Author
The case of Nilsson and another v Iqbal and another [2024] EWHC 49 (Ch) illustrates the court’s approach when determining beneficial interests in a property, in particular, the significance that will be placed on any express declarations of trust contained in formal transfer documents.
Background
Mr Iqbal (the “Bankrupt“) was adjudged bankrupt in March 2020.
The Bankrupt and Mrs Iqbal were married during an Islamic marriage ceremony in August 1996.
The Bankrupt purchased a property (the “Property“) in September 1998. The Bankrupt was the sole owner of the Property, however, it was used as the joint matrimonial home.
In March 2003, the Property was transferred into the names of both the Bankrupt and Mrs Iqbal. The relevant transfer (in form TR1) contained an express declaration that the Bankrupt an Mrs Iqbal held the beneficial interest in the property as tenants in common in equal shares.
The couple separated in 2016 and entered into an oral Islamic divorce agreement in 2017.
After the Bankrupt was adjudged bankrupt in 2020, the bankrupt’s trustees in bankruptcy (the “Trustees“) wrote to Mrs Iqbal on multiple occasions with a view to realising the Bankrupt’s interest in the Property. The Trustees did not receive a response from Mrs Iqbal, so made an application for:
- a declaration as to beneficial ownership of the Property; and
- an order for possession and sale of the Property.
During the proceedings, Mrs Iqbal asserted that:
- at the time of the 2003 transfer, the couple’s intentions (and instructions to the relevant solicitors) were that she should hold 90% of the beneficial interest and that the Bankrupt would have the remaining 10%; and
- pursuant to the oral divorce agreement, the Bankrupt transferred his beneficial interest to Mrs Iqbal in 2017.
Mrs Iqbal claimed that the divorce agreement involved her taking a 100% interest in the house and refraining from pursuing other assets of the Bankrupt.
Issues
At the trial, the court had to consider the following two issues.
- Was the express declaration of trust, as evidenced by the TR1, subsequently varied by agreement?
- Did Mrs Iqbal acquire the Bankrupt’s interest by virtue of proprietary estoppel?
Decision
During the trial, Mrs Iqbal gave oral evidence. The judge found her oral evidence to contradict her written evidence in two regards, causing the judge to approach her evidence with “considerable caution”.
- Mrs Iqbal had contradicted herself as to the date when she attended the solicitors and informed them that the beneficial ownership should be 90:10, not 50:50. In her written evidence, she had indicated this took place in 2000, before the execution of the 2003 TR1. However, during her oral evidence, Mrs Iqbal had asserted that the instructions were given to the solicitors after the 2003 TR1 was executed.
- Mrs Iqbal failed to refer in written evidence to the fact that the Bankrupt had continued to make mortgage payments for almost two years following the divorce.
The judge noted that the starting point was that the bankrupt and Mrs Iqbal were tenants in common with equal shares, on the basis that this was stated in the TR1.
In light of Mrs Iqbal’s contradictory evidence and the lack of a written agreement demonstrating that the Bankrupt and Mrs Iqbal had agreed to vary their beneficial ownership from 50:50, the judge was not prepared to find that an agreement had been reached to vary that position, either initially or subsequently in 2017.
Accordingly, the judge found that the beneficial ownership had not been varied by agreement.
When considering proprietary estoppel, the judge considered that there had been no clear assurance made to Mrs Iqbal to the effect that she would obtain an interest in the Property. Furthermore, the judge found that Mrs Iqbal had not acted in reliance on any such assurances. The judge made it clear that a distinction must be drawn between Mrs Iqbal’s desire to own the Property and an actual agreement being reached to that effect. Accordingly proprietary estoppel was not made out.
Conclusion
The case highlights the approach the court will take when asked to determine the beneficial interests in a property. In particular, the case re-iterates that where there is an express declaration of trust (for example one contained in the TR1) this will be the starting point and the court will only find a different beneficial interest if there is sufficient evidence of either a subsequent agreement to vary the beneficial interest or proprietary estoppel.
Should you wish to discuss any of the issues raised in this article, please contact Sacha Pickering.