Painter v Hutchison & Anor

Where a trust is expressly declared by a written instrument, the court ordinarily gives effect to the declaration unless it is set aside or rectified. A unilateral declaration may be a sham if the declarant intended it to create an appearance of rights different from those actually intended. Where the named beneficiary has not accepted the gift, the declarant’s intention is decisive. If the beneficiary disclaims, the beneficial interest may result back to the settlor, but an alleged contributor must prove the provenance of the purchase money. An illegal purpose does not bar relief where the claimant can recover without relying on it and the purpose was never carried into effect. Pre-bankruptcy liabilities remain bankruptcy debts after discharge and should be pursued by proof in the bankruptcy.

Mrs Beverley Painter sought declarations concerning the beneficial ownership of 84 Deanway, Chalfont St Giles, and resisted Mr Brian Hutchison’s Part 20 claim that the property was an asset of a joint venture. The wider dispute concerned alleged undocumented joint ventures involving furniture businesses, properties and cars.

The central issues were the provenance of the purchase monies, the effect of a written declaration of trust in favour of the Gemini Trust, whether that declaration was a sham, and the effect of Mr Painter’s bankruptcy and discharge on Mr Hutchison’s claim for an account.

The court found Mr Hutchison’s evidence unreliable unless corroborated by indisputable contemporaneous documents. It rejected his alleged interests in the relevant furniture businesses and properties, and found that the monies used to acquire 84 Deanway derived from assets beneficially belonging to the Painters.

1. Express declaration of trust. The court considered Pettitt v Pettitt [1970] A.C. 777, Gissing v Gissing [1971] A.C. 886 and Goodman v Gallant [1986] Fam 106. An express and comprehensive declaration of beneficial ownership must be given effect unless set aside or rectified. Writing signed by the person able to declare the trust satisfied section 53(1)(b) of the Law of Property Act 1925.
2. Resulting trust. Applying Townson v Tickell (1819) 3 B. & Ald. 31 and Vandervell v IRC [1967] 2 AC 291, the court held that the Bank’s refusal to accept the purported beneficial interest resulted in a trust in favour of the declarant. That did not determine competing claims between the Painters and Mr Hutchison. Mr Hutchison had to prove that he had provided the purchase money, which he failed to do.
3. Sham declaration. Following the definition in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, the declaration was a sham because it was intended to present rights different from those actually intended. The court applied Shalson v Russo [2005] Ch 281 to a unilateral declaration. Where the intended beneficiary has not accepted the gift, the settlor’s intention is decisive, although the surrounding circumstances may be examined.
4. Illegal purpose. The court applied the principles in Tribe v Tribe [1996] Ch 107 and held that Tinsley v Milligan [1994] 1 A.C. 340 did not bar the claim. Any illegal purpose had not been carried into effect, and Mrs Painter could establish her entitlement without relying on it.
5. Bankruptcy and account. Dealings before bankruptcy gave rise to bankruptcy debts under sections 281(1) and 382 of the Insolvency Act 1986; the remedy was proof in the bankruptcy. The court’s provisional view was that an account might be appropriate for dealings after bankruptcy until closure of the Pine Furniture business, while earlier dealings should be pursued by proof.

The court declared Mrs Painter the sole beneficial owner of 84 Deanway and ordered the caution to be vacated. The appropriate order concerning the account was reserved for submissions.