Commentary on Savage v Savage – “More like guidelines than actual rules”

Trusts of Land and Appointment of Trustees Act 1996 (“the Act”)

Better known as TOLATA, the Act provides the Court with the power to make orders in relation to property held in trust, including jointly owned property. It's most commonly used by parties in situations where one party would like a jointly owned property to be sold, and they apply to the Court for an Order to force that sale despite the other owner(s) not wanting a sale. 

Where a Court is asked to make such an Order for sale under section 14, it will need to have regard to various factors in section 15. The Court will also have regard to the wishes of any adult beneficiaries.  Where there's a dispute, section 15(3) dictates the Court must have regard to the wishes of the majority of beneficiaries according to the value/size of their interest/share.  

Background

Savage v Savage concerned various pieces of land held in trust for members of the family. The land had been farmed by two of the beneficiaries, a husband and wife. Sadly, they decided to get divorced, which triggered the process which led to this decision. The parties to the divorce proceedings, which for these purposes included the beneficiaries of the trust land, all agreed the land should be sold. However, there was disagreement about the land value and the method of sale.

One of the minority beneficiaries of the trust, Frank, operated a business on some of the land, and he wanted an option to enable him to purchase this land before it was offered on the open market. The majority beneficiary of the trust, Raymond, wanted to sell all of the land on the open market. A disagreement ensued, and Court proceedings were commenced.

County Court

In the first instance decision, the District Judge agreed that Frank should be given a right to buy the land, and ordered the price he should pay. In his decision, the District Judge took account of Raymond’s circumstances and wishes, as he was obliged to do under section 15(3), but also had regard to the minority beneficiaries’ wishes. Those beneficiaries wanted Frank to be granted a right of pre-emption, and the District Judge agreed with them, saying he was only required to consider Raymond’s wishes as the majority beneficiary, but wasn’t bound by them. 

High Court

Raymond disagreed with the District Judge’s decision and appealed on the basis that only his wishes, as majority beneficiary, should've been considered, not those of Frank and the other minority beneficiaries. The Judge agreed, suggesting that the original decision had misinterpreted section 15(3).  He set aside the original Order, and made an order for sale of all the land without any right of pre-emption for Frank.  

Court of Appeal

Understandably, Frank was not happy with this decision, and was granted permission to make his own appeal.

The Court of Appeal considered the interpretation of section 15(3) and the intention of Parliament when passing the Act. In their view, the Act was intended to give a Court as wide a discretion as possible when deciding whether to make an Order under section 14, and section 15 was drafted to reflect this wide discretion. This was supported by the Court of Appeal’s previous ruling in Bagum v Hafiz.  

Applying this reasoning, the Court of Appeal agreed with the District Judge’s decision that they must consider Raymond’s wishes as the majority beneficiary, but were not bound to follow them. They could also consider other factors, such as Frank’s and the minority beneficiaries’ wishes too. They reinstated the District Judge’s decision, allowing Frank a right of pre-emption over the land used for his business.

Commentary 

While not groundbreaking in terms of how applications under TOLATA are decided, this case is a helpful reminder that the Act gives the Court a wide discretion when considering applications, and that the factors for consideration in section 15 are more like guidelines than actual rules that must be followed (to misquote Geoffrey Rush in Pirates of the Caribbean). 

This was particularly evident where the majority beneficiary’s wishes were frustrated by those of the minority beneficiaries. Just because the Court had to consider Raymond’s wishes, that didn't mean it had to agree with them. Similarly, just because a Court must consider the majority’s wishes, that does not stop it from also considering (or not considering), the wishes of the minority. This reiterates that these cases are often fact specific, and each case will be decided on its own facts. It's, therefore, quite risky to simply rest on your laurels, and you should take specialist advice before considering whether to make an application under section 14 of the Act. It's often much easier (and cheaper) for the parties to mediate or negotiate in these cases.