Douglas Stuart Ponsford & Anor v Mesud Habib Sali & Anor

An order striking out a defence does not necessarily prevent a respondent from challenging items in an account, particularly where the order permits objections to the account. An appellate court may interfere with factual findings where the lower court materially misunderstood or failed to consider relevant evidence. For section 53(1)(b) of the Law of Property Act 1925, signed writing must manifest and prove both the existence of the trust and its essential terms. Writing evidencing a trust for sale, with restrictions on sale and rights limited to sale proceeds, cannot retrospectively evidence a materially different bare trust of land. A document handed over as part of conditional settlement negotiations has no independent legal effect where the condition is not fulfilled.

The appellants appealed against orders made by Master Marsh after a six-day trial arising from the taking of accounts of a dissolved property partnership. The Master declared that 2 Walsingham Road was held beneficially for the first respondent and ordered possession, management and payment of rent to him.

The defence had previously been struck out, but the Master permitted issues concerning the property’s ownership and a signed 2021 declaration of trust to be tried. The appeal challenged the Master’s findings about the conditional delivery and construction of that declaration, and whether it manifested and proved an alleged 2013 trust. The central issues were whether the Master had materially misunderstood the evidence and whether the statutory formalities were satisfied.

1. Appeal allowed. The Master’s declaration and the ancillary orders for possession, management and rent were set aside. The property remained to be dealt with as partnership property in the continuing account.
2. The striking-out order did not debar the first respondent from challenging the appellants’ case on particular items in the account. It struck out the defence to the claim, but permitted objections to the account. The principles applicable to debarring orders therefore did not govern the case.
3. The Master’s findings about the April 2021 meeting could be reviewed despite the usual appellate restraint. The Master had lost sight of evidence showing that the meeting concerned the wider resolution of the partnership dispute, including the property’s status. He had also misunderstood the legal and practical effect of clause 3 of the declaration, which required the prior written consent of all parties to any sale.
4. Objectively viewed, the declaration was a bargaining instrument forming part of the settlement negotiations. Its delivery was conditional upon the effectiveness of the other documents, including an acknowledgment of sums due to the partnership. Since the respondent tore up those documents, the declaration was not intended to have independent legal effect.
5. Section 53(1)(b) of the Law of Property Act 1925 requires signed writing to manifest and prove not only that there was a trust, but what the trust was, including its essential terms. The 2021 declaration created or evidenced a trust for sale, subject to a power to postpone and a consent requirement. It gave the respondent rights to sale proceeds, not an immediate right to the land or to require its transfer. Those terms were materially inconsistent with the bare trust allegedly intended in 2013.
6. The declaration therefore did not manifest and prove the alleged 2013 trust and was unenforceable against the appellants. The court did not determine how expenditure on the property should be treated in the partnership account. A hearing before a master was directed at the earliest opportunity for further directions.

• Chancery Appeals (ChD): Appeal against the order of Master Marsh dated 8 January 2024, following his decision made on 13 December 2023. The appeal was allowed and the relevant declaration and ancillary orders were set aside.