FREE sample from ‘A Practical Guide to TOLATA Claims’ by Greg Williams

CHAPTER ONE
AN INTRODUCTION TO
TOLATA

A brief history of the Act

  1. The year 1997 will perhaps be remembered in history for a number of reasons. New Labour swept to power in a landslide victory rarely seen in British politics. On the other side of the world, the British Government was to cede Hong Kong to the People’s Republic of China following 156 years of British rule. Diana, Princess of Wales, died. A computer, Deep Blue, beat a human, Garry Kasparov, at chess over a series of matches. Dolly the Sheep was cloned. In cinema, a blockbuster by James Cameron about a large ship sinking in the North Atlantic became the then highest grossing film of all time. And in literature, the first of what proved to be a series of novels about a young wizard named Harry Potter was published by a then relatively unknown author called J K Rowling.

  1. Against that context, few of the readers of this book, let alone the public at large, will specifically recall the coming into force, on 1 January 1997, of the Trusts of Land and Appointment of Trustees Act 1996. Nevertheless, the impact of that statute, the cases which have interpreted it, and the procedure which governs it already have had – or, in many cases, one day will have – a profound effect on the lives of thousands if not millions of people in England and Wales. That is because couples in cohabiting relationships are on the rise. Fewer people in England and Wales are getting married, providing a perhaps apposite context to those who would otherwise note with satisfaction the statistical reduction in the number of divorces.

  1. In 2017, there were nearly 3.3 million cohabiting couples in England and Wales, representing about a fifth of all family units.1 The number of cohabiting couples was the fastest growing type of family in the UK between 2004 and 2014 (up by 29.7%)2 and all the present signs suggest that cohabitants shall continue to be so – there were 100,000 more cohabiting couples even between just 2015 and 20173. Furthermore, of the 3.3 million cohabiting couples last year, 1.25 million had children. According to some, cohabiting couples now account for over half of all family breakdowns despite making up only a fifth of the pool of parents when compared to the approximately four fifths of couples who choose to get married.4

  1. The law relating to these cohabiting couples in England and Wales concerns strict property rights and interests. Despite widespread public opinion to the contrary, there is no such thing as a ‘common law marriage’. Consequently, on the breakdown of a cohabiting couple’s relationship, the parties and their advisors will be concerned with the legal principles of trusts of land; usually and specifically what are now called constructive trusts and importantly involving something termed ‘common intention’.

  1. That is far removed from a precise formula setting out what to do in any given circumstance. It does not even involve a wide statute based discretionary exercise to achieve a fair outcome between separating couples, as matrimonial finance lawyers will be commonly used to.5 All too frequently in TOLATA cases, there is a winner and a loser. Those practitioners who favour the certainty that the more technical aspects of trust principles may bring to cohabitees’ cases will nevertheless acknowledge that there will be cases where objectively the outcome is not always ‘fair’; and the same practitioners will be mindful that they frequently need to win on both ‘law’ and ‘fact’ to achieve a successful overall outcome. Given that many cases concern those former cohabitees who failed to reduce their common intention into writing when making investments in property, it has been said, perhaps rather gravely, that “the tenderest exchanges of a common law courtship may assume an unforeseen significance many years later when they are brought under equity’s microscope and subjected to an analysis under which many thousands of pounds of value may be liable to turn on fine questions as to whether the relevant words were spoken in earnest or in dalliance and with or without representational intent.”6

  1. And so, to this book. In an age where the number of cohabiting couples is growing rapidly, so too does the need to give legal advice to those whose relationships end unhappily (and even, it should be said for balance, happily). Despite the now famous remarks of Ward L.J. in the Court of Appeal in Carlton v Goodman7, the anecdotal experience of the author and his colleagues in Chambers is that this area of work is on the rise. Furthermore, any prospect of reform of this area of the law appears as distant today as it has been at any point since the Law Commission’s Report on Cohabitation: The Financial Consequences of Relationship Breakdown was published in 20078. That report was not received with the level of political appetite for reform that many would argue this area of the law deserves. It has been largely gathering dust ever since.

  1. This book is divided into the following parts. The remainder of this Chapter shall set out briefly some of the most important changes brought about by the passing into force of the Trusts of Land and Appointment of Trustees Act 1996 (hereafter called ‘the Act’, or ‘TOLATA’). It shall also deal with some of the key concepts which one typically encounters in these sorts of case.

  1. Chapter 2 shall set out the full Act in greater detail, with a limited amount of commentary, where relevant.

  1. Chapter 3 shall consider the background to and the detail of the significant decisions in Stack v Dowden9 and Jones v Kernott10 and the ascendancy of the common intention constructive trust.

  1. Chapter 4 shall consider some of the extended case law and in particular those decisions which postdate Jones v Kernott. It shall deal with, in particular, examples of cases where the courts have used imputation to find the quantum of the parties’ beneficial shares, sole name cases, investment cases, and quasi-investment cases. It shall also look at the circumstances in which one party may attempt to buy a co-owner’s interest in a jointly owned property.

  1. Chapter 5 shall deal with ‘taking of an account’ hearings and consider the origins of this area stemming back to equitable accounting principles.

  1. Chapter 6 shall provide an overview of the procedure which may apply in a particular case, whether that be a freestanding civil claim, or one where a TOLATA issue arises in a family law application, such as a trial of a preliminary issue concerning intervenors.

  1. We return to the present Chapter and the main changes brought about by the Act. The explanatory notes published by Parliament regarding the purpose of the Act reads as follows:

An Act to make new provision about trusts of land including provision phasing out the Settled Land Act 1925, abolishing the doctrine of conversion and otherwise amending the law about trusts for sale of land; to amend the law about the appointment and retirement of trustees of any trust; and for connected purposes.”11

  1. Section 1 of the Act, in conjunction with Sections 4 and 5, creates the (then) new concept of a ‘trust of land’ (as to the definition of which, see Chapter 2 of this work). The (now) old concept of a ‘trust for sale’ as previously found in the Law of Property Act 1925, was repealed. As will be seen later in this work, there is therefore no longer any presumption of a trust for sale, something which was duly noted in the Parliamentary debate on the second reading of the Trusts of Land and Appointment of Trustees Bill in the House of Lords. In that debate, the Government’s spokesperson argued that:

the trust for sale mechanism is not appropriate to the conditions of modern home ownership, which represents the majority of jointly-owned real property, since it is based on an assumption that property … is intended as an investment rather than as a home, to be bought and sold as market conditions demand, with the beneficiaries being interested in the proceeds of sale rather than the property for its own sake.”12

  1. Instead, on the coming into force of the Act, the court now considers a short checklist of factors when deciding what, if any, order to make on an application for an order for sale. These are found at Section 15 which may be seen in Chapter 2.

  1. Section 2 of the Act abolished the creation of all new settlements of property under the Settled Land Act 192513. It was argued in Parliament that the provisions of the Settled Land Act were unduly complex and a product of a bygone age, irrelevant to the vast majority of the current wider public.14 Furthermore, Section 3 of the Act abolished the doctrine of conversion in all new cases, although settlements created by a Will prior to the Act coming into force were exempt. The doctrine of conversion, of course, was the rule which provided that the interests of beneficiaries in land under an old trust for sale were deemed to be interests in the proceeds of sale of that land, not the land itself.

  1. Sections 4 and 5 of the Act introduced trusts of land (as defined in Section 1 of the Act, above), in place of trusts for sale.

  1. Sections 6 through to 9 (and the now inserted 9A) deal with the functions of trustees of land. In particular, Section 6 provides that trustees of a trust of land are to have all the powers of an absolute owner.

  1. Sections 10 and 11 deal with the need for consent by trustees from beneficiaries when carrying out any function under a trust of land. In the case of Section 10, that section deals with dispositions (i.e. deeds) that require trustees to obtain consent before exercising a function, and the Act limits the number of trustees who need to give such consent in favour of a purchaser to two trustees. As to Section 11, that broader section requires trustees exercising any function relating to the land to consult, so far as is practicable, the beneficiaries of full age and – insofar as is consistent with the general interest of the trust – to give effect to the majority view. However, as we shall see, Section 14 gives the court the power to override this consent if it is satisfied that it is appropriate to do so.

  1. Sections 12 and 13 concern the rights of beneficiaries to occupy trust land, and it is those sections that the reader will need to familiarise herself with when considering occupation rent issues, which are dealt with in this work at Chapter 5.

  1. Section 14 puts into legislative form the right for a trustee or a beneficiary to apply for an order in relation to the trust of land. This may be for an order for sale, or for any other order relating to the trust property, such as a taking of an account, or an occupation rent. It should be noted in particular that it is by this section that claimants who seek to establish a formal beneficial share may also apply. So, in a sole name case, where the former cohabiting partner of the legal title owner alleges that they have a share under a constructive trust, that person would bring their claim under Section 14.

  1. Section 15 sets out the factors to which the court shall have regard when determining applications under Section 14. For more detail on this, see Chapter 2.

  1. Section 16 concerns the rights of purchasers of trust property and is unlikely to be frequently relevant to the busy practitioner advising former co-owners about their respective beneficial interests as between each other.

  1. Section 17 confirms that Section 14 applies as equally to the proceeds of sale of any trust of land as it would have done to the property in question.

  1. The remaining Sections in Part II and Part III of the Act are less relevant to this work. However, some sections therein concern such matters as interpretation and commencement provisions under the Act and are therefore set out for completeness in Chapter 2.

Some fundamental concepts and terminology

  1. It is convenient at this point to examine some of the concepts which underpin the Act and the case law which interprets it.

Joint tenants

  1. To start with, what is the difference between a joint tenancy and a tenancy in common? Joint tenants have equal rights to the whole property, and if one of them were to die, the whole property would automatically pass by the rules of survivorship to the co-owning joint tenant or tenants. A tenancy in common, however, sees the beneficial co-owners owning specified – sometimes different – shares of the property. The main practical difference between tenants in common in equal shares and joint tenants is that the property doesn’t automatically pass to a co-owning tenant in common on the death of the other as the right of survivorship does not apply. On the death of a tenant in common that person’s share will fall into their estate rather than pass to their co-owner.

  1. In order for there to be a joint tenancy, the so-called ‘four unities’ of a joint tenancy must be present. They are the unities of (1) possession, (2) interest, (3) title and (4) time.15 The unity of possession means that each co-owner has an equal right to occupy or hold the whole of the property, as set out above. Although the courts now have statutory powers to regulate and exclude a co-owner from the property16, at common law no such power existed. Secondly, the unity of interest means that each co-owner’s interest must be identical and should arise from the same purchase or disposition. Thirdly, there must be unity of title. The co-ownership must arise from the same document, namely a completed contract for sale followed these days by registration of those interests. Fourthly, there must be unity of time. The co-owners’ interests must arise at the same time. One can see how on any straightforward purchase by two co-owners, provided they specify that they wish to hold as joint tenants, the unities of time and title will plainly be met.

  1. Each of these four unities must be present in order for there to be a joint tenancy. If even one of them is broken (including later on, such as by a notice of severance of joint interest), then the joint tenancy will fail and will be a tenancy in common.

  1. The position with joint tenants and tenancies in common is best demonstrated with a series of examples. Take, for example, four people who desire to own property together: Mrs White, Mrs Peacock, Colonel Mustard and Professor Plum. In the first example, let us suppose they wish to hold the property as joint tenants. Using the example below, they all jointly own the whole property, in undivided shares, and they all have all the rights of an absolute owner of the property. It is not possible to quantify their respective shares individually, because they each own all of the whole jointly.

MORE INFORMATION / PURCHASE THE BOOK ONLINE

1https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/bulletins/familiesandhouseholds/2017

2https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/bulletins /familiesandhouseholds/2015-01-28

3Ibid: ONS website.

4http://marriagefoundation.org.uk/cohabiting-parents-now-account-majority-family-breakdown/

5Namely under the under the Matrimonial Causes Act 1973, Section 25

6Waite J, in Hammond v Mitchell [1991] 1 WLR 1127, at 1139.

7[2002] EWCA Civ 545 at para 44, where Ward L.J. memorably wrote, including by the use of capital letters, as follows:

I ask in despair how often this court has to remind conveyancers that they would save their clients a great deal of later difficulty if only they would sit the purchasers down, explain the difference between a joint tenancy and a tenancy in common, ascertain what they want and then expressly declare in the conveyance or transfer how the beneficial interest is to be held because that will be conclusive and save all argument. When are conveyancers going to do this as a matter of invariable standard practice? This court has urged that time after time. Perhaps conveyancers do not read the law reports. I will try one more time: ALWAYS TRY TO AGREE ON AND THEN RECORD HOW THE BENEFICIAL INTEREST IS TO BE HELD. It is not very difficult to do.”.

8LAW COM (No 307): https://www.lawcom.gov.uk/document/cohabitation-the-financial-consequences-of-relationship-breakdown/

9[2007] 2 AC 432

10[2012] 1 AC 776

11See the tab marked ‘Original Print PDF’ on https://www.legislation.gov.uk/ukpga/1996/47/-contents/enacted for a free digital copy of the (unamended) HMSO Act.

12The quoted minister was the Government of the day’s spokesperson in the House of Lords, The Lord Advocate The Lord Mackay of Drumadoon, at the Bill’s second reading: https://api.parliament.uk/historic-hansard/lords/1996/mar/01/trusts-of-land-and-appointment-of

13Although it may be possible to achieve a similar effect by a carefully drafted trust of land.

14Ibid, see 8 above: Lord Mackay of Drumadoon’s same speech.

15Mikeover Ltd v Brady [1989] 3 All ER 618.

16TOLATA Section 13, and the Family Law Act 1996, Part IV.