor who occupies or might reasonably be expected to occupy any land.. as his home, and

(d) the interests of any secured creditor of any beneficiary. Under s.15(2), where an application is made to exclude or restrict a beneficiary's right to occupy, the court must also consider the circumstances and wishes of each beneficiary entitled to occupy.

Under s.15(3), In... any other application... the matters to which the court is to have regard also include the circumstances and wishes of any beneficiary of full age and entitled to an interest in possession of property subject to the trust or (in the case of dispute) of the majority (according to the value of their combined interests).

S.335A). Applicant is a creditor of a bankrupt co-owner

Under s.335A Insolvency Act 1986

(1) Any application by a trustee of a bankrupt's estate for an order under [s.14 1996 Act] for the sale of land shall be made to the court having jurisdiction in relation to the bankruptcy.

(2) On such an application, the court shall make such order as it thinks just and reasonable having regard to-

(a) the interests of the bankrupt's creditors;

(b) where the application is made in respect of land which includes a dwelling house which is or has been the home of the bankrupt or the bankrupt's spouse or former spouse-

(i) the conduct of the spouse or former spouse, so far as contributing to bankruptcy,

(ii) the needs and financial resources of the spouse or former spouse,

(iii) the needs of any children, and

(c) all the circumstances of the case other than the needs of the bankrupt.

(3) Where such an application is made after ...one year [from bankruptcy], the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations.

3. Explain the facts if necessaryNot applicable here as dealing with a statute but would consider doing so if case law. 4. Offer a point by point reasoned argumentIn considering whether the property should be sold the court will look at the underlying purpose of the trust and whether that purpose has ended. They will therefore consider all of the circumstances and decide whether to make an order for sale. Welfare of minors will be taken into consideration. In Rawlings v Rawlings 1964 p 398 Court made an order for sale but said "if there were young children the position would be different. One of the purposes of the trust would no doubt have been to provide a home for them and whilst that purpose still existed, a sale would not generally be ordered. This was applied in Re Evers Trust 1980 the intention was to provide a family home and this included for the children so the sale was postponed. In

Chun v Ho the sale was also postponed to allow the co-owner to finish their course. Generally speaking when the purpose of the trust has ended a sale will usually be ordered by the court.

However, on the bankruptcy of someone their share in property will automatically vest in the trustee in bankruptcy who has a duty to deal with the estate to the benefit of the bankrupts creditors. They will however take the property subject to any third party rights, including those of a co-owner.

Where an application is made to a court, under s14 TLATA 1996, for land to be sold in the event of the bankruptcy of one of the co-owners, s.15 TLATA1996 does not apply. Instead, the court has regard to the factors set out in s.335A which was added to the Insolvency Act 1986 by the 1996 Act. There are additional considerations which apply to existing family homes but generally a sale will almost always be ordered by the court. The circumstances must be quite exceptional to postpone it.

The judicial tone as to how applications should be approached was set in Re Solomon 1967 Ch 573. The judge commented that the contest was not just between the co-owners but also between one co-owner and the others creditor. In the circumstances of such a contest he was of the view that "the voice of the trustee in bankruptcy should prevail." The courts discretion has almost always been exercised in favour of the trustee in cases that have followed. The judicial attitude is that ones debts must be paid and paid promptly and if they cannot be paid promptly then the trustee in bankruptcy must prevail

For an order to be refused then exceptional circumstances must exist and the effect of an order being that the spouse and children lose their home is not enough as it is seen as a natural consequence of the bankruptcy. However, one case where order was refused was Re Holliday spouse petitioned for own bankruptcy, creditors not demanding payment and not suffer any hardship if order postponed. Other circumstances may be an illness or disability of the bankrupts spouse or children. That said, a year from bankruptcy, the law assumes that all other rights of co-owners and occupiers have been dealt with and the only right and interest that the court has to take into consideration is the right of the secure creditor. (S.335A(3))

5. Provide a conclusion, ensuring that you have answered the question

There should be is no mystery to a conclusion as its purpose is to tie the essay/answer together and to bring it to a logical end. Students can sometimes forget to include one which is a shame as they are a useful way to check your answer and to make sure that you have answered the question asked of you.

So having read the answer to this question write your own conclusion summarising what has been discussed whilst bringing things together to answer the question.Part B

In 1997, Abhinav and Barbara bought the council flat they were living in. They were not married and because Abhinav was a council tenant who exercised his option to buy the flat with a 40% discount, they only registered the house in his name. Of the remaining 120,000, 80,000 was given by Barbara from a flat she sold and the rest was financed with a personal loan in both names which they repaid in full last year.

The couple shared everything in life, benefits and responsibilities. They were both working and contributing equally to the household financially and with their personal work. Unfortunately their relationship started to deteriorate since last year when Abhinav suspected that Barbara had been having an affair. Last week when Abhinav returned home from work early he found Barbara in bed with another man. He was furious and wanted her out of his house. Barbara was afraid that he might hurt her and left the flat and came to you seeking advice. She wants to know what her share of the value of the flat is and how she can get her money. The flat is currently valued at approximately 300,000.

Advise Barbara.

1. Identify what the client wants to knowHere Barbara wants to know what her share of the property is and how she can get her money.

2. Identify the legal issues underlying the problemHere the legal issue is Trusts of Land and whether Barbara can show that she has an equitable interest in the property under an implied trust arising from either a resulting trust or constructive trust.

3. Define any legal termsIn property purchases there are have legal owners and equitable owners (those with an equitable interest in the property).

The legal owner will have their name on the title documents, here Abhinav, and the person with an equitable interest only will not, here Barbara. The equitable owners are those with an equitable interest in the property, here Abhinav and Barbara. The equitable interest in the property can arise under an express trust e.g. declaration of trust or under an implied trust. An interest under an implied trust will arise either from a resulting trust or a constructive trust.

A resulting trust will arise where one person pays all or part of a purchase price but it is conveyed into the name of another. Here the law assumes that the property is held by the second person for the benefit of the first in equity, unless the money was a gift or a loan Bull v Bull. The court recognises the contribution of a deposit as triggering a resulting trust Halifax Building Society v Brown. The share they will have in the property will be in proportion to their contribution. The court can increase the size of an interest by looking at the whole course of dealings between the parties. You need not have a common intention between the parties.

A constructive trust arises after the purchase and can be triggered by conduct. A constructive trust will be imposed where it is inequitable to deny it. Constructive trust can arise on a bargain between the parties rather than just financial contribution. Two tests outlined in Lloyds Bank v Rossett;

1. There should be evidence of express agreement made by the parties at some stage before the acquisition and evidence the non-legal owner acted to their detriment in reliance on that agreement.

2. Where there is no evidence of express agreement court can infer a common intention. The only way the intention can be shown is by the contribution of money to the purchase price (initially or mortgage payments). The person would then be entitled to a share according to the agreement or according to their contribution.

4. Work through the problem point by point (law, authority and facts)

In this case in 1997 Abhinav and Barbara bought the council flat they were living in, they were not married and Abhinav was the only tenant property and so it went into his name. He received a 40% discount. Remaining 120k, 80k was given by B. Rest was done on a loan in both names which they repaid in full last year. They have always shared everything, financially and personally but their relationship has now broken down. The flat is currently valued at 300k.

Here there could be a resulting trust on the basis that Barbara contributed directly towards the purchase price by way of the direct contribution to the purchase price of 80,000(deposit under Halifax BS v Brown) and it was not a gift or a loan Bull v Bull (and the loan repayments). Generally speaking the shares given in a resulting trust are based on financial contributions alone, however the court may increase the size of that interest by surveying the whole course of dealings between the parties in relation to the property (Midland Bank v Cooke).

As to whether there is a constructive trust there is no suggestion from the facts that the couple had an agreement prior to or at the time the property was purchased as to their respective shares in the property so no constructive trust that way under Lloyds Bank v Rossett.

However there could be a constructive trust by way of common intention. Under Lloyds Bank v Rossett the conduct of the parties allows the court to confer a common intention that parties intended the property to be shared beneficially. Only the contribution of money to the purchase price will show the necessary intention. Here the intention can be shown by the deposit and loan payments.

In Oxley v Hiscock the court said look at the whole course of dealings between the parties and widened the class of indirect contributions to housekeeping, council tax and other expenses.

In Fowler v Barron they also said to look at their shared intention (but this applied where the property was held in joint names and you just needed to determine each partys share.)

In our case it could be said that the parties shared intention was that the property was to be shared beneficially jointly and equally. There is no inference on the facts that the property was not i.e. by Barbara having a charge on the property for the 80,000 contribution.

In terms of the partys monetary contributions, the property was bought for 200,000.

Resulting Trust:

Abhinav: 40% from the discount (the courts are prepared to treat such discounts like they would cash contributions Mumford v Ashe.) and 10 % from the personal loan. In money: 40% = 80,000 and half of the loan 10%= 20,000

Barbara: 40% from the sale of her house and 10% from the personal loan. In money: 80,000 = 40% and half the loan 10% = 20,000

Value of the property at the time of the purchase: 200,000 Share under resulting trust: 50% - 50%On a resulting trust therefore the parties would prima facie receive the shares indicated above.

However, it could be argued that under a common intention constructive trust they are likely to receive exactly the same share 50:50 as all things between them personal and financial were split equally.In a domestic relationship such as this, you should always argue a constructive trust first and use the resulting trust as a fall back if the constructive trust does not work.5.Advice to ClientIn this matter Barbaras share is likely to be somewhere around 50% (or 150,000. She is entitled, as a beneficial owner, to apply to the court under S. 14 TLATA 1996 and ask for an order to sell the property. The court will look at S. 15 TLATA 1996 factors and will most probably order sale since the purpose of the Trust has failed and there is no other family say minors to consider.

6.Remedies Available to Client

Order for sale (as mentioned above).PAGE 5