Safeguarding the Interests of Minors in Property Disputes

Part A

A trustee or a person with interest in a property under trust can apply to the court for an order in relation to exercise by the trustee of his/her function or declaring the nature or extend of a person’s interest in the property. While considering this application, the court must consider the welfare of a minor who is occupying or may occupy the property as his or her home. This essay will determine whether or not the welfare of the child is effectively enforced by the court.

The recent case of V v W (2020) is a good example, where the court was able to justified s15(1) provision and meet the intention of the Law Commission to separate the children’s interest from interests of beneficial owners. In this case, there was a clash of s14 application and Children Act 1989 (CA 1989), Sch 1 application. CA 1989, Schedule 1 allows a parent to apply to orders providing for children financially. In this case, husband and wife bought the property. They have two children. They separated in 2017. After separation, husband continued to stay in the home. Wife was in full-time employment. Husband was self-employed, but had been unable to work since 2015. Wife applied for an order under S14 of TOLATA. Husband made a Schedule 1 of the Children Act 1989 application for holding under trust the wife’s share of the home until the youngest child finishes full-time education.

In V v W, the court rejected the husband’s application. The court took a balance approach as the wife despite continuing contributing to the mortgage payment could not benefit from the family home as she was isolating elsewhere. Moreover, the husband was surviving from continued financial assistance from his parents Selling the home was the only option for financial sustenance as both of them have unsecured debts.

It is the facts of the case that enable determining the welfare of the children. The interest of the children was determined not based on the breakdown of the relationship between the husband and wife. It is a balanced approach with no linkage to the interests of other beneficial owners.

The basic problem that could, however, be said about the elements provided under s15(1) is that there is no hierarchy. The courts are given a wide discretion, which may be subject to equitable, fair and just principle. This is a continuance of section 30 of the Law of Property Act 1925, where the court in TSB Bank Plc v Marshall was held to follow this principle.

The basic question here is whether it is based on facts or equitable, fair and just principle, are the court able to prioritise child’s welfare?

TSB Bank Plc v Marshall ruled that chargee’s interest in the matrimonial home will prevail over interest of the spouse except in exceptional circumstances. The case also involved children residents. However, the ruling did not clearly provide whether or not the purpose to provide the children home would survive once they attained majority. This ruling does not seem to rely on the facts of the case.

Similar basis was followed in Mortgage Corporation v Shaire. This case considered s15(1) in detailed. A (with 25%) and B (with 75%) bought the home as joint tenants. B has a son from previous marriage. A mortgaged the home by forging B’s signature. After A’s demise, the mortgagee sought a sale. The court rejected this. This ruling favoured the interest of the families over banks, mortgagees and other charges.

The basis of favouring the families was not found in the ruling in the Bank of Ireland Home Mortgages v Bell. This case considered factors while balancing the rights beneficiaries and rights in exceptional circumstances in regard to a sales order. Husband and wife (only 10%) jointly owned the home. Husband forged wife’s signature to mortgage the home. Husband left the wife with the son. Husband stopped mortgage payment and after that they remained in the home for 10 years. Court considered elements given in Section 15 and ordered the sale even when the wife was in poor health. The court considered of creditor’s proper re-compensation as the major consideration in the case.

Given Bell’s ruling, considerations of s.15(1) particularly the minors’ welfare living in the property may be argued to be given an inferior consideration.

Unmarried couples may rarely express the terms as to ownership of property is their relationship ends. In such circumstance, the application of a common intention constructive trust in regard to family home issues may be considered unsettled or unsatisfactory so far. Children become a victim in case of sale of family home. S15 have given too wide a discretion to the courts. The diminishing legal protection offered to the wife and the children favours the creditors’ interest.

Shaire and Bell show inconsistency in case laws. However, question is what would have been the effect if the order was sale was passed in Shaire or if it was not in Bell? In First National Bank Plc v Achampong, the court attempted to find a balance between interest of different parties where it observed that the purpose for which the family home was acquired was no longer relevant when the marriage broke down. The court ruled that selling the home would not affect the interest of the children as one child was a grown up and the other with mental disability would not be adversely affected by the sale. Further, if the sale was not ordered, it will affect the share of the mortgaging bank in the property.

Achampong shows that it is not sufficient that a child is living in the family home. It will not make the factor relevant while considering S14 application. There must be specific evidence that shows that the welfare of the children will be affected if the order for sale is granted. This view is held by Blackburne J in Achampong.

The collateral purpose, which is that of the child’s welfare, must also carry weight against the interest of parties. However, in some case, even though the courts need to consider s15(1) elements, courts turn a blind eye towards the welfare of the child. As seen in Shaire too, the welfare of the child can displace the priority of creditors.

It was the Law Commission anticipated that the guidelines of Section 15 would impact the courts’ policy or discretion to favour child occupiers’ interest. So, if the child’s welfare is independent of the interest of the beneficial holdings, the court may restrict its discretion to sell the property. This intention could be found in the case of Edwards v Loyds TSB Bank Plc, the court postponed the sale in order to allow the wife to continue living in the home until her youngest child reached the full age.

This case took a priority consideration of the family. This is different from the decision of Achampong, although Achampong involves a mentally disabled minor. The issue with the inconsistent case law seems to be rooted to the fact that since the TOLATA 1996, a direct authority was absent to determine the scale of weight the minor’s welfare must carry when it is balanced against the interest of creditors. As such, cases such as Achampong show the creditors’ interest prevailed.

To conclude, the recent case of V v W (2020) is the good example for the appropriate balance of interests where even where the welfare of the child is dependent on the interest of the beneficial’s holding. The question is not whether the order for sale must be allowed or not. The question is also not whether the order would affect the child’s welfare. The key is determining how to secure the welfare of the minor occupier.

Part B Question B2

In regard to Tess. A legal lease beyond seven years must be registered at the Registry. The Law of Property Act 1925, s53(1)(a) provides for the formalities requirements to create an interest in the land. It requires that the creation of interest of land must be in writing signed by the person creating the interest. In this case, there is no formal agreement. The issue is whether the absence of a formal agreement would preclude Tess of his interest in the property.

In Walsh v Lonsdale, which concerned an unwritten lease, the court cited the maxim ‘Equity looks on as done that which ought to be done’ and ruled that the lease was enforceable in equity as would a written agreement be from the date of the agreement. Thus equitable lease will have the same terms.

Such interest, as is seen in Walsh, may be created without complying with the formalities requirement. The Walsh ruling was adopted in R v Tower Halest LBS, ex p von Goetx. The case concerned a 10 year tenancy of a house. No deed was executed even though the parties agreed a written contract. The council refused the renovation grant as the Local Government and Housing Act 1989 required the lease to be a written legal lease. However, it was held that the claimant has an interest as good as the legal interest.

Equitable lease prevails between the parties. Walsh has shown that an equitable lease is converted into a legal lease by way of specific performance.

The notion of detrimental reliance removes the requirement of written instrument, provided in s53(1)(a). If there is a common intention, the establishment by the claimant that they relied on common intention to their detriment is sufficient to create the interest in the land.

Equity does not a volunteer. So, there is no unconscionability if the promise did not impact the claimant’s behaviour. The claimant would not have had behaved if there was no common intention. In Rosset, Lord Bridge held that the claimant must establish that they have relying on the agreement and acted to their detriment.

In this case, even though the agreement was not entered, the ruling in Walsh will make the lease an equitable lease. It will be converted into a legal lease by ensuring that Adanna undertakes the specific performance of the terms of the agreement. Tess relied upon the agreement and the started restoration work on the barn. This will constitute detrimental reliance on the common intention between Adanna and Tess. Thus, the agreement between them is enforceable equity will make Tess’ interest as good as the legal interest.

In regard to Justin.

The Law of Property (Miscellaneous Provisions) Act 1989, s2 provides that a contract for the sale of an interest in land must be in writing and must incorporate all the terms. Any variation of the contract must also be subject to s2 requirement.

Any formal written documents can be varied by signed writing. This means there must be physical alteration to the original signed agreement. Thus, any kind of informal variation, as held in McCausland v Duncan Lawrie, cannot remove the effect of the existing formal contract. Unamended contracts are enforced. Thus, any informal contract will fail to create any rights in the property. In Jelson v Derby CC, the oral agreement between the city council and the owners of the two development sites that a development corporation should provide quota of units of affordable housing from the part of the site owner was held not valid as it was not included in the written agreement.

The requirement of completing formalities under Section 2 was reiterated in P Francis v F Berndes Limited. This case concerned determining whether or not a document met the statutory formalities to create a legally effective contract to sell a land. The parties did not set all express terms in writing. This failure to comply with the formalities requirement invalidated the contract to sell the property.

Likewise, variation of the contract also needs to comply with the formalities requirement. In Rock Advertising Limited v MWB Business Exchange Centres Limited, the Court of Appeal held that contracts can be made in writing or orally. An oral variation is itself a contract. For a valid variation of an existing contract, if there is a consideration, there is a valid contract variation. In such case, a discharge must be supported by a consideration from both of the parties.

Equity principle will intervene to avoid injustice by enforcing a contract that does not strictly meet the requirement to Section 2. In Yaxley v Gotts, the court made the oral agreement enforceable as the claimant spent money on converting the flat based on the belief that he owned the flat. The claimant argued a constructive trust and proprietary estoppel. The formalities requirement of s2(1) is subject to the exception if s2(5) that it does not affect the “creation or operation of resulting, implied or constructive trusts.”

As against the exception of s2(5), variation of a contract can affect only those obligations that are to be performed and not executed obligation. Estoppels cannot alter the terms of the contract. They apply to executed contracts. Thus, if there is an effective variation, there cannot be the dissolution of the contract.

For effective variation, the requirement of offer, acceptance and consideration are required. In Goss v Lord Nugent, it was observed that parties can orally vary or qualify the contractual terms to make a new contract. Where a contract is required to be in writing or evidenced to that effect, the variation must also be in writing. Variation takes place before a contract is concluded if the facts that led to formation of a collateral contract took place before the conclusion of the contract.

Variation made by Adanna and Justin was on informal terms not included in the contract. Section 2 requires the variation or alteration of a contract to meet the formalities requirement. Reading Section 2 with the ruling in McCausland and Jelson, the informal variation cannot affect the validity of the existing contract. Unamended part of the contract, which is the sale of the property, will be enforced. The informal alteration cannot create rights in the machinery in the property.

Variation did not adhere to the formalities under Section 2 as the parties did not set the set all the express terms including those related to the machinery in writing. Thus, the part of the sale of the machinery may not be valid.

Considering Rock Advertising Limited, the doctrine of consideration and equity principle, informal alterations could constitute a valid variation of the existing contract. In this case, it would constitute injustice to Justine if the variation is not allowed.

As the contract in the case was not executed, the variation could be performed. Estoppels can alter the contractual terms without dissolution. As an oral variation is valid, as was held in Goss unless the contract says otherwise, and as facts leading to the variation took place before the contract was concluded, the agreement will be binding.

Cases

Bank of Ireland Home Mortgages v Bell Bank [2001] 2 All ER (Comm) 920, CA Edwards v Loyds TSB Bank Plc [2004] EWHC 1745 (Ch) First National Bank Plc v Achampong [2003] EWCA Civ 487 Francis v F Berndes Ltd & Ors [2011] EWHC 3377 (Ch).

Dig deeper into Analyzing the Treatment of Foetuses as Property with our selection of articles.

Goss v Lord Nugent (1883) 5 B & Ad 58 Jelson v Derby CC [1999] EGCS 88.

Lloyds Bank plc v Rosset [1990] UKHL 14 McCausland v Duncan Lawrie [1997] 1 WLR 38 CA.

Mortgage Corporation v Shaire [2001] Ch 74, HC R v Tower Halest LBS, ex p von Goetx [1999] QB 1019 (CA) Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24]

TSB Bank plc v Marshall [1998] 2 FLR 769V v W [2020] EWFC 2 Walsh v Lonsdale (1882) 21 ChD 9 Yaxley v Gotts [2000] Ch 162.

Legislation

The Law of Property Act 1925

The Law of Property (Miscellaneous Provisions) Act 1989

The Trusts of Land and Appointment of Trustees Act 1996

Reports

Law Commission, ‘Transfer of Land, Trust of Land’ (1989) Law Com No 181, at para 12.9.

Books

Abbey R and Mark Richards, A Practical Approach to Conveyancing (Oxford University Press 2019)

Davys M, Land Law (Palgrave Macmillan 2015)

Dixon M, Modern Land Law (Taylor & Francis 2021)

Duddington J, Land Law (Pearson 2019)

Fisher JC, Contract Law in England and Wales (Wolters Kluwer 2018)

Garton J et al., Moffat's Trusts Law 6th Edition: Text and Materials (Cambridge University Press 2015)

Law J, A Dictionary of Law (Oxford University Press 2018)

O'Mahony, LO, Conceptualising Home: Theories, Laws and Policies (Bloomsbury Publishing 2006)

Sparkes P, A New Land Law (2003)

Wilken S and Karim Ghaly, The Law of Waiver, Variation and Estoppel (Oxford University Press 2012)

Journals

Gina Heung, ‘No Sympathy to Women and Children in Securing Their Family Home’ (2018) 6 Legal Issues J. 61