Legal Principles and Key Points
- In the case of Abbey National Plc v Moss  26 H.L.R. 249, it was held that when a property is owned jointly, the owners hold it on trust for sale. Under the terms of the trust, they are under a duty to sell, but this may be postponed for the purposes of the trust. If the owner gives a joint interest in the land to another on the condition that the land cannot be sold during their lifetime, that postpones the duty to sell unless both owners agree to sell.
Facts of the Case
- In 1971, D and her husband purchased a house in their joint names. In 1981, following her husband’s death, D became the sole owner of the property.
- At the time of her husband’s death, the house was occupied by D, her daughter and son-in-law and their children.
- D suffered a breakdown and received psychiatric treatment. Her daughter suggested a transfer of the property into the joint noise of D and herself.
- D agreed to the transfer (without consideration from the daughter) on the condition that the house would never be sold in her lifetime.
- In 1986, D’s daughter applied to C to borrow £30,000 on the security of the house. She forged D’s signature on all documentation, leading D to discover the mortgage from subsequent correspondence.
- In 1988, the daughter threw D out of the house and started proceedings under the Law of Property Act 1925 to sell the property.
- The proceedings did not come to trial, but D was allowed to return to her home. D’s daughter and family left the country.
- No further mortgage payments were made. In February 1989, C commenced possession proceedings and sought an order for sale.
- Was the condition for D granting her daughter a joint interest still binding, thereby precluding the sale of the property?
Held by the Court of Appeal (Civil Division)
- Finding for D, that to order a sale would be grossly inequitable. While the property was subject to a trust for sale (D being the owner), this could not be enforced without D’s consent since her condition that the house would not be sold during her lifetime required the property to be retained.
Peter Gibson L.J.
- The agreement and transfer of the property into joint names meant that the trust for sale brought into being could not be implemented without D’s consent in her lifetime. Such a condition is well established to be consistent with a valid trust for sale. The clear purpose of the agreement was that D could live in the house until death if she wished.
- It could not have been within either party’s contemplation that the assignment, whether voluntary or involuntary, of the daughter’s interest could lead to the sale of the property against D’s wishes.
- Jones v Challenger is clear authority for the principle that so long as there is a collateral purpose, still subsisting requiring the retention of the property, the trust for sale will not be enforced. Once the collateral purpose has come to an end, one beneficial owner cannot insist on further retention against the wishes of another beneficial owner who wants the property sold.
- Re Citro only establishes that the collateral purpose will not subsist when that purpose is to provide a matrimonial home and one of the parties ceases through bankruptcy or the like to own his share. It does not purport to apply where a different collateral purpose continues to subsist.
- “It seems to me plain that the most important consideration is the continuing collateral purpose, particularly when viewed against the background of how it came about that D’s daughter acquired any interest at all. Further, in the judge’s own words, ‘D has, in effect, been defrauded, and she stands to lose the home to which she is deeply attached and which she shows every intention of not leaving except under compulsion…’ But I feel bound to observe that I do not agree with the judge’s comment that there was no fault on the part of C. The detriment it is suffering comes from its failure to obtain D’s signature to the Mortgage Deed. It should have ensured, through its solicitor, that all the intended parties to the mortgage did in fact execute the Mortgage Deed” .