When does a legal owner have to share their property? Answer: When that is what they agreed to do!

The Court of Appeal decision in Agarwala v Agarwala [2013] EWCA Civ 1763 underlines the fact that the court will look at what the parties agreed and intended to do in terms of sharing a property, rather than who is strictly the legal owner. It will give effect to those intentions. In this case the Court of Appeal upheld a decision made in the county court that a property claimed to be solely owned by the appellant was in fact held on trust for the respondent.

The appellant and respondent were sister-in-law and brother-in-law respectively. The appellant bought the property “in name only” as a commercial investment to be run as a B&B because the respondent did not have the credit rating to take out the mortgage used to fund the purchase price.

It was common ground that there had been an express oral agreement between them as to the terms upon which the property had been bought, but the parties each asserted that they owned 100% of the beneficial interest.

The fact that the mortgage was in the appellant’s name and that she had paid the mortgage instalments was not relevant to deciding who owned the beneficial interest in the property.

Grounds for appeal

The trial judge accepted that pursuant to what had been agreed, she was bare trustee of the property which she owned for the benefit of the respondent. The agreement was that she was to receive the income from the B&B business which was to be run by the respondent. In return he was to get the benefit of any over bookings. She was therefore merely a “conduit” for the payment of mortgage instalments out of the profits of the business.

One of the grounds for the appeal was that the judge had given insufficient weight to the presumption that the beneficial and legal interest should coincide. The appeal court found that the judge had had the presumption “well in mind” and there could be no doubt that he applied it, but that “presumption” was rebutted by the evidence of the common intention of the parties to create a trust, which separated the legal and beneficial interest in the property.

There was also an allegation that the judge had erred in reversing the burden of proof, but the court of appeal found the judge had correctly placed the burden of proving his claim on the respondent. He had shown that the entire beneficial interest was his and was separate from the legal interest.

There was also a suggestion that the judge erred in trying to ascertain what the parties intended, rather than if a common interest existed in the first place, but this was also dismissed because both parties agreed there was a common intention.

Was evidence ignored?

It was further said that the judge had failed to have regard to some e-mail evidence showing the property was not insured, not compliant with fire regulations and operating without planning permission, but it was said that the judge was entitled to consider the case as a whole and to conclude that those e-mails supported the Claimant’s argument. The court of appeal even commented that had the respondent believed she owned the property exclusively it was surprising that she made no attempt to ensure that the insurance and regulatory requirements had been complied with!

The trust deed forged by the respondent and relied on by him was irrelevant and the judge had rightly not placed any weight upon its contents, save as to take it into account when assessing the respondent’s credibility.

The only criticism from the appeal of the judge was that in his reasoning he should have given more emphasis on the “detriment suffered” by the respondent in terms of the work he had put into the B&B and in running the business.

Conveyancing negligence

This case highlights the importance of seeking legal advice as to the nature and effect of an agreement as to how to purchase and own property before buying it. We see many cases at Redress Law where there is an inherent misunderstanding as to the agreements reached, but specialise in handling property disputes and can help get clarification for our clients. We also sadly see many cases of conveyancing negligence where conveyancers get it wrong leaving client’s to deal with disputes about who owns what. In those cases we are able to obtain justice for clients by bringing professional negligence claims. If you think you are being denied your rightful interest in property or have any other property negligence queries – get in touch, so we can help.