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Ally Tow
Ally Tow,
SENIOR ASSOCIATE - CHARTERED LEGAL EXECUTIVE
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TLATA Scope of Court’s discretionary powers
04 August 2015

A recent case, Bagum v Hafiz & Hai (2015) questioned the discretionary powers of the Court under the Trusts of Land and Appointment of Trustees Act 1996 (“TLATA”).

Facts

Mrs Bagum’s late husband purchased the property in Copenhagen Street, Islington as a right-to-buy tenant in 2003, just two years before his intestate death.

Following his death and by family agreement, Mrs Bagum became the sole registered owner of the property.  Both she, her three sons and one of her daughters continued to live at the property.  Her two eldest sons, Mr Hafiz and Mr Hai had made financial contributions to the purchase of the property and continued to do so by way of mortgage repayments following their father’s death.

In due course both sons married and started families of their own.  The increasingly crowded conditions in the house led to inevitable tensions and eventually Mr and Mrs Hai decided to leave the property and find separate rented accommodation.

Before leaving Mr Hai sought to protect his investment in the property by securing Mrs Bagum’s and Mr Hafiz’s agreement to the making of a declaration of trust.  By that trust, they declared themselves to be trustees of the property for the three of them in equal shares.

Following his departure, the parties were estranged for some time but Mr Hai then made contact with a view to agreeing a method by which funds could be made available to him.  In the end the parties agreed to sell the property but Mr Hai subsequently refused to sign the transfer document.  Instead, he offered to buy the property himself but Mrs Bagum would not consent to this.

Preliminary issue

Following a series of pre-action correspondence which failed to resolve the issue, Mrs Bagum issued proceedings in December 2012.  By those proceedings, Mrs Bagum sought an order obliging Mr Hai to sell his interest to Mr Hafiz or alternatively, an order for sale.

The court directed that Mrs Bagum’s claim for an order that Mr Hai should sell his share to Mr Hafiz should be listed as a preliminary issue with a view to their being a declaration as to whether the court had jurisdiction to make such an order.

At first instance the Judge concluded that she did not have jurisdiction to make such an order.  However, she considered that she could, and should, make an order directing the trustees to sell the property upon terms as follows:

“Mr Hafiz shall have the opportunity to purchase the property at a price to be determined by the court at the trial…. In default of Mr Hafiz completing the purchase within 6 weeks of the court’s determination of the price, the property shall be sold on the open market by private treaty with liberty to all parties to bid.”

The judge went on to give directions as to how the price at which Mr Hafiz should have the opportunity to purchase the property was to be determined.

Appeal

Mr Hai appealed, asserting that the Judge did not have jurisdiction to make the order that she did and that even if she did it was not a proper exercise of her jurisdiction under TLATA.

Mrs Begum (supported by Mr Hafiz) cross-appealed.  She submitted that the Judge did have jurisdiction to make the order that she had originally sought upon issue of the proceedings.

In order for the Court to consider the two appeals it was necessary for the appellant court first to consider the relevant provisions of TLATA.

Section 14 of TLATA provides:

  1.  Any person who is a trustee of land…. may make an application to the court for an order under this section.

  2. On an application for an order under this section the court may make such an order:

    1. relating to the exercise by the trustees of any of their functions…., or

    2. declaring the nature or extent of a person’s interest in property subject to the trust, as the court sees fit.

Section 15 provides:

  1. The matters to which the court is to have regard in determining an application for an order under Section 14 include:

    1. The intentions of the person or persons (if any) who created the trust,

    2. The purposes for which the property subject to the trust is held,

    3. The welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and

    4. The interests of any secured creditor or any beneficiary.....

Save for any irrelevant exceptions, sub-section (3) provides that the matters to which the Court is to have regard:

                “… also include the circumstances and wishes of any beneficiaries of full age and entitled to an interest in possession in property subject to the trust and (in case of dispute) of the majority (according to the value of their combined interests).”

The court took the view that the clear object and effect of sections 14 and 15 was to confer upon the Court a substantially wider discretion, exercised upon the basis of wider considerations, than might be enjoyed by the trustees themselves. The court stated that its powers are there to enable the property to be dealt with justly and effectively when the consent of the trustees breaks down.

Given this wider discretion, whilst the court acknowledged that the order was an unusual one, it did not consider that it was an order capable of being challenged upon appeal.  Whilst it may be considered more usual for an order for sale on the open market to be made, this did not make the order wrong.  The order fell squarely within the Judge’s jurisdiction under section 14(2)(a) of TLATA and had been made with clear and cogent reasons.

In all the circumstances, the appeals were dismissed.

For more information on anything in this article or to find out more about what the Dispute Resolution Team can offer please contact Ally Tow on 0118 952 7206 or email atow@boyesturner.com.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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