Savage v Savage [2024] EWCA Civ 49 (01 February 2024)
It is not unusual for land and property to be held within a trust for the benefit of family members (and is a particularly common arrangement for farming families). Predictably, this arrangement can enter choppy waters when one of the beneficiaries wants – or needs - to sell their share. The law governing disputes relating to property held in trust is the Trusts of Land and Appointment of Trustees Act 1996 (more commonly known as TOLATA) and it was the exercise of the court’s powers under this law that was tested in the recent case of Savage v Savage [2024] EWCA Civ 49. In it the Court of Appeal considered how much discretion a court can exercise when taking into account the wishes of the minority when deciding disputes between beneficiaries of a trust in relation to the sale of land.
Background to the case
Three separate parcels of land were held on trust for Raymond Savage (the majority beneficiary) and his four nephews and nieces, one of whom, Frank, ran a business on one of the blocks of land. As part of the financial remedy proceedings following Raymond’s divorce, an order was made to sell the land. However, rather than sell it as one lot which Raymond wanted to do so that he could ‘move on with his life’, the judge agreed that Frank should be given the opportunity to buy the land on which his business was based at a set price before it was offered for sale on the open market. This desire of Frank’s was supported by the other minority beneficiaries (Frank’s siblings) and endorsed as a reasonable approach by an experienced valuer. Raymond appealed the decision.
The first appeal
On appeal, the first instance Judge’s order to allow Frank the first right to buy was set aside and the land was ordered to be sold on the open market. The appeal judge disagreed with the first instance judge’s analysis of the relevant sections (14 and 15) of TOLATA (see detail below), ruling that the only wishes and circumstances that should be considered were those of the majority beneficiary, namely Raymond. Frank appealed and this is the case that came before the Court of Appeal in February 2024.
Court of Appeal’s findings
The Court of Appeal commented that, to work out whether Frank, as a minority beneficiary, should be allowed the first right to buy the land, sections 14 & 15 of TOLATA should be considered as a whole. The Court of Appeal looked at the broad language of section 14 of TOLATA, which includes “as the court thinks fit” and decided the court has wide power. The Court of Appeal also noted that the list of factors set out in section 15 of TOLATA, which the court must consider when exercising its discretion under section 14, is not intended to be exhaustive. Factors beyond that list could be considered. The Court of Appeal therefore found that the wishes and circumstances of the minority beneficiaries could be considered.
Comment
The case provides useful guidance on what factors can be considered on an application under TOLATA. The court may look at factors beyond those detailed within section 15 of TOLATA. The decision to allow Frank the first right to buy the land, gives him the opportunity to continue his business in the same location without having to outbid other parties on the open market. The court has applied TOLATA in an effort to keep the land within the ownership of the beneficiaries rather than it being sold to parties who are not beneficiaries under the trust. The decision also offers Frank a degree of certainty over the price of the land, although it does mean that Raymond may not receive as much as he might have done from a sale on the open market. Beneficiaries to trust property should keep this decision in mind if they are hoping to force the disposal of trust property. This case confirms that the courts have a wide discretion to take into account the wishes and circumstances of all the beneficiaries, and not just the majority beneficiary, and make different orders beyond a simple sale on the open market, including alternative options proposed by minority beneficiaries.
Footnote: The relevant law
The relevant law that was assessed in relation to this dispute was sections 14 & 15 of the Trusts of Land and Appointment of Trustees Act 1996 ("TOLATA").
Section 14 of TOLATA deals with applications for an order in relation to property and provides as follows:
- Any person who is a trustee of land or has an interest in property subject to a trust of land may make an application to the court for an order under this section.
- On an application for an order under this section the court may make any such order - (a) relating to the exercise by the trustees of any of their functions (including an order relieving them of any obligation to obtain the consent of, or to consult, any person in connection with the exercise of any of their functions), or (b) declaring the nature or extent of a person's interest in property subject to the trust, as the court thinks fit.
Section 15 of TOLATA deals with the relevant matters in determining applications under section 14 and lists (amongst other things) the following:
- The intentions of the person or persons (if any) who created the trust,
- the purposes for which the property subject to the trust is held,
- the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and
- the interests of any secured creditor of any beneficiary.
Additionally, section 15 of TOLATA provides that the matters to which the court is to have regard also include the circumstances and wishes of any beneficiaries of full age and entitled to an interest in possession in property subject to the trust or (in case of dispute) of the majority (according to the value of their combined interests).
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
