Sharon Barnard v Gwendolyn Ruth Brandon & Ors

A court order must be construed by identifying its natural and ordinary meaning in context, including the history and purpose of the order and the reasons for making it. The court must construe the order made, rather than correct it by reference to perceived fairness or the order that might have been preferable.

Where a trust separates legal and equitable ownership to protect a judgment creditor, the beneficial owners may have an interest in possession without an immediate right to call for transfer of the legal estate. Occupation rights depend on the statutory and general principles governing trusts of land. Mortgagees in possession must take reasonable precautions to obtain the proper market price and may recover only properly incurred expenses.

The claimant and the fourth defendant were former partners who had sold Home Barton Farmhouse to the first three defendants. In earlier proceedings, the sale contract was rescinded for fraudulent misrepresentation, and the sellers were ordered to pay a judgment sum. The order provided that the purchasers would hold the Farmhouse on trust until the judgment sum was paid, after which it would re-vest in the sellers.

The present proceedings concerned the construction and effect of that order, the parties’ rights to occupy and sell the Farmhouse, the validity of a later transfer of charged properties to the fifth defendant, the judgment debt and interest, and the accounting obligations arising from occupation, expenditure and sales.

1. Construction of the Trial Order. The order had to be construed by reference to its words, context, historical circumstances, object and the reasons given for making it. The court was concerned with what the order meant, not whether it should have been made in different terms. The parties’ later understanding and submissions were of little assistance.
2. The order created an immediate interest in possession in the Farmhouse for the claimant and fourth defendant. The first to third defendants held the legal estate on trust for them. Their equitable interest was not contingent on payment of the judgment sum. Payment would bring the trust to an end and require conveyance of the legal estate, but did not create the beneficial interest.
3. The claimant and fourth defendant had no right to occupy under section 12 of the Trusts of Land and Appointment of Trustees Act 1996. The purposes of the trust were to protect the purchasers by preventing conveyance of legal title before payment, not to make the Farmhouse available for the sellers’ occupation. The trustees nevertheless had power under section 6 to permit the first and third defendants to occupy in order to look after the property. They were not trespassers.
4. Transfer of the Properties. The 2019 transfer to the fifth defendant was a prohibited transfer to self. It was made without consideration, on an understanding that unwanted property would be transferred back, and with the fifth defendant agreeing to act in accordance with the purchasers’ wishes. The transfer therefore engaged the prohibition against a mortgagee selling to an agent, nominee or through a scheme for recovering the property.
5. Accounting. The trustees were entitled under section 31 of the Trustee Act 2000 to reimbursement of expenses properly incurred while acting for the trust, but not remuneration under section 29. Each item required consideration of whether it was an expense, whether it was incurred by the trustees, and whether it was incurred on behalf of the trust. Necessary expenditure could qualify even without conscious reference to trustee status, but personal labour and double recovery did not.
6. The mortgagees were required to account for the undervalue on the sale of Property 3. Applying the principles in Silven Properties Ltd v Royal Bank of Scotland plc, they had failed to take reasonable precautions to obtain the true market value and were liable to account for £15,000.
7. The trustees’ resistance to sale of the Farmhouse from 26 November 2018 was a breach of trust. The Farmhouse was ordered to be sold, with further consequential issues, accounting and costs reserved for later hearings.

The judgment describes earlier first-instance proceedings before HHJ Melville QC, resulting in the Liability Judgment, Remedies Judgment and Trial Order. It does not state an appellate decision in the same litigation.