The decision of Sir Geoffrey Voss, Master of the Rolls has been handed down in the Court of Appeal in the case of Ralph v Ralph  EWCA Civ 1106.
This was a case where a father and son purchased a property together for which the father paid all outgoings, the son only joining in the purchase because the father could not get a mortgage.
One solicitor acted for both parties in the transaction and ticked box 11 on the TR1 transfer form indicating that the property was held on trust for themselves as tenants in common in equal shares.
Many years later, the son claimed his half interest in the property, and father opposed it. The son had not contributed financially, but it could be said that he had been disadvantaged by him being a joint owner as it limited his ability to obtain a mortgage in his sole name.
The Court held that to rectify the TR1 on the basis of common mistake, there would have had to be a common intention between the parties at the time the contract was made.
On the facts found by the trial judge, there had been no discussion as to beneficial ownership at the time of the purchase. Accordingly, the Court of Appeal found that there was no power to rectify the TR1 declaration that the property was held on trust equally because they had never had a common intention.
The Master of Rolls in an extensive judgment stated that the bulk of these cases concerning common mistake rectification had been between commercial parties and related to commercial contracts. The Court laid down the following points:
- The rules relating to rectification of a commercial contract assumed that parties had negotiated that contract.
- It had to be relatively common for family members buying property jointly not to discuss openly how the beneficial interest was to be held.
- Like pension cases and settlements, declarations of a trust like the present one could demonstrate special features that distinguish them from commercial contracts.
- In a case where the parties on the evidence simply gave no thought to beneficial interests at all, rectification was not possible.
- The Master of the Rolls noted that this was a case that cried out for the parties to reach a mediated settlement. He said the case demonstrated how important it was for the Courts to be able to direct mediation in appropriate cases and referred to the report of the Civil Justice Council on Compulsory Alternative Dispute Resolution.
The Judgment was dated July 22, 2021 and published in the Times Law Reports on 24 August 2021.
What can we learn from this?
Whenever there is a joint purchase, the parties must address the issue of beneficial interest in the property in order to avoid future argument.
Pinney Talfourd LLP provide an excellent conveyancing service and would always ensure that the question of beneficial entitlements was dealt with at the time of the transaction.
Where appropriate, Pinney Talfourd LLP would recommend the parties entering into a specific trust deed to deal with the beneficial interests.
How Pinney Talfourd can help
Our Property Litigation Department can assist the resolution of disputes arising out of beneficial interest declarations and have extensive experience of both mediation and Court adjudication.
or visit the team's website page here.
This article was written by Stephen Eccles, Partner and head of our Residential Property Litigation Team. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of August 2021.