I would appreciate comments and assistance on the following case that I'm dealing with.

In summary, my client is the legal owner of a property (the title deeds and mortgage are in her name). There is a trust deed which confirms that she holds the property on trust for her partner and both client's say the property belongs to the partner's mother.

This arrangment came about because the partner's mother was offered the house at a knock down price but she couldn't get a mortgage. The partner was living in Africa and he couldn't either. Therefore, the arrangment was made with my client, and the mother-in-law made all the payments in respect of the property. Now, client and partner are married and live together in the UK. Client receives rental income from the property which she uses to pay the mortgage - any balance going to the mother. They face large overpayments of benefit and no ongoing entitlement due to an actual capital decision.

So, we have:
- client as owner
- partner has having the benefit of an express trust
- mother in law having the benefit of an informal trust.

Please assume that the arrangment is legitimate and above board - I'm not interesting discussing this aspect. I'm also OK with valuation issues and don't need to talk about that either.

What I need to know, from those in the know (trusts are beyond me) is what are the implications for the client's appeal. I have no doubt that the arrangment is genuine, but with a formal trust in place, how can we convince the tribunal of this? Are you aware of any case-law that considers similiar issues? What else should I be looking at/for?

Ultimately, my view is that if we can prove the arrangment to be genuine - which I believe we can - then the mother owns the beneficial interest and the property is not my client's capital. I just need to know where the pitfalls are...

Thanks all.

Why on earth is the express trust at odds with what you describe as an informal trust? Oh dear, this really is amazingly complicated - another good example of the God-awful messes people get into without proper legal advice, just perfect for a law exam (I only taught the subject for 10 years)...

By "property" you presumably mean real property, ie land (which just happens to have a house on it). The basic law of trusts of land is that all trusts of land or any interest in land must be manifested and proved by signed writing. This is clearly done by your express trust.

What then seems to have happened is that a sub-trust has been created: the partner is holding her equitable interest on trust for her mother (or that's the intention). We then run foul not only of the legal principle above, but of a second one which is that an equitable interest (which is what the partner has) can only be transferred in writing signed by the transferor.

There are however three exceptions to these two principles. The first is the doctrine of resulting trusts, which says that if you transfer property (of any type, including cash) to another person, without the intention of making a gift of it, you retain the beneficial interest. So any money put in by Mum could remain hers. There is the itsy-bitsy problem that your client is receiving the income and paying the mortgage, which would prima facie give HER a beneficial interest but I think we can ignore that, as she is clearly in her capacity as legal ownere dealing with both on behalf of the beneficiaries without acquiring any beneficial interest at all.

As second, similar and sometimes confused possibility is a constructive trust. This is a trust which arises in circumstances where is would be uncoscionable for the apparent owner of property to assert rights as against another person who has acted to his detriment in reliance of a promise to give him and interest in the property. Both resulting and constructive trusts are common in matrimonial property cases where the title is in the name of only one partner but the other has acquired an interest in it.

The third way in which a trust which does not comply with legal formalites can be validated is if value was given - money or money's worth. So if mum paid for an interest in the property, then the trust can be valid without formalities.

You may however have difficulty proving all this since by definition there will be no documentary evidence of the trust. You may however be able to find evidence of mum's payments and ask why she would have done this if she did not believe that she was going to get anything out of it.

Trusts law does come up quite often at Tribunals and while a lot of lawyers out there don't do it, tribunal judges have to be aware of it. So go and argue it.

p.s - I assume the land in question is in England and Wales.

Thanks very much for your detailed reply Ariadne - I'm on holiday hence no earlier reply.

The property is a house in England.

Would you have any objection to my including a print of your post in my submission. I'm not sure I could explain any of it to a tribunal judge...

Thanks again,

Tony

It isn't drafted in a manner suitable for a submission - basically because it looks at all the options and goes through what you would have to prove in order to satisfy any one of them. You wouldn't be able to argue from it unless you have decided what evidence (presumably oral, possibly documentary) you might be intending to use.

You would need to concede that the claimed sub-trust does not comply with section 53 of the Law of Property Act 1925 as it is not in writing and signed (unless there is CONTEMPORANEOUS written and signed evidence somewhere - doing it now is too late). However you would be saying that the irregularity doesn't matter because the circumstances fall into the exemptions (the last part of s 53 says "nothing in this section affects the operation of implied, constructive or resulting trusts."

You would have to argue that it is either:
1. - a resulting trust because mother put money into it without the intention of making a gift: it would be desirable to be able to prove this; or
2.- a constructive trust because the mother acted in some way to her detriment (and how she did that) in the belief that she would have an interest in the property - not easy. Constructive trusts were all the rage in the 1970s (Lord Denning), but the courts have rather gone off them; or

3.- rather like 1, mother made a payment in money or money's worth in return for the interest in the property, and thus there is a contract for the transfer of the equitable interest which a court would be willing to enforce. Again evidence of any actual payment would be almost esssential.

You would also have to explain that in receiving the rent and using it to pay the mortgage the trustee is by definition simply acting as a trustee and not for her own benefit. And you need ideally to argue the case you ahve best chance of proving.