Ahmed Khan & Ors v Muhammed Iftekhar Khan

An acquisition constructive trust may arise where a person takes legal title on the agreed basis that it will be held for another. Actual fraud, dishonest procurement, or a precisely identifiable moment of agreement is unnecessary. The court may infer the agreed basis from the parties’ entire course of dealings. The principle is not confined to gratuitous transfers, although the value given by the title-holder remains material. A subsequent signed acknowledgement can satisfy section 53(1)(b) of the Law of Property Act 1925 without setting out every term of the trust. Appellate courts should generally respect discretionary sale and case-management orders absent a recognised error.

Six siblings disputed the beneficial ownership of four South London properties. The trial judge found that their late father had created a family property portfolio, with one property intended for the daughters and the other properties for the sons. She found an express trust in the leasehold interests in 7 Essex Grove and, alternatively, acquisition constructive trusts over all four properties. She ordered sales and accounts.

The defendant appealed on grounds concerning the pleadings, fraud and procurement, detrimental reliance, the alleged express trust, conduct of the sale, and expert evidence about market rents. The appeal was from the decision reported at [2024] EWHC 2491 (Ch). The central questions concerned the requirements of acquisition constructive trusts and whether the consequential orders should stand.

The appeal was dismissed. Lord Justice Miles gave the leading judgment, with which Lord Justice Nugee and Lady Justice Asplin agreed.

1. The acquisition constructive trust claims were within the issues tried. The claims had been fully argued in the pleadings, issues list and skeleton arguments. Muhammed had shown no surprise or prejudice, so a belated pleading objection did not justify disturbing the judgment.
2. An acquisition constructive trust may arise where legal title is taken on the agreed basis that the title-holder will hold the property, at least in part, for another. The relevant unconscionability lies in repudiating that basis after acquisition. Actual fraud, a dishonest intention at the time of transfer, and wrongdoing-type procurement are unnecessary. The authorities, including De Bruyne v De Bruyne [2010] EWCA Civ 519, Rochefoucauld v Boustead [1897] 1 Ch 196 and Bannister v Bannister [1948] 2 All ER 133, supported that analysis.
3. The principle is not confined to gratuitous transfers. It can apply to purchasers, although the nature and extent of value given are relevant. Nor must the parties identify a single moment when a concluded agreement was reached. The court may consider the entire course of dealings and draw appropriate inferences. The judge’s findings established that Muhammed acquired the interests on agreed trusts for his father during his lifetime and then for the siblings. The uncertainty over the source of the funding for 5 Ullswater Road did not alter that conclusion.
4. Under section 53(1)(b) of the Law of Property Act 1925, a subsequent signed acknowledgement may manifest and prove an earlier trust. The writing need only sufficiently identify the beneficiaries and the existence of the trust; it need not state every term, including an already-extinguished life interest. Muhammed’s 2013 email was sufficient evidence of an express trust over the leaseholds at 7 Essex Grove. His acceptance of the interests on the agreed basis also supported a declaration by conduct.
5. The court declined to decide whether detrimental reliance by one putative beneficiary can establish beneficial interests for other beneficiaries under a common intention constructive trust. That question was left for a case in which the outcome depends upon it.
6. The order under CPR 40.1 giving conduct of the sale to the trust corporation associated with the claimants’ solicitors was a proper exercise of discretion. The directions for an account of rents followed by expert evidence about market rents were also a permissible case-management decision.

• Court of Appeal (Civil Division) dismissed Muhammed’s appeal on all grounds.
• High Court of Justice, Chancery Division — the Deputy High Court Judge found for the claimants, declared trusts over the properties, and made orders for sale and accounts: [2024] EWHC 2491 (Ch).