The defendant was the landlord and registered proprietor of a property which comprised eight residential flats and three commercial units. An agreement (“the first transfer”) was entered into between the defendant and S Ltd, a company under the landlord’s control, for the sale of the property. A trust deed provided that S Ltd held the beneficial interest in the property on trust for the defendant. The tenants of the flats became aware of the transfer and a majority of the them formed the claimant company for the purpose of acquiring title to the property pursuant to the provisions of Part I of the Landlord and Tenant Act 1987. S Ltd later transferred the property (“the second transfer”) to the defendant for no consideration. The claimants commenced a claim against the defendant under CPR Pt 8 seeking declarations that the defendant was a purchaser of the property within the meaning of section 11(3) of the 1987 Act under the terms of the second transfer and that following service of a section 12B notice upon him, the defendant was under an obligation under the Act to transfer the property to the claimant for nil consideration. The claim was allowed. The defendant appealed on the ground, inter alia, that at the time of the second transfer the property had been held on trust for him, it was, therefore, an exempt disposal under section 4(2)(g) of the 1987 Act.
On the defendant’s appeal—
Held, Appeal allowed. That the judge had proceeded on the footing that section 4(2)(g) of the Act only applied where the relevant estate or interest was held on trust both before and after the transfer. However, the requirements of section 4(2)(g) were that the estate or interest should be held “on trust for any person” when the disposal was made, and that the disposal was made “in connection with the appointment of a new trustee or in connection with the discharge of any trustee”. There was nothing in the language of that section which prevented its application to a situation where the legal estate in property held on trust for a beneficiary was conveyed to the beneficiary, thereby terminating the trust and discharging the trustee. The words “in connection with the discharge of any trustee” were wide enough to cover such a situation, and there was no reason to confine their scope to situations where the trustee of a continuing trust was discharged, whether or not a new trustee was appointed in his place. Section 4(2)(g) of the Act covered the circumstances of the second transfer. Accordingly, the defendant was not a purchaser of the property from S Ltd within the meaning of the Act, the purchase notice served upon him was invalid and he was not in breach of his obligations under the Act (paras 64–66, 69, 70).
Stephen Jourdan QC and William Hansen (instructed by Heritage Solicitors) for the appellant; Lawrence Caun (instructed by Ronald Fletcher Baker LLP) for the respondent.