September and October gave us two High Court decisions (one on appeal) looking at determination of beneficial interests in family homes registered in sole names. Both provide a cautionary tale of how to prepare and present such cases.
Iranian Offshore Engineering and Construction Co v Zavarei  EWHC 2497 (Comm)
In Iranian Offshore Engineering and Construction Co v Zavarei  EWHC 2497 (Comm) the Court determined the extent of the beneficial interest of a wife of one of the defendants involved in a complex international fraud. The Applicant company was seeking to enforce a judgment for $87 million against the defendant husband, amongst other defendants, for a mobile oil rig that was never delivered. The husband was found to have received AED 11.9 million as proceeds of “dishonest participation” in the defrauding of the Applicant.
The property in question had been bought as the family home for over £4 million. The wife was the sole registered proprietor of the property. It was subject to a charge, and the net equity had been valued at £235,811. The Applicant company argued that it was to be inferred that the wife held the legal title on resulting or common interest constructive trust for the husband’s sole benefit, as he had paid the whole or most of the purchase price from his resources. The wife argued that the whole of the purchase price was paid from her resources or her borrowings on terms that obliged her personally and exclusively to repay sums borrowed.
Judge Pelling QC found the evidence of both the husband and wife to be profoundly unsatisfactory. In particular, the wife had failed to provide proper disclosure and those documents that were disclosed either did not support her case or were adverse to it. The legal burden rested on the Applicant to displace the presumption, showing the beneficial interest should be different from the legal title, but the wife had an evidential burden to prove that her alleged resources or borrowings had in fact paid for the purchase price. To this end, she could only evidence an interest to the extent of her share of the proceeds of sale of previous property and that her husband had loaned her his share of the proceeds. Her beneficial interest therefore only amounted to 27.45%.
The importance of ensuring documentation to support and corroborate a beneficial interest cannot be understated.
Amin v Amin (Deceased)  EWHC 2675 (Ch)
In Amin v Amin (Deceased)  EWHC 2675 (Ch) the home was again registered in the wife’s sole name (although the couple were not legally married). The claim started as a claim for possession but the defendant husband (and her two sons) counterclaimed that she held the property on trust for them and that they were entitled to an equitable interest by way of common intention constructive trust. The husband died after the claim was issued.
The Judge at first interest applied the test in Jones v Kernott  UKSC 53, that financial contributions were relevant but other factors might lead the Court to decide what shares were intended, if any. He made factual findings as to who made mortgage payments, that the wife made no financial contribution, that registration in her name was done without much consideration, the background being that the family had previously transferred properties between members of the extended family. In the circumstances there was enough evidence to hold that the property was held on trust by the wife for all three defendants and ordered it to be transferred into their names.
The wife argued that the Judge had failed to consider whether there was a common intention between the parties to share the property and if so how and when it was formed. The test in Jones referred to by the Judge dealt with joint names cases and the quantification stage only came into play if the Court had already decided there was a common intention. Further, that it was perverse that the sons shared in the beneficial interest because at purchase they were not old enough to have knowledge of the acquisition, and that the Judge had failed to consider whether there was sufficient detrimental reliance by any of the defendants.
Nugee LJ dismissed the appeal. It was true that Jones is a joint names case, but it also dealt with sole name cases and stated that the parties’ common intention had to be deduced objectively from conduct. The Judge had recognised that the starting point in a sole name case is the presumption that they are also the sole beneficial owner. What is needed to displace the presumption that the beneficial interests followed the legal title was a common intention, to be deduced objectively from conduct. Financial contributions and many other factors may assist the Court to conclude not only the parties’ intended shares but also whether there was common intention.
The conclusion that the sons had a beneficial interest was not perverse. The Judge did not have to consider how or when the sons acquired their interests or what they were. He had just had to decide whether to accept their argument that their financial contributions and other factors were sufficient to displace the presumption that she was the sole legal and beneficial owner. Detrimental reliance is a requirement for a common intention trust but there was an inference to be drawn that making mortgage payments was on the understanding that they had an interest in the property. The defendants’ evidence was that they regarded the property as their own, made mortgage payments and lived at the property while carrying out building work to it. That was sufficient.
It was surprising that the wife, who was the legal owner, had been found at first instance to have no beneficial interest in the property at all. A case could have been made that the original purchase of the property in joint names gave rise to the presumption they were intended to be joint beneficial names (before it was transferred on and then retransferred to the wife in her sole name), but this was not the case the Judge was presented with. The case he had to deal with was an all or nothing case. Her case had been that the house solely belonged to her without a fallback position.
A lesson then for parties and their representatives to consider carefully from an early stage how a case should be presented and may ultimately be viewed by the judge if no fallback position is presented.