Thandi v Sands & Ors

Where a person claims a beneficial interest under a common intention trust, the legal interest is the starting point and the claimant bears the burden of proving a different beneficial ownership. The court must examine the whole course of conduct, including express words, contributions to purchase price and dealings with third parties. Contributions may support an inference of actual intention, but do not by themselves establish a trust. Self-serving retrospective evidence of intention requires careful scrutiny and may require independent corroboration. A document created to present a position to third parties which does not reflect the parties’ actual intention is a sham and cannot create a trust where none previously existed.

Tarlochan Singh was adjudged bankrupt in 2011. His father, Chanan Singh Thandi, claimed that sixteen properties registered in Tarlochan Singh’s name were held on bare trust for him and therefore fell outside the bankruptcy estate.

The claim relied principally on a purported deed of trust dated 8 August 2003 and, alternatively, on an alleged common intention that the properties had always belonged beneficially to Mr Thandi. The trustees disputed the existence of any trust and alleged that the deed was invalid or a sham. The central issues were whether a beneficial interest had been established and whether the deed genuinely recorded the parties’ intentions.

1. Burden and applicable approach. The beneficial interest ordinarily follows the legal interest unless convincing evidence establishes otherwise. The person asserting a different beneficial interest bears the burden of proof. In deciding whether a common intention trust exists, the court must consider the whole of the relevant circumstances, including express words and inferences from conduct such as payment of the purchase price: [2007] UKHL 17.
2. Actual intention. The relevant intention is ordinarily the parties’ actual intention. Contributions to acquisition may provide evidence from which intention is inferred, but they do not automatically establish a resulting or common intention trust. Retrospective evidence from interested parties is capable of being received, but must be assessed against contemporary documents and conduct.
3. Evidence. The claimant’s evidence was materially inconsistent with mortgage applications, tax returns, property accounts and dealings with lenders. Those objective matters showed that Tarlochan Singh had been presented as the beneficial owner of the properties and their income. The court inferred that this had been the parties’ intention throughout.
4. Deed of trust. The claimant failed to prove that the deed had been executed in 2003. The court found that it was probably produced in 2006 and backdated. In any event, it had been created to present to third parties a position which did not reflect the parties’ actual intention. It was therefore a sham and could neither evidence an earlier trust nor create one where none existed.
5. The claim that Mr Thandi had a beneficial interest in the properties failed. The court therefore did not need to determine the alleged losses caused by the trustees or the counterclaim that the deed was a transaction at an undervalue. The parties were invited to agree an order reflecting the judgment.