Mustafa Erdem Baldudak v Mark Matteo

A resulting trust arises where one party provides the whole purchase price for property transferred into joint names, subject to rebuttal by evidence of the parties’ actual intention. The relevant intention is objectively inferred from words and conduct. A Quistclose trust requires money to be advanced on terms restricting the recipient’s free disposal to a specific purpose; a general commercial purpose is insufficient. A party may be held to an election made in earlier proceedings and may be estopped from contradicting a fact necessarily determined or agreed there. The claim succeeded because the claimant funded the purchase, the presumption of resulting trust was not rebutted, and the defendant was bound by his earlier position that the whole purchase cost had been debited from the claimant’s loan account.

The parties were former 50/50 business partners. The property was registered in their joint names, but the purchase money came from an account of PCB, a company funded by a £750,000 loan from the claimant. The claimant sought a declaration that the property was held on resulting trust for him alone. The defendant claimed equal beneficial ownership and counterclaimed for sale, protection concerning the mortgage and occupation rent.

The court also considered whether the loan was subject to a Quistclose trust, whether it had been novated from PCB to HTS, whether the parties had agreed joint ownership, and whether the defendant was bound by his position and by findings in earlier proceedings, including the Liability Judgment, [2022] EWHC 1070 (Ch).

1. Resulting trust. The claimant’s money had funded the whole purchase price, while the property was transferred into the parties’ joint names. Under the principle stated in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, a presumption arose that the claimant did not intend to make a gift and that the property was held for him as sole contributor. The presumption could be rebutted by an objective inference from the parties’ words and conduct, applying Gissing v Gissing [1971] AC 886, but the defendant failed to rebut it.
2. Quistclose trust. The £750,000 loan was not restricted exclusively to acquiring OEM. The parties contemplated several business uses, and payments were made for HTS’s general expenses. The necessary restriction on the recipient’s free disposal was therefore absent. The claim based on a Quistclose trust failed.
3. Novation and use of the money. Before the purchase, the parties agreed to wind up PCB and transfer the claimant’s loan to HTS. The purchase cost was then debited from the claimant’s HTS loan account as a personal payment. Consequently, neither company remained liable to repay the purchase monies, and the rule in In Re Sharpe [1986] 1 WLR 219 concerning double recovery by a lender did not apply.
4. Election. The defendant agreed in the earlier remedies proceedings that the entire purchase cost should be debited from the claimant’s loan account. That position increased the value of the defendant’s HTS shareholding and enabled the claimant to fund the property. Applying Express Newspapers Plc v News (UK) Ltd [1990] 1 WLR 1320, the defendant could not adopt an inconsistent position in these proceedings.
5. Issue estoppel. The earlier valuation depended materially on the agreed loan-account figures, including the debit for the whole property purchase price. Applying Arnold v National Westminster Bank Plc [1991] 2 AC 93 and Spens v IRC [1970] 1 WLR 1173, the issue was necessarily determined and relevant to the present claim. The defendant was estopped from denying that the claimant funded the purchase.
6. The claimant was entitled to a declaration that the property was held on resulting trust for him alone and to an order requiring the defendant to transfer his legal interest. The defendant’s counterclaim was dismissed. Consequential matters were left for agreement or further submissions.