Pankhania v Chandegra

An express declaration of trust which comprehensively states the beneficial interests in property governs those interests. The court cannot replace it with a resulting, implied or common intention constructive trust unless the declaration is varied, rectified, set aside for a vitiating factor, or affected by proprietary estoppel.

A document is a sham only where the parties intended both that it should not create the apparent legal rights and that it should give third parties or the court a false impression. A discrepancy between the document and the parties’ subjective intentions is insufficient. Unless rectification or another recognised ground is established, the parties remain bound by the legal consequences of the document they signed.

The claimant and defendant acquired a registered freehold as joint legal owners. Their transfer expressly declared that they held the property as tenants in common in equal shares. The claimant later sought a sale and equal division of the proceeds.

The Oxford County Court dismissed the claim and declared the defendant sole beneficial owner. It inferred from the parties’ intentions, financial contributions and conduct that the claimant had joined the purchase only to facilitate a mortgage. The claimant appealed, contending that this reasoning impermissibly disregarded the express declaration.

The central issues were whether a common intention constructive trust could displace the declaration and whether the transfer was a sham.

1. Appeal allowed. Patten LJ held that the express declaration governed the parties’ beneficial interests. Mummery and Treacy LJJ agreed. The property was to be sold and its net proceeds divided equally.

2. A comprehensive express declaration of beneficial ownership speaks for itself unless it is varied, affected by proprietary estoppel, set aside or rectified. Fraud, mistake and undue influence may provide grounds for avoiding such a declaration. No such ground was pleaded or established, and no claim for rectification had been made.

3. The County Court therefore had no authority to determine beneficial ownership by inferring a different common intention from the parties’ conduct, contributions or family arrangements. The constructive trust principles discussed in Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53 concern cases in which beneficial interests have not already been comprehensively declared. They could not be used to substitute a constructive trust for the express trust.

4. The declaration was not a sham. That doctrine required proof that both parties never intended the document to create its apparent legal rights and intended it to give third parties or the court a false impression. Evidence that the claimant joined the purchase to facilitate the mortgage, or that the document did not reflect the parties’ subjective intentions, did not satisfy those requirements. There was no relevant deception or intention to deceive.

5. Executing the declaration made the claimant an equitable tenant in common and prevented the defendant from denying his title. Without rectification or another established ground for avoiding the declaration, both parties were bound by the legal consequences of the transfer they signed.

1. Court of Appeal (Civil Division): The court allowed the appeal in [2012] EWCA Civ 1438, ordered the property to be sold and declared that the parties were entitled to the net proceeds in equal shares.

2. Oxford County Court: HH Judge Harris QC dismissed the claimant’s claim for sale and declared that the defendant was the sole legal and beneficial owner. No neutral citation is stated.