Court of appeal decision affecting Beneficiaries and Trustees to a Trust of Land.
In Savage v Savage [2024] EWCA Civ 49 the Court of Appeal considered the correct interpretation of section 15(3) of ToLATA and whether, when making an order under section 14 (where there is a dispute), the court is entitled to have regard to the circumstances and wishes of the minority beneficiaries.
Under ToLATA 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 here was: what should the court have regard to when exercising that power?
Properties and land
This case concerned three parcels of land. The properties were held under trusts for Mr Savage and his late brother’s four children. One of the children ran a business on land which formed part of the properties. Mr Savage 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 Mr Savage and his ex-wife. His ex-wife 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. Mr Savage wished to see the properties sold as a whole. The children, on the other hand, supported the child with the business on the land, being given a right of pre-emption over the land from which he conducted his business.
The court’s power is found in s14 of ToLATA, which reads:
“(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—
(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.”
Matters relevant in determining applications are set out in s15 (1) and (3), which read:
“(1) The matters to which the court is to have regard in determining an application for an order under section 14 include—
(a) the intentions of the person or persons (if any) who created the trust,
(b) the purposes for which the property subject to the trust is held,
(c) the welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home, and
(d) 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).”
The Court at first instance ordered that the child with the business interest be given a right to buy out Mr Savage’s interest in the properties, before they were offered for sale on the open market. The judge stating that whilst he had taken into account the circumstances and wishes of Mr Savage, as majority beneficiary, he was not prevented from having regard to the circumstances and wishes of the children, as minority beneficiaries.
The appeal
On appeal, the appeal judge set aside the trial judge’s order and ordered that the properties be sold on the open market without giving the child (with a business interest) a right of pre-emption. The judge disagreed with the trial judge on the meaning of section 15(3), holding that the court was precluded from considering the minority beneficiaries’ interests.
The Court of Appeal then overturned the appeal judge’s decision, re-instating the decision of the trial judge at first instance. The outcome turned on a simple question of statutory interpretation: does section 15(3) exclude the consideration by the court of minority beneficiaries’ interests in exercising its discretion under section 14?
The lead judgment, with which the others agreed, was based solely on the words of the statute itself. The starting place was the words of section 14, which gives the court the power to make any order “as the court thinks fit”. This is a broad discretion. The ordinary and natural meaning of the opening words of section 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”. The same words are used in section 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.
The Court of Appeal judge cited sections of the 1985 Law Commission Working Paper (No. 94) and its subsequent 1989 Report (No. 181), which he said put 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.
Finally, an example was proffered by way of explanation and support, 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. This issue had been considered previously by Court of Appeal in White v White [2003] EWCA Civ 924 and it was decided, in that case, that section 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 trial judge at first instance, concluding 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.”
Our comments
The correctness of this decision and findings seem sound. The word “include” in section 15(1) and (3) alone indicates that the factors mentioned therein are not meant to be exhaustive. There is nothing else in the statute that indicates that other factors are to be excluded from consideration. 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 section 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: what should the court have regard to, when exercising that power? It is clear that the court's discretion is not fettered by the non-exhaustive list of s15.
There is a further question, however: should particular factors be given more weight than others?
It might have been argued that even if the minority beneficiaries’ views can be taken into account, the majority beneficiary’s views should be given particular weight.
The 1985 Law Commission Working Paper cited by the Court of Appeal Judge, 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.”
The 1989 Law Commission’s Report 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.”
This would suggest that there is no need for the majority beneficiaries’ interests to be privileged, or for there to be a need of unusual, or special circumstances, before a court gives effect to minority beneficiaries’ interests.
The Court of Appeal found there was nothing wrong in the trial 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 comments about the breadth of the discretion under s14, it would appear that the relative weight to be given to the considered factors, in any given case, is at the judge’s discretion.
