Agarwala v Agarwala

Where property is registered in one person’s sole name, beneficial ownership is presumed to coincide with legal ownership. The person asserting otherwise bears the burden of proof.

In a commercial arrangement where the parties admittedly agreed how the property would be acquired, held and used, that presumption is only the starting point. A claimant establishes a common intention constructive trust by proving, on the balance of probabilities, an agreement that the claimant should have the beneficial interest and detrimental reliance upon it. The weight of the initial presumption depends on the circumstances. It may be decisive where there is no prior agreement and the parties’ conduct is equivocal.

The appellant held the legal title to a house bought with a mortgage in her name and operated as a bed-and-breakfast business. The respondent, her brother-in-law, claimed that she had agreed to act as a bare trustee because his credit history prevented him from obtaining the mortgage. The appellant maintained that the property and business belonged entirely to her.

His Honour Judge Moloney QC found that the respondent’s account of the oral agreement was more probable. He held that the appellant held the property on constructive trust for the respondent. She appealed, principally challenging the judge’s treatment of the presumption arising from sole legal title, the burden of proof, the mortgage, the evidence of common intention and detrimental reliance.

1. Appeal dismissed unanimously. Lord Justice Sullivan held that the trial judge had correctly found that the appellant held the property on constructive trust for the respondent. Mr Justice Arnold and Lady Justice Hallett agreed.

2. Sole legal title gave rise to a presumption that legal and beneficial ownership coincided. The trial judge had treated that presumption as his starting point and had correctly placed the burden on the respondent. The respondent had to prove his claim on the balance of probabilities.

3. The weight of the presumption depended on the circumstances. It was likely to be decisive where no prior agreement was alleged and the parties’ conduct was equivocal. Here, however, the parties agreed that they had reached an understanding about how the commercial asset would be bought, held and used. The dispute concerned the terms of that understanding. If the respondent proved that he was intended to be the sole beneficial owner and that he had relied on the agreement to his detriment, he could establish that beneficial ownership differed from legal ownership.

4. The trial judge was entitled to find the respondent’s account more probable. It was supported by his conduct in similar transactions and by the contemporary emails viewed as a whole. The judge placed no evidential weight on the respondent’s forged trust deed and properly treated the forgery as seriously damaging his credibility.

5. The fact that the mortgage and remortgage were in the appellant’s name was of little assistance. This case involved an admitted commercial agreement, and the judge was entitled to find that the appellant acted as a conduit for mortgage instalments funded from the business. Laskar v Laskar [2008] EWCA Civ 347, which concerned a resulting trust where there had been no ownership discussions, was materially different.

6. Although the trial judge did not make a separate express finding on detriment in his conclusions, his judgment had to be read as a whole and in a common-sense manner. His finding that the respondent managed the letting business implicitly accepted the claimed detriment constituted by the work undertaken in buying, converting and running it. The judge was not required to repeat that finding word for word in his conclusions.

• Court of Appeal (Civil Division): The court unanimously dismissed the appeal in [2013] EWCA Civ 1763 and upheld the finding that the appellant held the property on constructive trust for the respondent.

• Cambridge County Court: His Honour Judge Moloney QC found on 6 December 2012 that the appellant held the property on trust for the respondent. An order giving effect to that judgment was made on 14 December 2012.