Sparkasse Koln Bonn v Cutts & Anor

In proceedings for an order for sale following a charging order, the court may determine the extent of the judgment debtor’s beneficial interest within the same proceedings. A known occupier should ordinarily be joined, both to permit any assertion that legal and beneficial ownership differ and to address possession. The court may require points of claim and defence to frame that issue, using its case-management powers where the procedural rules do not expressly provide for that hybrid course. A claimant asserting a beneficial interest bears the burden of proving it. A purported declaration of trust must identify the property with sufficient accuracy, and a late-created or inadequately pleaded document will not establish beneficial ownership.

The claimant obtained and registered in England a German judgment debt and secured it by a final charging order over property registered solely in the first defendant’s name. It then sought an order for sale. The second defendant, who occupied the property, was joined and claimed that she and the first defendant held it as tenants in common in equal shares.

She relied primarily on a purported declaration of trust, alternatively on a common-intention constructive trust, a resulting trust and proprietary estoppel. The central issues were whether the declaration was genuine and effective, whether it related to the whole property despite referring only to flats 115 and 116, and whether the evidence established any alternative beneficial interest.

1. Procedure and burden. It was generally appropriate to join a person known to reside at property in order-for-sale proceedings. The court could direct determination within those proceedings of the extent of the judgment debtor’s interest, rather than require separate proceedings. Although the rules did not expressly provide for points of claim and defence in the Part 8 claim, that hybrid procedure was authorised by the court’s case-management powers. The burden lay on Mrs Cutts to show that the legal and beneficial interests differed.
2. Declaration of trust. The evidence was unsatisfactory and materially inconsistent. The court found that the document bearing the date 26 March 2003 had been created recently to reduce the effect of the claimant’s judgment. It therefore did not evidence the parties’ intention at the date it bore. Even if genuine, it referred only to flats 115 and 116 and not to the registered title comprising all three flats. The claim also failed because it did not plead a construction of the document as relating to the whole property or seek rectification.
3. Alternative claims. The evidence did not establish a common intention constructive trust. The purported declaration was inconsistent with the alleged intention that the whole property had always been jointly owned, and the first defendant’s conduct was inconsistent with the asserted trust. The evidence did not establish contributions sufficient for a resulting trust, or promises and detrimental reliance sufficient for proprietary estoppel.
4. Disposition. Mrs Cutts’s claim was dismissed. Directions were given for implementation of the order for sale.