Rodway v Landy

Under the Trusts of Land and Appointment of Trustees Act 1996, the purposes for which trust land is held are assessed when the application is determined, separately from the creators’ original intentions. The trustees’ power under section 13 may restrict each of two beneficiaries to separate parts of a building, provided the exercise does not leave all beneficiaries without occupation rights. A condition requiring beneficiaries to share the cost of adapting the property may also be imposed. On a sale of medical-practice premises, purchase finance applied to redeem the secured loan is consideration for the disposal, even where no cash changes hands. The statutory deeming provisions may therefore make the transaction an unlawful sale of goodwill.

Two doctors jointly held premises on trust in equal shares after purchasing them for a medical practice. Their partnership at will later ended. The High Court had earlier held that the premises were not a partnership asset. On 13 October 2000, the High Court refused to order a sale or partition, but directed the trustees to divide the building and restrict each doctor’s occupation to a separate part under section 13 of the Trusts of Land and Appointment of Trustees Act 1996. The judge ordered Dr Rodway to pay two thirds of Dr Landy’s costs. Dr Rodway appealed against the substantive orders. Dr Landy cross-appealed on costs. The central issues were the legality of a proposed sale, the scope of the trustees’ section 13 powers, and the appropriate appellate approach to the discretionary orders.

Peter Gibson L.J. delivered the leading judgment. Latham L.J. and Lord Phillips M.R. agreed.

1. Sale and illegality. The appeal was dismissed. Applying Schedule 10 paragraph 2(1) of the National Health Service Act 1977, the amount of the outstanding secured loan which would be extinguished on a sale was consideration for the disposal, even though the loan proceeds would be applied directly to the lender. The proposed transaction was therefore not merely a transfer of an equity of redemption. The conditions in paragraph 2(1) were satisfied, so the disposal was deemed to be a sale of goodwill and was unlawful. The reasoning of Abbey National Building Society v Cann [1999] AC 56 could not be transposed to these materially different circumstances. The Medical Practices Committee could not ignore the statutory deeming provision when considering a certificate.
2. Purposes of the trust. Section 15(1)(b) requires consideration of the purposes for which the property is held at the time of the application. That inquiry is distinct from the creators’ intentions under section 15(1)(a). The partnership had ended, so practising in partnership was no longer a current purpose. The judge was entitled to regard NHS medical services as the core purpose and to treat the one-stop health-shop concept as an important original objective rather than the prevailing purpose.
3. Division and conditions. The words “but not all” in section 13(1) limit the number of beneficiaries whose occupation rights may be restricted. They do not prevent reciprocal restrictions assigning separate parts of trust land to separate beneficiaries, provided occupation rights remain. The building was capable of practical division. Section 13(3) was wide enough to permit a condition requiring each beneficiary to contribute to adaptation costs. Although one consideration concerning the lender’s position was unsatisfactory, it did not undermine the judge’s overall discretionary decision to prefer division to sale.
4. Costs. Permission was granted for the cross-appeal, but it was dismissed. The trial judge was better placed to assess the conduct and costs of the proceedings and had acted within the proper ambit of his discretion. The substantive appeal and cross-appeal were dismissed. Costs followed the orders stated by the court, and leave to appeal to the House of Lords was refused.

• Court of Appeal: Appeal and cross-appeal dismissed. Leave to appeal to the House of Lords refused. [2001] EWCA Civ 471.
• High Court, Chancery Division: On 13 October 2000, refused sale and partition, directed the trustees to restrict occupation and divide the property under section 13 of the Trusts of Land and Appointment of Trustees Act 1996, and ordered Dr Rodway to pay two thirds of Dr Landy’s costs.