French v Barcham & Anor

Sections 12 to 15 of the Trusts of Land and Appointment of Trustees Act 1996 do not provide an exhaustive regime for occupation compensation. Section 13(6) applies only where the beneficiary claiming compensation has a statutory right to occupy under section 12 and that right has been excluded or restricted.

Where a bankrupt co-owner’s interest vests in a trustee in bankruptcy, the trustee ordinarily cannot reasonably be expected to occupy the property. The occupying co-owner may therefore be required, in equity, to account for an occupation rent. The question is ultimately one of fairness and discretion. The principles applied in Byford v Butler remain correct.

The trustee in bankruptcy of Peter Barcham appealed against an order of District Judge Chandler in the Southend County Court dated 19 November 2007. The order directed the sale of a jointly owned matrimonial home and divided the net proceeds equally, subject to credits for Mrs Barcham’s payments. It made no deduction for her continued occupation.

The parties accepted that the property had been held in equal beneficial shares and that Mr Barcham’s share had vested in his trustee in bankruptcy. The central issue was whether Mrs Barcham’s share should be debited with an occupation rent, notwithstanding that the trustee had no statutory right to occupy under section 12 of the Trusts of Land and Appointment of Trustees Act 1996.

1. Appeal allowed. Mrs Barcham’s half share of the net sale proceeds was liable to be reduced by one half of the property’s letting value from the date of Mr Barcham’s bankruptcy. The reduction was limited to one half of the mortgage and insurance payments for which she was entitled to credit.
2. Sections 12 to 15 of the Trusts of Land and Appointment of Trustees Act 1996 do not constitute an exhaustive code governing all compensation for occupation of trust property. Section 13(6) presupposes that the beneficiary claiming compensation has an entitlement under section 12 to occupy the land, and that entitlement has been excluded or restricted. A trustee in bankruptcy has an interest in possession for the benefit of creditors, but no statutory right to occupy the property. Section 13 therefore does not directly apply.
3. The absence of a statutory claim under section 13(6) does not remove the court’s equitable jurisdiction to require an occupation rent. The ordinary principle is that one tenant in common is not liable merely because the other is in occupation. Liability arises where, viewed practically, it would be unreasonable to expect the non-occupying co-owner to exercise the right of occupation and fairness requires compensation.
4. That principle ordinarily applies when a trustee in bankruptcy succeeds to a co-owner’s interest. A trustee cannot practically reside in the property, and the occupying co-owner enjoys the property while the bankrupt’s creditors obtain no corresponding benefit. The position may differ where the trustee represented that no rent would be charged, or where the occupying co-owner was unaware of the bankruptcy and had no reasonable means of discovering it.
5. The reasoning in Stack v Dowden concerned a case in which both parties had rights of occupation under the statutory regime. It did not displace the pre-existing equitable principles in cases outside that regime. Byford v Butler was correctly decided and applied. The absence of marriage between the respondents at the date of bankruptcy did not materially distinguish the present case.
6. Whether rent should be charged remains discretionary. On materially indistinguishable facts, no sufficient ground had been shown for departing from Byford v Butler. The financial effect on Mrs Barcham, although sympathetic, was not a principled reason to refuse the charge.

• High Court (Chancery Division): District Judge Chandler’s order of 19 November 2007 was reversed on the occupation-rent issue. The appeal was allowed.