Pankhania v Chandegra [2012] EWCA Civ 1438





The claimant appealed from the decision of Judge Charles Harris QC to dismiss his claim seeking an order for sale of 7 Cossington Street, Leicester (the property) and the division of the sale proceeds in equal shares between him and the defendant. A declaration had been made by the judge that beneficial ownership of the property was vested solely in the defendant, despite the property having been conveyed into the joint names of the claimant and defendant. A simultaneous express declaration of trust had been made in the transfer declaring that the parties were to hold the property as tenants in common in equal shares.

Both parties agreed that the property had been identified for purchase in 1987 by the claimant’s uncle (who was the defendant’s brother), but that he had been unable to raise a mortgage himself. However, the claimant alleged that the intention was that the uncle would live in the property and ultimately purchase it from the parties. This had not happened and the uncle had died in 2003. The defendant had lived in the property since 1989. The claimant said he had not objected to the defendant living in the propery when she needed a home, but that this had not been intended to be permanent.

The defendant alleged that when the uncle had been unable to purchase the property, she had applied for a mortgage in her sole name but her income had been insufficient. She claimed that it had been decided within the family that the claimant should become a joint purchaser for the purposes of raising a mortgage. No reference was made by the defendant to the express declaration of trust in the transfer. There was no evidence in the form of the solicitors’ file as to how the transfer came to include the declaration.

Judge Charles Harris QC held that beneficial title to the property was vested solely in the defendant, based on findings (inter alia) that the claimant had agreed that the beneficial interest belonged to the family (of which he was but a fraction), had become a joint tenant simply to facilitate the defendant’s purchase of the property, and that the intentions of the parties had been that the property was bought for the benefit of the defendant and would be a ‘family’ asset.

Held (allowing the appeal)

Per Patten LJ:

  1. (1) The judge had misrecollected the claimant’s evidence when he found that the claimant agreed that the beneficial interest belonged to the family. This apart, if there had been no indication in the transfer as to beneficial ownership, then the judge’s approach could not be faulted. However, the parties had executed an express declaration of trust. Such a declaration is conclusive unless varied by subsequent agreement or affected by proprietary estoppel (para [13]).
  2. (2) Imposition of a constructive trust in favour of the defendant was impermissible unless the defendant could establish some ground upon which she could set aside the declaration. The judge did not have a free hand to decide the parties’ common intention; that inquiry was not open unless the defendant had established a case to set aside the declaration (para [16]). A declaration of trust could be set aside for fraud, mistake or undue influence. There was no such allegation or any counterclaim for rectification on the basis that the parties had not appreciated the effect of the declaration (para [17]).
  3. (3) The declaration was not a sham. If the judge had intended to find the declaration to be a sham, then he was wrong. To establish a sham, it must be shown that both parties never intended to create a trust and that they did so to give such a false impression to third parties or to the court. The defendant’s evidence that the claimant was on the legal title solely in order to be a party to the mortgage was not sufficient to make the declaration a sham and deprive it of legal effect (paras [18][20]).
  4. (4) The declaration was effective to make the claimant an equitable tenant in common regardless of the parties’ subjective intention and to estop the defendant from denying the claimant’s title. The sham principle does not apply to a situation where the highest a party can put it is that the document does not accurately record what they intended to achieve. Unless conditions exist for the court to rectify the document, the parties are bound by the legal consequences of what they have signed (para [22]).

Per Mummery LJ:

  1. (5) Reliance on Stack v Dowden and Jones v Kernott for inferring or imputing a different trust in this and other similar cases is misplaced where there is an express declaration of trust and no valid legal grounds for going behind it (para [28]).
JUDGMENT LORD JUSTICE PATTEN: [1] This is an appeal by the claimant, Nilesh Pankhania, against the dismissal of his claim for an order for the sale of a registered freehold property at 7, Cossington Street, Leicester (the property) and for the division of the net proceeds of sale between himself and the defendant in equal …
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Counsel Details

Ian Lamacraft instructed by BP Legal (221 Belgrave Gate, Leicester, LE1 3HT, tel 0116 2536856, e-mail for the appellant.

John Small (36 Bedford Row, London, WC1R 4JH, tel 020 7421 8000, e-mail instructed by Josiah Hincks (The Manse, 22 De Montfort Street, Leicester, LE1 7GB, tel 0116 255 1811) for the respondent.