Welcome to the second edition of RED Alert of 2024.
Also featuring in this month's update:
Savage v Savage [2024] EWCA Civ 49
Summary
The Court of Appeal confirmed that, in exercising its discretion whether to make an order to sell jointly owned property pursuant to section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA), it is entitled to have regard to the circumstances and wishes of the minority where there is a dispute between the beneficiaries.
The law
Section 14 of TOLATA entitles a joint owner or beneficiary of property to apply for an order, amongst other things, to sell that property on terms that the Court thinks fit.
Section 15(1) of TOLATA includes a list of matters that the Court must take into account when determining an application under section 14.
Section 15(3) of TOLATA includes an additional matter that the Court must take into account when determining an application under section 14, where the beneficiaries are in dispute. This is the circumstances and wishes of the majority beneficiaries (according to the value of their combined interests).
The background
An order was made to sell three parcels of land following the divorce of Raymond and Vanessa Savage. The parcels of land were held on trust for Raymond and his four nieces and nephews. Raymond held the majority beneficial interest in the parcels of land with the nieces and nephews holding the minority beneficial interest.
When making the order pursuant to section 14 of TOLATA, the District Judge took into account the circumstances and wishes of Raymond as majority beneficiary. The District Judge also took into account the circumstances and wishes of the minority beneficiaries, who supported Frank (one of Raymond's nephews) having a pre-emption right over the sale of the parcels of land. This was because Frank ran a business involving a campsite, a tennis court and other facilities on part of the land. Consequently, the District Judge made an order that gave Frank a right to buy out Raymond's interests in the land before they were offered for sale on the open market.
Raymond appealed the District Judge's order and, on appeal, the Judge held, where there is a dispute between beneficiaries, the Court is precluded from having any regard to the circumstances and wishes of minority beneficiaries, and the only wishes and circumstances that could be taken into account were those of the majority ie Raymond. The Judge set aside the original order and made an order for sale which did not give Frank a pre-emption right.
Frank appealed this decision and it was brought before the Court of Appeal.
The Court of Appeal decision
The Court of Appeal upheld the appeal and restored the original decision of the District Judge; the parcels of land were to be sold subject to Frank having a pre-emption right.
It was held that the list of matters that the Court must take into account when determining an application under section 14 pursuant to section 15(1) is not exhaustive. Just because a matter isn't on that list, this doesn't mean that the Court can't take this into account; for example, the circumstances and wishes of minority beneficiaries – although it is not obliged to.
Consideration was also given to the Law Commission's 1985 Working Paper (No.94) entitled "Trusts of Land" and its 1989 Report (No. 181) entitled "Transfer of Land, Trusts of Land". These documents provided evidence of the intention behind TOLATA which includes that, where there are competing interests, the wishes of the majority in value should prevail in the absence of special considerations and the need for a broad and flexible approach.
Our comments
This judgment has clarified that the Court has wide discretion to take the circumstances and wishes of all of the beneficiaries of jointly owned property; it is not bound to only consider those of the majority. The weight that the Court affords to the circumstances and wishes of the majority and minority beneficiaries is at its discretion.
The reason behind the family fall-out here was because Raymond thought that he could sell the parcels of land for a higher price immediately on the open market compared to if Frank was allowed to exercise a pre-emption right. On these facts, the Court decided to place more weight on Frank's business operating on part of the parcels of land over Raymond's desire to obtain a higher sale price.
Given the Court's wide discretion, disputes between joint owners of property will ultimately turn on the specific circumstances and wishes of all involved, not just those with the majority interest in value.
