Arif v Anwar

Where a property is held under an express trust, an alleged later oral agreement altering the beneficial ownership must be analysed according to the rules governing dispositions of equitable interests. Authorities concerning informal common-intention trusts between cohabitants do not displace those rules. A constructive trust or proprietary estoppel may nevertheless arise where clear evidence establishes an agreement or understanding intended to have legal consequences, reliance, and detriment. In a family context, particularly where the arrangement is not genuinely contested by its parties, the evidence must be carefully scrutinised because informal conversations should not readily defeat the policy favouring formal recording of interests in land. Relief for proprietary estoppel is the minimum equity required to do justice and need not correspond pound for pound with the claimant’s expenditure.

The judgment determined two preliminary issues directed in matrimonial proceedings concerning a substantial property occupied by the husband, his son and their families. The wife was the registered proprietor under a declaration of trust in favour of the husband. The son claimed that he had acquired a 50% beneficial share by an agreement made in 2006, alternatively through proprietary estoppel, after money belonging to him was used for refurbishment works.

The husband’s bankruptcy and the wife’s financial claims made the son’s alleged interest material to the available estate. The court also examined related mortgage and trust-account dealings. The central questions were whether the earlier declarations were effective, whether a 50% constructive trust arose, and what equitable relief was appropriate.

1. Effect of the declarations. The 2001 Declaration was probably prepared for possible future implementation and was not intended to take immediate legal effect. Its form, retention, inconsistency with later dealings, failure to deliver it, and subsequent treatment as ineffective supported that conclusion. The 2003 Declaration therefore operated according to its terms, under which the wife held the Property on trust for the husband.
2. Alleged transfer of the beneficial interest. Because the husband held the beneficial interest under an express trust, the alleged change required an assignment of part of that equitable interest. Section 53(1)(c) of the Law of Property Act 1925 applied, subject to the exception for constructive trusts. The authorities concerning informal common-intention trusts between cohabitants did not displace that analysis. The court was not satisfied that a clear agreement for a 50% share had been made.
3. Required evidential standard. An arrangement within a family may have legal consequences, but it must be established by clear evidence subjected to appropriate scrutiny. That requirement is especially important where the parties to the alleged arrangement are not genuinely contesting its existence and the arrangement would defeat claims by a spouse or creditors.
4. Proprietary estoppel. The son had allowed money beneficially belonging to him to be used for the Property’s refurbishment in reliance on an understanding that he would receive some interest, to be sorted out later. This was sufficient to establish detriment and an equity. The appropriate relief was a 25% share, representing the minimum fair equity in light of the estimated contribution, the defective works and the uncertainty as to the resulting enhancement in value. There was no pound-for-pound entitlement.
5. Dealings. The son’s beneficial entitlement included the proceeds of Tema House and certain Category 1 payments, estimated together at approximately £300,000, less £20,000 for an uncompleted kitchen. The £200,000 Category 2 payment belonged to the husband. The £245,000 retained from the equity-release loan properly recouped the husband’s payment of the Norwich Union charge and represented a proper borrowing of the trust.
6. Orders. The son was declared entitled to a 25% share in the Property. The equity-release loan, together with interest, was to be borne and discharged by the trust of Rifsons House in the taking of any trust account. Costs were reserved for written submissions or a later hearing.

First-instance determination of preliminary issues directed in matrimonial proceedings. The judgment refers to an earlier directions judgment at [2013] EWHC 624 (Fam).