Bank of Scotland plc v (1) Forrester (2) Forrester  EWHC 2036 (Ch)
(Chancery Division, Mr Simon Monty QC (sitting
as a deputy judge of the High Court), 20 June 2014)
A father was able to demonstrate the existence
of an agreement pursuant to which he held 100% of the beneficial interest in a
property even though the legal interest was owned by his son.
The Second Defendant (‘IF’) had owned a property
since 1964. In
bankruptcy order was made against him and a trustee in bankruptcy was
appointed. In 1998 the trustee obtained an order for possession of the
property, which he enforced the following year. The First Defendant (‘NF’) (the
Second Defendant’s son) purchased the property from the trustee, having
obtained a mortgage. IF remained in occupation and made payments to NF.
NF remortgaged the property to the Claimant
(‘the Bank’), but defaulted. The Bank sought possession. IF asserted that after
the trustee enforced the order for possession, he and NF agreed that the
property would be transferred to NF to enable him to get the first mortgage, IF
would then pay his son sufficient to cover the mortgage repayments, and the
beneficial interest would remain with the father.
The son (NF) denied any such agreement, stating
that he had acquired the beneficial interest, and that his father had paid him
rent. Under a settlement agreement, the Bank’s claim against NF was subject to
an agreement with the father that, unless the son defeated his claim, a
possession order would not be sought, but the father would become responsible
to the Claimant for part of the mortgage debt.
The court had to determine ‘two simple
questions’. The first was whether the father held a beneficial interest in the
property. The second was if so, what the size of that beneficial interest was.
The court accepted IF’s
evidence and refused the application. On NF’s case his father would have
sacrificed substantial equity for no apparent gain. Instead, the court found
that there had been an express agreement between IF and NF that whilst NF was
to hold the legal interest in the Property, the beneficial interest was to
remain with IF. In the absence of an express agreement, the court found that
there had been a shared common intention that IF was to retain one hundred per
cent of the beneficial interest in the property.