Kanval v Kanval

A common intention constructive trust may arise where the parties expressly agree to share beneficial ownership and rely on that agreement to their detriment. In the absence of express agreement, shared intentions may be inferred from the parties’ whole course of conduct relating to the property. The court must ascertain actual or inferred intentions and may impute an intention only when quantifying shares, not when deciding whether beneficial interests are shared.

Where a beneficial interest is later disposed of, Law of Property Act 1925, section 53(1)(c), requires writing unless the transaction is properly characterised as the operation of a constructive trust. A deceit claim requires a materially false representation which induced the claimant to act. A representation must have had an impact on the claimant’s thinking; knowledge that it was false does not automatically defeat inducement, but may make it difficult to prove.

The proceedings concerned two related claims about the beneficial ownership of 35 Sutherland Road. Imran claimed that he and Javaid alone owned the beneficial interest, although legal title was held by Javaid and Rizwan. Javaid claimed that he had sold only part of a 50% beneficial interest to Rizwan and sought rescission for deceit.

Rizwan contended that the brothers had agreed to share beneficial ownership in proportion to their contributions, that Javaid’s interest was 26.2%, and that the brothers agreed in 2011 that Rizwan would acquire their interests. The central issues were the existence and terms of the common intention constructive trust, the effectiveness of the disposals, and whether Rizwan’s representations or non-disclosures induced Javaid’s transaction.

1. Beneficial ownership. The court found express agreements that the brothers would share beneficial ownership of Osterley proportionately to their contributions, that Abid would receive a fixed 8% share, and that the arrangements would continue in relation to Sutherland. Raza’s interest was extinguished after he was paid out. The resulting Sutherland shares were Imran 26.2%, Javaid 26.2%, Rizwan 20%, Urfan 18.6% and Abid 8.9%.
2. The court applied the principles in Lloyds Bank Plc v Rosset [1991] 1 AC 107, Stack v Dowden [2007] UKHL 17, Abbott v Abbott [2007] UKPC 53, Jones v Kernott and Geary v Rankine [2012] EWCA Civ 555. The whole course of conduct was relevant. The court could quantify shares by imputation, but could not impute an intention that beneficial interests should be shared in the first place.
3. The brothers’ contributions to mortgage, endowment, ground rent, service charges, renovations and household expenditure, together with the detailed financial records and their conduct, supported the existence of the trust. The informality of the arrangements and absence of legal documentation did not prevent it. Detrimental reliance was established.
4. Disposals. The court accepted that Imran, Urfan and Abid disposed of their Sutherland interests to Rizwan in September 2011. Javaid agreed in October 2011 to transfer his 26.2% interest for the £37,770 already received from his parents and a further £15,000. The whole of Javaid’s interest was therefore extinguished.
5. Under section 53(1)(c) of the Law of Property Act 1925, the dispositions were not ineffective. The agreed sale of the beneficial interests and the operation of the constructive trust brought section 53(2) into play. The court considered Neville v Wilson [1996] 3 WLR 460, Singh v Anand [2007] EWHC 3346 (Ch) and Hasan Dalkilic v Metin Pekin [2021] EWHC 219 (Ch).
6. Deceit. The court accepted that statements of present intention can found deceit and applied the principles in Derry v Peek (1889) 14 App Cas 337 and Zurich Insurance Co plc v Hayward [2017] UKSC 48. Javaid was not induced by the statement that Rizwan could raise only £15,000: Javaid had already agreed to sell his entire 26.2% share for £53,265 and needed only the additional £15,000 to complete that price.
7. Rizwan did conceal that he had redeemed the mortgage and later made false statements suggesting that it remained in place. Those statements did not induce Javaid’s agreement or execution of the transfer, because Javaid’s concern was removal from the mortgage and title, not the mechanism by which that occurred. The deceit claims therefore failed for lack of inducement and causation. The alternative breach of contract claim also failed.
8. The claims were dismissed. Rizwan was declared sole legal and beneficial owner of Sutherland.