An apparently straightforward possession claim for rent arrears revealed contradictory explanations as to how the beneficial interest of a number of properties was held. The dispute was determined by the High Court in Yalcinkaya v Hassan and another [2022] EWHC 2516 (Ch), with the court considering whether the defence of constructive trust/proprietary estoppel could overcome the hurdle presented by sections 53 and 54 of the Law of Property Act 1925.
Section 53 and 54 state:
“53 (1) Subject to the provisions hereinafter contained with respect to the creation of interests in land by parol – (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law; (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will. (2) This section does not affect the creation or operation of resulting, implied or constructive trusts.
“54 (1) All interests in land created by parol and not put in writing and signed by the persons creating the same, or by their agents thereunto lawfully authorised in writing, have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.”
The claimant had been a council tenant of 226a Devonshire Road, London SE23 3TQ, but in 1999 she had utilised the right to buy to purchase the long leasehold of that property. The first defendant (the defendant) was well known to the claimant and had experience in selling and renting out property.
In 2002, the claimant was considering selling 226a Devonshire Road. Following discussions with the defendant, it was instead decided that she would remortgage that property. The actual agreements and the ending of the arrangement created were disputed. The claimant broadly contended that the defendant agreed to manage Devonshire Road and subsequent properties that she acquired, and that in return for part of the remortgage monies she would acquire 50% of the beneficial interest in two properties that he owned (14 Kashmir Road SE7 8QL and 26 Charlton Dene SE7 7BZ).
The defendant accepted that it had been agreed that part of the remortgage monies would be used to purchase half the beneficial interest of the two south London properties already owned by him but contended that it was also agreed that he would refurbish Devonshire Road and manage it, that the beneficial ownership of Devonshire Road would also be held equally and that the income received from renting out the properties would be used to purchase additional properties.
Two properties, 33 Kashmir Road SE7 8QN and 38 Highcombe SE7 7HR, were subsequently purchased in the claimant’s sole name, and the defendant contended that it had been agreed that they would also be held in equal beneficial shares. The defendant further maintained that the arrangement was ended by agreement and subsequent transfer of monies, and that Devonshire Road and 38 Highcombe were sold with the remaining three properties being then owned beneficially by him alone.
Resolving the factual dispute was no easy task for the court. The dealings between the parties were marked by a striking degree of informality, and both witnesses gave evidence that was in large parts untrustworthy. The court applied the guidance given in the commercial case of Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm), making findings of fact on inferences drawn from the documentary evidence and known or probable facts.
To succeed in his argument, the defendant had the burden of overcoming the general principle that the beneficial interest in property follows the legal interest. There was also the difficulty that there was no written document within 53(1) to show the creation of his alleged beneficial interest in 33 Kashmir Road or 38 Highcombe, or the transfer of the claimant’s admitted beneficial interest in 14 Kashmir Road.
Despite these obstacles, the defendant succeeded. The court found that there was a common intention constructive trust. Further, the necessary requirements of a constructive trust were in this context very similar (if not identical) to those of proprietary estoppel. Having reviewed the authorities, there was no reason in principle why section 53(2) could not apply. The expectation of the defendant as to the agreement made should be met, but as the court found that he had not paid to the claimant all the money that had been agreed, he was ordered to pay her the outstanding sum (£7,000 plus interest). A claim for such payment would have been statute-barred, but it would not have been equitable or conscionable for him to succeed without paying it.
Elizabeth Haggerty is a barrister
