A such an order fell within the ambit

A

The Court of Appeal decision in Bagum v Hafiz1
is of particular significance in the context of trusts of land under the Trusts
of Land and Appointment of Trustees Act 1996 (TOLATA), under which the court
has the power to order a sale of the property in the event that beneficial
owners cannot agree amongst themselves how the property should be managed or
apportioned.2 In
particular, it is the first decision in which an appellate court has overtly
considered the nature and extent of the court’s jurisdiction and discretion when
ordering a sale of property under ss.14 and 15 TOLATA, suggesting a more
flexible approach is possible where the circumstances permit of it.

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The facts of Bagum v Hafiz are relatively straightforward. Mrs Bagum and her two
sons, Hafiz and Hai, owned the family home as joint legal tenants and
beneficial tenants in common, in equal shares. Hai did not live at the property
and, at some point, the relationship between Mrs Begum and Hai irreparably
broke down. Mrs Begum applied to court under s.14 TOLATA for an order of sale,
seeking an enforced sale of Hai’s beneficial interest to Hafiz. The question
thus arose whether such an order fell within the ambit of the court’s
jurisdiction under ss.14 and 15 TOLATA.

At first instance the trial judge
noted that the courts had no jurisdiction under TOLATA to order a sale between
beneficiaries, as that would be in effect to forcibly reorient the beneficial
ownership between the parties. However, the judge did not accept the argument
of counsel for Mr Hai that the jurisdiction of the court under TOLATA was
limited to ordering a sale of property on the open market. On the facts, the
trial judge ordered that the property be sold but that Mr Hafiz should have a
right of pre-emption over the sale, allowing him to purchase the property for
market value provided the right of pre-emption was exercised within 6 weeks of
the order. Mr Hai appealed the decision and the matter was remitted to the
Court of Appeal.

The Court of Appeal, affirming
the decision of the trial judge and dismissing the appeal of Mr Hai, confirmed
that the powers available to a court under ss.14 and 15 were not limited to the
powers exercisable by a trustee of land, as ss.14 and 15 represented a
statutory extension of the discretion accorded to a court when resolving a
dispute between co-owners. As was noted by Briggs LJ, in giving the leading
judgement:

“the clear object and effect of
sections 14 and 15 is to confer upon the court a substantially wider
discretion, exercised upon the basis of wider considerations, than might be
enjoyed by the trustees themselves, acting without either the consent of their
beneficiaries or an order of the court. … All this departs from the general
rule of equity which requires the trustees single-mindedly to advance the
interests of the beneficiaries as a class, without preferring some of them over
others”3

This statement is significant as
it draws a clear line between the powers exercisable by a trustee and the
powers exercisable by a court assuming
the function of a trustee under s.14 TOLATA. The latter is wider because
the court is statutorily enjoined to consider the effects of an order on
parties to whom the trustees owe no duty, for instance minors who hold no
beneficial interest under the trust, and as such may make an order which in
practice is to the benefit of a particular beneficiary, provided the
circumstances suggest such an order would not be inappropriate on the facts. In
Bagum v Hafiz itself, for instance,
the court was presented with clear evidence as the market value of the property
and there was no suggestion that to order a sale on such terms would unduly
prejudice any one co-owner.

The outcome in Bagum v Hafiz is of significant
practical importance, as the situation itself is not particularly uncommon; it
is presumably often the case that trustees of land will fall out over how to
manage the property or, as in Begum
itself, for reasons personal to themselves. It has long been understood that
the court has no jurisdiction, either inherently or under s.14 TOLATA, to
compel the transfer of an equity from one party to another.4
Yet the solution in Bagum appears to
provide a compellingly practical solution where a sale on the open market has
the potential to frustrate the parties’ intentions with respect to the property
and there is strong evidence of market value. Where equitable owners are
unmarried cohabitants, therefore, it appears the exercise of the court’s enhanced
discretionary powers under ss.14 and 15 potentially open the doors to de facto buyouts of an equitable
interest. It might be noted, of course, that ordering a sale subject to a right
of pre-emption is, in effect, no different than directing a sale between
beneficiaries, save that the same doctrinal difficulties are not encountered.

To summarise, the decision in the
Court of Appel in Bagum v Hafiz
conclusively settles the question as to whether the powers bestowed upon the
courts under ss.14 and 15 TOLATA are restricted to determining whether it would
be appropriate to order a sale or whether the discretion under ss.14 and 15
extends beyond the powers exercisable by a trustee of land. In upholding the
findings of the trial judge the Court of Appeal definitively favoured the
latter view and, in the process, have injected some much needed clarity and
practicality into this area of the law, allowing for the resolution of disputes
other than by recourse to a sale on the open market. Although Briggs LJ noted that
the order itself was somewhat unusual,5
implying circumstances would not ordinarily lend themselves to such an order,
it is submitted that a sale subject to a right of pre-emption may not be as
rarefied a solution as Goff LJ anticipates.

 

 

 

 

 

 

 

 

 

 

 

 

 

Bibliography

 

Text Books

Charles Harpum, Megarry &
Wade: The Law of Property (8th edn, 2016, Sweet & Maxwell: London)

Kevin Francis Gray & Susan
Gray, Elements of Land Law (4th edn, Oxford University Press: OUP, 2009)

 

Cases

Bagum v Hafiz EWCA Civ 801

 

Legislation

Trustees of Land and Appointments
of Trustees Act 1996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B

Scenario (i)

Introduction

Where title to land is
registered, and the question arises whether third party rights over said land
will continue to bind a successor in title, the matter is governed primarily by
the provisions of the Land Registration Act 2002 (LRA). It is of course
necessary that the rights claimed are proprietary in character, as it is only
proprietary rights which may bind a successor in title, personal rights being
personal between the parties to the grant or contract.

6
Presuming the right claimed by a third party is proprietary, a sale of
registered land for value will subordinate to the interest of the new
registered proprietor any proprietary rights not protected by entry of a
notice.7
An unregistered interest may still bind a purchaser if it overrides the
registered disposition, either because it is a short term legal lease,8
an implied legal easement9
or because the right belongs to a person who is in actual occupation on the
date of the disposition.10
Whether the rights claimed by Agatha, Harry, Ross and Drake are proprietary,
and whether they might take priority over the registered proprietorship of
George will now be considered.

Agatha

It appears that Agatha is the beneficiary
of a trust of land.11
There is nothing to indicate that Francis, as the previous legal owner, created
an express trust of his estate. Rather, it seems that Agatha is the beneficiary
of an implied or resulting trust.12
Whether the trust in question is to be classified as a resulting trust or as a
common intention constructive trust is, however, less clear. 13

It should be noted no written
formality requirements apply to implied or resulting trusts,14
it is thus immaterial that there is apparently no written evidence to
substantiate the trust in question. In terms of the trust itself, it seems
there are two possibilities here. The first, and simplest, is that Agatha is
the beneficiary of a presumed resulting trust, which may be imposed where a
person has part-financed the purchase of a real property, in which case she
will take an equitable interest commensurate to her 25% contribution, i.e. she
will hold a quarter of the equitable as a tenant in common with Francis.15

Alternatively, Agatha may be the
beneficiary of a common intention constructive trust.16
This form of trust depends upon clear evidence of a common intention between the
legal owner and the putative beneficiary that the latter should take an
equitable interest in the property.17
This common intention may be express, or inferred, in which case it appears
that only direct financial contributions will invite the necessary inference.18
In all cases the common intention must be backed by detrimental reliance,19
although direct contributions to the purchase of realty will necessarily
suffice. It is plain that Agatha meets the aforementioned conditions; her
contribution to the purchase may give rise to an inferred common intention that
she should take an interest.

Actual occupation is to be given
its ordinary meaning, although the courts have emphasised that a sufficiently
material and consistent physical presence on the land in question is required.20
Suffice it to say there is no issue here; if Trentwith is Agatha’s primary
residence she is certainly in actual occupation, and the fact of her occupation
would also be ‘obvious on a reasonably careful inspection’.21
It is therefore submitted that Agatha’s interest will override the disposition
between Francis and George.

 

Ross

The facts indicate that Ross’
legal estate has the benefit of a restrictive covenant over Trentwith. A
restrictive covenant is an equitable proprietary right annexed to both the
estate which incurs the burden of the covenant and the estate which benefits
from its enforcement.22
A restrictive covenant will be capable of binding successors in title where it
imposes negative obligations only,23
is intended to run with the land by the parties to its creation and it
‘accommodates’ the servient tenement.24
A potential difficulty here is that the covenant also contains positive
obligations to maintain the boundary wall. The burden of a positive covenant
cannot bind a successor to the title it affects,25
although the covenant in question appears to be mixed. In such cases the
positive aspects of the covenant may be disregarded, provided the restrictive
aspects of the covenant are dominant,26
as would appear to be the case here; a covenant restraining development of land
is far more significant than a positive obligation to maintain a boundary wall.

Unfortunately for Ross the burden
of the covenant will not bind George unless it has been protected by entry of a
notice. If Ross has not taken this step then the covenant will be extinguished
by the registration of George.

 

Caroline

Caroline may have an easement
over Trentwith permitting her to park her car on the driveway. As a proprietary
right an easement must meet certain conditions,27
although there is no difficulty here; there is both a dominant and servient
tenement; there is diversity of ownership and occupation; the right claimed
accommodates the servient tenement28
and, provided it does not purport to grant exclusive use of the servient land,
an easement of parking is perfectly capable of lying in grant.29
Assuming there is room to park more than one car on the driveway, as there
evidently is, Caroline’s right to park may exist as an easement. This is not
enough, however, as a right to park may exist equally as a personal licence.
The right in question must also be created as an easement, either expressly or
by implication.

An easement, to be legal, must be
created by deed.30
An express legal easement must also be completed by registration,31
although this is not a requirement for easements which are implied into a
registered conveyance. If the agreement between Francis and Caroline is by
deed, and is registered, the easement will be legal and it will bind George. If
it has been created pursuant to a specifically enforceable contract32
it will be equitable only33
and will not bind George unless protected by entry of a notice.

If Carol’s initial right to park
has been informally created it will be a contractual licence, although such a
licence may be implied into a conveyance of land as a fully legal easement
under s.62 Law of Property Act 1925, provided the operation of s.62 is not
excluded by the conveyance.34
For s.62 to have this effect the right concerned must be both ‘continuous and
apparent’35
in that it is used regularly and there is suitable physical evidence of its
existence,36
and must have been exercised within a reasonable period prior to the
conveyance.37
It is therefore submitted that if Caroline’s right to park was granted as a
licence, and s.62 remains operative, it will be implied into the conveyance of
Trentwith as a legal easement,38
which would then necessarily bind George under Schedule 3(3) LRA 2002.

 

Drake

The issue with Drake is whether
he has a successful claim under the doctrine of adverse possession.39

To be in adverse possession of
land a person must enter into factual possession,40
without the consent of the true owner and with an intention to possess the
property to the exclusion of all others. Factual possession is a contextual
inquiry and will depend on the nature of the premises;41
the question is whether Ross has taken ‘custody and control’ of the land
concerned.42
On the facts it is submitted that he has. The erection of a fence is prima facie evidence of this,43
and is likely to suffice here given the character of the land. The erection of
a fence is also indicative of the requisite intention to possess.

Whether the possession is adverse
is unclear; it is possible that Drake previously had Francis’s permission to
grow vegetables on Trentwith. This is important, as Drake must have been in
unbroken adverse possession for a period of either 12 years,44
ending prior to the enactment of the LRA 2002, or 10 years, ending at some
point after the enactment of the LRA 2002. In the former case the provisions of
the LRA 1925 would apply and Drake would be entitled
to registration as the proprietor of the vegetable patch. If he only completed
at least 10 years unbroken adverse possession after October 13 2003, however,
he must apply to be registered as
proprietor under Schedule 6(1) LRA 2002.

Schedule 6 LRA 2002 requires
Drake submit an application to be registered as proprietor, at which point HM
Land Registry will notify Francis, who may then serve a ‘counter-notice’.45
If a counter-notice is served the application must be rejected unless it falls
within one of three narrow exceptions which would entitle Drake to registration.
On the facts it is submitted that the ‘boundary’ exception might apply,46
as the land claimed is registered, it adjoins Drake’s own property and there is
no indication the true boundary between Trentwith and the orchard. The final
requirement of the boundary exception, that Drake reasonably believed the land
belonged to him,47
is unclear; it may be that Drake thought the land belonged to him until George
apprised him of the situation, or it may be that Drake at no point thought the
land belonged to him. Suffice it to say that if the provisions of the LRA 2002
apply the resolution of this question will determine the success of any
application brought by Drake.

 

 

Scenario (ii)

Introduction

Where unregistered land is
purchased for value this will constitute a ‘trigger’ for first registration,48
meaning the transfer will not be complete at law until the new owner is
registered as proprietor. At that point the registered proprietor will only be
affected by those rights of which he has ‘notice’49
or which override under Schedule 1 LRA. Significantly, a proprietor is deemed
to have notice of any proprietary rights protected by entry of a land charge
against the burdened estate, under the Land Charges Act 1972,50
and indeed such rights must be entered as a land charge or they will
necessarily fail to bind a purchaser such as George.

 

Agatha

The position of Caroline is no
different than it would be if Trentwith was registered. The determination of an
equitable interest under an implied or resulting trust takes place in the same
manner, as does the determination of whether Agatha was in actual occupation on
the date of the disposition; the sole difference here is that Agatha’s beneficial
interest will override under Schedule 1 LRA 2002 rather than Schedule 3.

 

Caroline

The position of Caroline is
slightly different in this scenario, although if her right is an easement, and if
this easement has been implied into the conveyance in the manner suggested
above, the outcome will be the same.

If Francis has created the
easement expressly, by deed, it will be legal whether or not it has been
registered and will override under Schedule 1. If the easement is equitable,
however, it will not bind George unless Francis entered the easement as a Class
D(iii) land charge against the title of Trentwith.51

 

Ross

The position of Ross is very
similar to that in scenario (i), save that where land is unregistered a
restrictive covenant will not bind a purchaser such as George unless it is
protected by entry of a Class D(ii) land charge.52
If no charge has been entered then George will take title to Trentwith free of
the covenant, as there is no suggestion he is, or was, in actual occupation of
any part of Trentwith.

 

Drake

The position of Drake is
identical to that in scenario (i); if he completed 12 years unbroken adverse
possession prior to the sale between Francis and George he is entitled to be
registered as proprietor of Trentwith.53
If he has not completed this period, or if he completes an unbroken period of
10 years after George has registered
his proprietorship so as to render it legal, then Drake must once more have
resort to the far more restrictive scheme introduced by the LRA 2002, the operation
of which is set out above in relation to scenario (i).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bibliography

 

Text Books

Charles Harpum, Megarry
& Wade: The Law of Property (8th edn, 2016, Sweet & Maxwell:
London)

Kevin Francis Gray & Susan Gray, Elements of Land Law (4th edn, Oxford University Press:
OUP, 2009)

 

Journals

Davis, ‘Implied, Resulting or Constructive Trust?’ (1989)
DLJ (4)1

 

Cases

Abbey National Building Society v Cann 1991 AC 56

Batchelor v Marlowe 2001 EWCA Civ 1051

Curran v Collins 2015 EWCA Civ 40

Gissing v Gissing 1970 UKHL 3

Hair v Gillman (2000) 80 P&CR 108

Hill v Tupper (1863) 2 H & C 121

International Tea Stores Co v Hobbs 1903 2 Ch 165

J A Pye (Oxford) Ltd and Others v Graham and another 2002
UKHL 30

Jones v Kernott 2011 UKSC 53

Laskar v Laskar 2008 EWCA Civ 347

Lord Advocate v Lord Lovat (1880) 5 App Cas 273

Marr v Collie 2017 UKPC 17

Powell v McFarlane (19770 38 P & CR 452

Stack v Dowden 2007 UKHL 17

Re Ellenborough Park 1955 EWCA Civ 4

Rhone v Stephens 1994 2 All ER 65

Tulk v Moxhay 1848 EWHC J34 (Ch)

Walsh v Lonsdale (1882) 21 Ch D 9

Williams & Glyn’s Bank v Boland 1981 AC 487

Zarb v Parry 2011 WLR (D) 331

Legislation

Law of Property Act 1925

Law of Property (Miscellaneous Provisions) At 1989

Land Registration Act 1925

Land Registration Act 2002

Land Charges Act 1972

Limitation Act 1980

1 2015
EWCA Civ 801

2
Ss.14 and 15, TOLATA 1996

3 Bagum v Hafiz EWCA Civ 801 at 22 per
Briggs LJ

4
See Kevin Francis Gray & Susan Gray, Elements
of Land Law (4th edn, Oxford University Press: OUP, 2009) at p.377

5 Bagum v Hafiz EWCA Civ 801 at 25 per
Briggs LJ

6
See Kevin Francis Gray & Susan Gray, Elements
of Land Law (4th edn, Oxford University Press: OUP, 2009) p.1129

7
Ss.29, 32, LRA 2002

8
Schedule 3(1) LRA 2002

9
Schedule 3(3) LRA 2002

10
Schedule 3(2) LRA 2002

11
See Charles Harpum, Megarry & Wade:
The Law of Property (8th edn, 2016, Sweet & Maxwell: London) p.175

12
See Marr v Collie 2017 UKPC 17 at
42 per Lord Kerr

13 See
Davis, ‘Implied, Resulting or Constructive Trust?’ (1989) DLJ (4)1

14
S.53(b), LPA 1925

15 Laskar v Laskar 2008 EWCA Civ 347

16 Gissing v Gissing 1970 UKHL 3

17 Stack v Dowden 2007 UKHL 17; Jones v Kernott 2011 UKSC 53

18 Lloyds Bank plc v Rosset 1990 UKHL 144

19 Curran v Collins 2015 EWCA Civ 40

20
See Abbey National Building Society v
Cann 1991 AC 56 at 73, per Lord Oliver

21
Sch 3(2)(c), LRA 2002

22 Tulk v Moxhay 1848 EWHC J34 (Ch)

23 Rhone v Stephens 1994 2 All ER 65

24 Hill v Tupper (1863) 2 H & C 121

25 Rhone v Stephens 1994 2 All ER 65 at
84

26 Tulk v Moxhay 1848 EWHC J34 (Ch)

27 Re Ellenborough Park 1955 EWCA Civ 4

28 Hill v Tupper (1863) 2 H & C 121

29 Batchelor v Marlowe 2001 EWCA Civ 1051

30
S.52 LPA 1925

31
S.27, LRA 2002

32
S.1(2), Law of Property (Miscellaneous Provisions) Act 1989

33 Walsh v Lonsdale (1882) 21 Ch D 9

34 International Tea Stores Co v Hobbs
1903 2 Ch 165

35
See Wheeldon v Burrows (1879) 12 Ch.
D. 31, albeit the method of implication in this case is different.

36 Wood v Waddington 2015 EWCA Civ 538 at
554 per Lewinson LJ

37
Ibid.

38
Schedule 3(1), LRA 2002

39 J A Pye (Oxford) Ltd and Others v Graham and
another 2002 UKHL 30

40 Powell v McFarlane (19770 38 P & CR
452

41 Lord Advocate v Lord Lovat (1880) 5 App
Cas 273

42 J A Pye (Oxford) Ltd and Others v Graham and
another 2002 UKHL 30 at 45

43
See Zarb v Parry 2011 WLR (D) 331

44
S.15 Limitation Act 1980

45
Schedule 6(2) LRA 2002

46
Schedule 6(5) LRA 2002

47
Schedule 6(5)(4)(c), LRA 2002

48
S.4, LRA 2002

49
S.198(1), Law of Property Act 1925

50
Ibid.

51
S.4(5) Land Charges Act 1972

52
S.4(5) Land Charges Act 1972

53
S.15, Limitation Act 1980; s.75, LRA 1925