TLATA: The Court’s discretion

In Bagum v Hafiz and Hai [2015] EWCA Civ 801, the Court of Appeal considered, apparently for the first time, the extent of its discretion under section 14, Trusts of Land and Appointment of Trustees Act 1996 (“TLATA”).  The case is a sad and apparently bitter family breakdown case, where the central parties each had a one third share in the property as tenants in common.  The judge made an unusual order for the sale of the property in that the property was to be offered for sale to one of the beneficiaries (Mr Hafiz) and, if he did not pursue the purchase within six weeks, it was to be offered for sale on the open market.

The question for the Court of Appeal was whether that order was open to the judge.

Indeed, originally, Ms Bagum had requested that Mr Hai’s share be sold to the other beneficiaries.  However, the judge had found that TLATA did not provide a warrant for that order.  This is because of the ambit of section 14, TLATA which gives the court a wide discretion in relation to “the exercise by the trustees of any of their functions”.  The Court of Appeal (rightly) agreed with the judge that a direction to one beneficiary to sell to others would not be an exercise by the trustees of their functions.  I suspect that this was a Law Commission oversight when it settled the Bill that became TLATA.

The more interesting question, though, was as to the judge’s actual order.  Did the court have power to direct trustees of land to sell the trust property to particular beneficiaries, without the consent of the beneficiary or beneficiaries to whom the land is not being sold?  The court held that it did.  The only significant point of note here, in the sense that it is of more general application, is Briggs LJ’s comment, at [23], that “the clear object and effect of sections 14 and 15 is to confer upon the court a substantially wider discretion, exercised upon the basis of wider considerations, than might be enjoyed by the trustees themselves, acting without either the consent of their beneficiaries or an order of the court. … All this departs from the general rule of equity which requires the trustees single-mindedly to advance the interests of the beneficiaries as a class, without preferring some of them over others”.  And, further, that the court is not rigidly constrained in the exercise of its discretion by principles of the law of equity which constrain the trustees themselves.  This, in itself, is a not uninteresting observation.

h/t to William Ford, who acted for Ms Bagum, for bringing this case to our attention.  It will be on my student’s reading list next year.

Posted in Housing law - All, Trusts and Estoppel and tagged , .

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