Chaudhary v Chaudhary

Where money is contributed towards the purchase of property registered in another person’s sole name, the court must determine the transferor’s subjective intention. If that intention is not evidenced, resulting-trust and advancement presumptions may apply. A close relationship may attract a presumption of advancement, but that presumption is rebuttable by contemporaneous or later evidence. A contribution is not treated as a gift, tenancy premium or arrangement fee without evidential support. A beneficial interest may arise from a deposit intended to count towards a future purchase. Any separate account of rents or profits must be properly pleaded and pursued in appropriate proceedings; it does not automatically set off an existing rent-arrears judgment.

The appeal concerned a property bought in 1996 in the respondent’s sole name for occupation by his father, stepmother and their children. The father and stepmother contributed £5,000 towards the deposit. The County Court rejected the stepmother’s Part 20 claim to a beneficial interest, characterising the payment as akin to a premium or arrangement fee. It also found rent arrears owing under the tenancy. The possession issue was not appealed.

The stepmother appealed, submitting that the contribution gave rise to an 8 per cent beneficial interest. The respondent relied on an intended gift, the presumption of advancement and the parties’ common intention. The appeal therefore concerned the effect of the deposit contribution and whether any beneficial interest affected the rent-arrears order.

Lord Justice Aikens gave the judgment, with which Lord Justices Sullivan and Underhill agreed.

1. Beneficial interest. The appeal was allowed on the principal issue. The court accepted the trial judge’s findings that the original arrangement was made between father and son, that Mrs BC was an unreliable witness, and that the £5,000 deposit had been provided by the father and stepmother.
2. Presumptions and intention. Following Lavelle v Lavelle and others [2004] EWCA Civ 223, where the transferor’s intention is not established, the law applies presumptions. A close relationship may give rise to a presumption of advancement. That presumption may be rebutted by evidence, including evidence arising after the transaction. The decisive task remains to ascertain the transferor’s subjective intention.
3. The trial judge had no evidential basis for treating the £5,000 as a tenancy premium or arrangement fee. The father’s expressed hope of buying the property later showed, on the balance of probabilities, that the deposit was intended for the benefit of the father and stepmother and was not a gift. Mrs BC therefore had an 8 per cent beneficial interest, including the interest inherited from her late husband.
4. Rent and profits. The proposed account of rent and profits could not be set off against the agreed rent arrears because no such account had been pleaded. Any such claim had to be pursued in the County Court. The court expressed no final view on possible lateness or illegality objections arising from the fraudulent housing-benefit claims. There was no basis to stay the rent-arrears order.

A declaration was granted that Mrs BC had an 8 per cent beneficial interest in the property. The appeal was allowed.

• Court of Appeal (Civil Division): On appeal from the Mayor and City of London County Court, the court allowed the appeal and declared that Mrs BC had an 8 per cent beneficial interest in the property: [2013] EWCA Civ 758.
• Mayor and City of London County Court: The judge dismissed the Part 20 claim to a beneficial interest, upheld the liability for rent arrears, and had separately rejected the possession claim on the basis of an invalid notice under section 21(4)(a) of the Housing Act 1988. The possession issue was not appealed.