Murphy v Gooch

The taking of accounts between co-owners of land is governed by sections 12–15 of the Trusts of Land and Appointment of Trustees Act 1996, rather than the former doctrine of equitable accounting. The court must achieve justice between the parties while giving due regard to the statutory considerations.

A beneficiary may receive credit for occupation rent without proving actual or constructive ouster. The credit may be used as a set-off although no free-standing payment is claimed. Where mortgage interest and rent are expenses of the occupying co-owner’s continued sole occupation, justice may require the non-occupier’s occupation-rent credit to offset those expenses in full.

The parties owned equal beneficial shares in a 25% leasehold interest in their former home. After their relationship ended, Ms Murphy left with their daughter and Mr Gooch remained in sole occupation, paying the mortgage interest, rent due to the housing association and endowment-policy premiums.

On Ms Murphy’s application under section 14 of the Trusts of Land and Appointment of Trustees Act 1996, the county court gave Mr Gooch credit for one half of the relevant payments after allowing a limited occupation-rent set-off. It valued Ms Murphy’s share at £3,209 and granted Mr Gooch an option to purchase it.

Ms Murphy appealed against the limited set-off. Mr Gooch cross-appealed, denying any occupation-rent credit and claiming additional payment credits. Following Stack v Dowden [2007] UKHL 17, the central issues were whether an occupation-rent credit was procedurally available, whether ouster was required and the proper amount of the credit under the statutory scheme.

1. Appeal allowed and cross-appeal dismissed. The House of Lords’ decision in Stack v Dowden [2007] UKHL 17 established that sections 12–15 of the Trusts of Land and Appointment of Trustees Act 1996, rather than equitable accounting, govern the court’s power to allow occupation rent between co-owners. Because the county court had proceeded solely under equitable accounting, the Court of Appeal had to determine the issues afresh under the Act.
2. Ms Murphy’s disavowal of a free-standing claim for occupation rent did not prevent her from using the corresponding credit as a set-off against Mr Gooch’s claims. That was a proper procedural course.
3. An occupation-rent credit could be ordered where just, whether or not the occupying co-owner had ousted the other beneficiary. In any event, Ms Murphy’s departure following the breakdown of the relationship amounted to constructive exclusion from the former joint home.
4. The statutory task was to do justice between the parties with due regard to the intentions of the trust’s creators, the purpose for which the property was held, the welfare of any relevant minor, the secured creditor’s interests, and the beneficiaries’ circumstances and wishes. The original purpose of providing a joint home had failed. No minor’s welfare or mortgagee’s interest would be prejudiced, while both beneficiaries had straitened circumstances and competing housing and realisation needs.
5. The mortgage interest and housing-association rent were expenses and outgoings of Mr Gooch’s continuing sole occupation. They were neither capital payments nor expenditure increasing the property’s capital value. There was no justification for limiting Ms Murphy’s set-off to half of those sums. Her occupation-rent credit therefore cancelled Mr Gooch’s credits for mortgage interest and rent in full, including payments made outside the period quantified below.
6. Ms Murphy’s interest was valued at £11,280. Mr Gooch received a three-month option to purchase it, subject to using his best endeavours to obtain her release from the mortgage and indemnifying her while liability remained. Otherwise, the property was to be sold and the adjusted net proceeds divided equally. Ms Murphy received the costs of the appeal, the cross-appeal and 90% of her costs below.

1. Court of Appeal (Civil Division): Allowed Ms Murphy’s appeal, dismissed Mr Gooch’s cross-appeal and replaced the county court’s valuation and consequential orders.
2. Exeter County Court: His Honour Judge McKintosh allowed only a half set-off against the credits for mortgage interest, rent and policy premiums, valued Ms Murphy’s share at £3,209 and granted Mr Gooch an option to purchase it.