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Saleem Fazal

Saleem Fazal

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Autor
Saleem Fazal

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7. Oktober 2021

RED alert - Autumn 2021 – 4 von 7 Insights

To share or not to share? Claim for rectification of property transfer

  • Briefing

Dean Ralph v David Ralph [2021] EWCA Civ 1106

Summary

This case concerned a claim for rectification of a transfer of residential property which on the face of it suggested the proprietors owned it in equal shares.  This was disputed on the ground that the deposit and mortgage was paid by only one of the proprietors.  The Court of Appeal refused to rectify the transfer as there was no evidence of what the parties had actually agreed.

The facts

David Ralph lived at the property with his partner (who he subsequently married) and their five children.  Dean Ralph was their eldest son.  David was unable to raise the purchase price by way of mortgage and so the property was bought in the joint names of David and Dean.  David provided the deposit and paid the mortgage instalments.

In due course, a dispute arose between David and Dean.  Dean issued a claim asking the court to confirm that he enjoyed an equal share in the property.  This required consideration of the property transfer document known as the TR1.

Whenever there are joint purchasers of property, there are three options on the TR1 to indicate how the buyers will hold the property by inserting an "x":

  • on trust for themselves as joint tenants
  • on trust for themselves as tenants in common in equal shares
  • on trust.

Briefly, these mean:

  • Joint tenants:  equal shares and the property will pass to the other in the event of one party's death.
  • Tenants in common in equal shares: equal shares and the property will pass in accordance with their will or intestacy on their death.
  • On trust: the parties may hold different shares in the property pursuant to a separate trust deed that would pass in accordance with their will or intestacy on their death.  

The buyers' solicitors are responsible for completing this part of the form in accordance with instructions from their clients.

In this case, David & Dean had the same solicitor who inserted the "x" in the option indicating that they would hold the property as tenants in common in equal shares.

Dean applied for a declaration that he was entitled to a share in the property based on the TR1.   David argued that this was a mistake and should be rectified by deleting the "x" and relied on the fact that he had paid the deposit and also the mortgage instalments as was the original intention.

Dean's claim was dismissed by the County Court which agreed the TR1 could be rectified by deleting the "x."

There was an unsuccessful appeal to the High Court and the case then reached the Court of Appeal.   

The decision

The case had been argued using the recent Court of Appeal authority on rectification FSHC Group Holdings Ltd v. GLAS Trust Corpn Ltd [2020] Ch 365.  Although, the Court of Appeal doubted whether the same principles applied given this was not a commercial contract negotiated by the parties but was in fact a family arrangement, it continued to apply the principles given both parties had advanced their cases on that basis.

An important requirement for rectification of a contract in accordance with the FSHC case was that there was a common intention as to the contractual terms which was continuing at the time when a contract was made.  In order to answer this, it was important for the Court of Appeal to review the County Court findings of fact as follows:

  • It was never intended by either Dean or David that they should be joint owners in equity.
  • Dean became a joint owner purely to assist with the purchase, so that the mortgage advance could be obtained.
  • There was no discussion with the solicitor about how the property should be held.
  • It may have been that Dean agreed to be a joint purchaser because the purchase was a good and sensible investment for the family as a whole.
  • David’s contention that it should be held on trust for “his family” was too vague and amorphous to result in any other finding but that the property was to be held for David alone.

Having reviewed these findings, the Court of Appeal found that it could not be said that there was a continuing common intention shared by David and Dean at the time of the completion of the purchase of the property as to how they would hold the property. They had simply failed to record or discuss anything.  For that reason, the TR1 could not be rectified to record such alternative agreement.  

The appeal was therefore allowed and so Dean was entitled to his equal share.  The court also pointed out that Dean had been disadvantaged by being "lumbered" by the mortgage which had "prevented him buying a house of his own."

Our comments

Family relationships are often very positive when entering into property transactions.  However, such relationships can deteriorate and so it is important to have a clear understanding of any interests that are created and to ensure it is properly documented.

The Court of Appeal also suggested that it should have been resolved by mediation and advocated the right of the court to direct mediation in appropriate cases.
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