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Savage v Savage – a recent Court of Appeal decision on TLATA

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22nd February 2024

Andrew Martin reviews the recent case of Savage v Savage.

Introduction

In the system of trusts of land introduced by the Trusts of Land and Appointment of Trustees Act 1996 (“TLATA”), the court is given the power, on an application by a trustee of land or someone who has an interest in the property under the trust, to make any order relating to the trustees’ exercise of their functions as it thinks fit. The question for the Court of Appeal in Savage v Savage [2024] EWCA Civ 49 was what the court can have regard to when exercising that power.

Facts

This case concerned 3 parcels of land in East Sussex. These properties were held under certain trusts for Raymond Savage and his late brother’s four children. One of the children, Frank, ran a business on land which formed part of the properties. Raymond was the majority beneficiary by value: he had a two-thirds interest in one parcel of land, a three-quarters interest in another, and a one-half interest in the remaining parcel. The remaining interests were held by the children.

The question of how to deal with the properties reached the court through financial remedy proceedings between Raymond and his ex-wife, Vanessa. Vanessa sought a sale of the properties, but there was a dispute between the beneficiaries of the trusts as to how the sale should take place. At trial, Raymond said he wished to see the properties sold as a whole and move on with his life. The children, on the other hand, supported Frank being given a right of pre-emption over the land from which he conducted his business.

Law

The court’s power is found in TLATA, s.14, which reads as follows:

14 Applications for order.

1.  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.
2. On an application for an order under this section the court may make any such order—

• 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
• declaring the nature or extent of a person’s interest in property subject to the trust, as the court thinks fit.

S.15 is entitled “Matters relevant in determining applications”. The relevant subsections are (1) and (3), which read as follows:

(1) The matters to which the court is to have regard in determining an application for an order under section 14 include—

•  he 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.

[…]

(3) In the case of any other application, other than one relating to the exercise of the power mentioned in section 6(2), 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).

Decisions below

Following the trial, the district judge ordered that Frank be given a right to buy out Raymond’s interest in the properties before they were offered for sale on the open market. The judge said he had taken into account the circumstances and wishes of Raymond as majority beneficiary, but that he was not prevented from having regard to the circumstances and wishes of the children as minority beneficiaries. His reasoning for this was that the main discretion was conferred by s.14, and that s.15 contained a list of non-exhaustive factors. The court was obliged to take those factors into account, but was not limited to only considering them.

On appeal, the circuit judge set aside the district judge’s order and ordered that the properties be sold on the open market without giving Frank a right of pre-emption. He disagreed with the district judge on the meaning of s.15(3), holding that the court was precluded from considering the minority beneficiaries’ interests by reason of that subsection. His reasoning was that the statute only made sense if only the majority interest was considered in the case of a dispute between beneficiaries. The statute, he reasoned, set out two separate options: where there was no dispute, the wishes of any beneficiary are to be taken into account, but where there was a dispute, the majority’s wishes are to be taken into account. If the court were not to exclude consideration of the wishes of the minority in the case of a dispute, the words “or (in the case of dispute) of the majority” would be rendered otiose. This, he said, was akin to the maxim of statutory construction “expressio unius est exclusio alterius”.

Court of Appeal’s decision

The Court of Appeal overturned the circuit judge’s decision.

The outcome turned on a simple question of statutory interpretation: does s.15(3) exclude the consideration by the court of minority beneficiaries’ interests in exercising its discretion under s.14?

Snowden LJ gave the lead judgment, with which Phillips and Moylan LJJ agreed. His primary reasoning was based solely on the words of the statute itself ([33]). The starting place was the words of s.14, which gives the court the power to make any order “as the court thinks fit”. This is a broad discretion ([22]). The ordinary and natural meaning of the opening words of s.15(1) do not operate to create an exhaustive list of factors that the court should consider, as shown by the word “include” and the phrase “have regard to”([23-4]). The same words are used in s.15(3). This means that the court must consider the specified factors set out in that subsection, but other factors are not excluded expressly or by necessary implication, and so a court is permitted to consider them too ([26-9]).

Snowden LJ was fortified in his interpretation by reference to the relevant context to the statute, namely the Law Commission materials. He cited the relevant sections of the Law Commission Working Paper and its subsequent Report. These put it beyond doubt that the intention of the statute was not to restrict the exercise of the court’s discretion by creating an exhaustive list of factors that the court could consider, but rather to set out the more important factors by way of guidance ([40]).

Finally, he tested that conclusion by way of an example in which there is a dispute between two beneficiaries who each hold a 50% beneficial interest. It would be absurd to say that, as neither had a majority interest, neither of their wishes or circumstances could be considered by the court ([41]). This issue had been considered by the Court of Appeal in White v White [2003] EWCA Civ 924 and it was decided, in that case, that s.15 did not contain an exhaustive list of factors to be considered and therefore did not prevent the court considering the interests of someone with a 50% beneficial interest.

The Court of Appeal therefore restored the order made by the district judge. Snowden LJ concluded that: “The District Judge took into account all the relevant circumstances and reached a decision which appears to me to be both sensible and well within the reasonable ambit of his discretion under section 14”.

Commentary

There is unlikely to be much doubt cast over the correctness of this decision. The word “include” in s.15(1) and (3) alone indicates that the factors mentioned therein are not meant to be an exhaustive list, and there is nothing else in the statute that indicates that other factors are to be excluded from consideration by necessary implication. The distinction between factors that the court must consider and those that it may consider is the reason why this interpretation does not render otiose the inclusion of specific factors in the statute. Parliament intended that the listed factors are always considered by the court, hence they are specified. It does not follow from this, however, that Parliament intended that other factors are never considered. In fact, as the wording of s.14 makes clear (“the court may make any such order… as the court thinks fit”), the court’s discretion is broad.

Therefore on the question of “can the court take other factors into account?”, the answer is clear. There is a further question, though: should particular factors be given more weight than others when the court is exercising its discretion? It might have been argued (but does not appear to have been) that even if the minority beneficiaries’ views can be taken into account, the majority beneficiary’s views should be given particular weight.

It is notable that the 1985 Law Commission Working Paper cited by Snowden LJ, at paragraph 10.9, states: “Where there are concurrent interests, it seems sensible that, although the court should have regard to the circumstances referred to above, in the absence of special considerations, the wishes of the majority in value should prevail” (my emphasis).

By the time of the 1989 Law Commission Report, that does not feature and instead the recommendation is that “These guidelines are not designed to restrict the exercise of judicial discretion by either narrowing it in breadth or giving certain interests formal priority over certain others. They are simply designed to indicate some of the more important factors to which the courts should have regard” (my emphasis). This would suggest that there would be no need for the majority beneficiaries’ interests to be privileged or for there to be special circumstances before a court gives effect to minority beneficiaries’ interests.

Notwithstanding this, the approach taken by Edwin Johnson QC in a few (admittedly short) passages in Baxter v Stancomb [2018] EWHC 2529 (Ch) appears to be closer to the one suggested in the Working Paper. At [91], he held that “By reason of Section 15(3), and in terms of matters to which I am required to have regard, the wishes of the Claimants, as the majority owner of the beneficial interest in the Cottage, prevail over the wishes of the Defendant”. Such a brief treatment of the issues should be treated with caution. It also does not appear to accord with the comments of Arden LJ in White v White at [26]: “The judge must have regard to certain specified factors as set out in section 15(1). The Act does not say what weight is to be given to those factors. Nor does it say that the specified factors are exhaustive of all the circumstances which the judge must consider. It was open to the judge, in my judgment, to have regard to the wishes of the mother and to her circumstances, and to give that factor such weight as he thought fit” (my emphasis).

The difficulty in how to approach this question can be seen by analogy in the case law about relief from sanctions under CPR, r.3.9. r.3.9(1) says the court will consider “all the circumstances… including the need – (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders”. There the court is directed expressly to consider “all the circumstances” and yet, nonetheless, in the leading case of Denton v TH White, the majority (Lord Dyson MR and Vos LJ) said that the two specified factors “should be given particular weight at the third stage when all the circumstances of the case are considered. That is why they were singled out for mention in the rule” ([32]). Jackson LJ, dissenting on this point, commented at [85] that “The rule does not require that factor (a) or factor (b) be given greater weight than other considerations. What the rule requires is that the two factors be specifically considered in every case. The weight to be attached to those two factors is a matter for the court having regard to all the circumstances. The word “including” in rule 3.9 means that factors (a) and (b) are included amongst the matters to be considered. No more and no less”. He went on to analyse why those factors had been expressly included in r.3.9, concluding that it was because courts had been failing to take them into account. Therefore they had been included so that judges would consider these factors every time they decided an application under r.3.9, not so that judges would give them particular weight in such applications.

It is conceivable that Parliament specified certain factors to be taken into account by a court when exercising a discretion either because it is particularly important that they are considered every time the discretion is exercised, even if ultimately little weight is given to them, or because particular weight should be given to them. In the absence of clear indications that particular weight should be given to the specified factors, it is difficult to see how that can be inferred simply from the fact that those factors have been specified.

The Court of Appeal did not address this question head-on in this case. It is noteworthy, though, that the court appears to have been given a binary choice between giving effect to the wishes of the majority or the minority. The Court of Appeal found there was nothing wrong in the district judge, having considered the wishes of the majority, giving effect to the minority beneficiaries’ wishes. There is no suggestion that particular weight has to be given to the majority beneficiaries’ wishes, or that the minority beneficiaries had to show special circumstances before their wishes could prevail over the majority. In the particular context of TOLATA and in light of the Court’s other comments about the breadth of the discretion under s.14, it would appear that the relative weight to accord to the relevant factors in any given case is at the judge’s discretion.

 

This article was first published on Practical Law here.

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