Facts:
An order was made in financial remedy proceedings between Raymond Savage and his ex-wife, Vanessa Savage concerning the method of selling three parcels of land. One of the parcels serves a business run by one of the minority beneficiaries. The parcels of land were held on trust for Raymond and the four children of his late brother.
Raymond had a two-thirds interest in the largest parcel of land, a three-quarters interest in the second largest parcel, and a one-half interest in the smallest parcel. The remaining interests were held by the four children. Vanessa sought the sale of the parcels of land, although the beneficiaries could not agree between themselves on the method of sale. As a result of a trial, the District Judge made an order giving Frank, the business owner, a right to buy out Raymond’s interest before the properties were offered for sale on the open market.
The District Judge ruled that the main discretion was conferred by section 14, while section 15 included only a non-exhaustive list of factors. Though the court was obliged to take into account the factors in section 15, it was not governed by them alone following Bagum v Hafiz [2016]. On appeal, the Judge disagreed with the District Judge’s conclusions on section 15(3).
Decision:
The case considered the meaning of section 15(3) of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). The central question was whether the statutory direction that the court must take should have regard to the specific circumstances and express wishes of the majority in the case of a dispute between beneficiaries and whether this means that the Court must disregard the circumstances and wishes of the minority.
The Court allowed the appeal on the basis that the Judge had misinterpreted section 15(3) and misapplied it. The Court of Appeal confirmed that the circumstances and wishes of minority beneficiaries were not excluded. The Court ruled that section 15(1) contains the list of factors to which the Court must have regard when exercising its discretion under Section 14. The Court agreed with the District Court that the list is not intended to be exhaustive. Consequently, a court can take into account other factors that it thinks fit ‘unless it is otherwise excluded by express words or necessary implication’.
Section 15(3) only identifies some additional matters that the court must take into consideration in the two specified cases, namely where there is no dispute and where there is a dispute. Similar to section 15(1), nothing in section 15(3) indicates that it is an exhaustive list. The Court noted that “The structure and purpose of section 15 is to set out the factors to which the court is obliged to have regard: it is not intended to limit other factors that the court is permitted to take into account. The court is not prevented from having regard to the circumstances and wishes of the minority by value”. The Court also looked at the report and explanatory notes which indicated that the “intention of the Law Commission was not to restrict the exercise of the Court’s discretion by setting out an exhaustive list of factors”.
The first instance decision was restored, which gave the minority beneficiary a right of pre-emption in respect of the parcels of land from which he operated his business, despite Raymond objecting and seeking an immediate sale on the open market.
Implication:
The Court provided some clarification on section 15 by explaining that the structure and purpose of the section is to set out those factors to which the court is obliged to have regard although, in no event, are those lists deemed to be exhaustive. Indeed, there is nothing in the wording or structure of section 15(3) that expressly or impliedly prevents the courts from considering other factors. The judgement also confirms that the wishes of minority beneficiaries cannot be excluded despite the objections of a majority beneficiary.