REF/2008/1260

 

The Adjudicator to Her majesty’s Land Registry

LAND Registration act 2002

 

IN the matter of a reference from hm land registry

 

BETWEEN

 

(1) PETER BRADLEY

(2) LINDA BRADLEY

APPLICANTS

and

 

RODNEY CROMPTON ADAMS

RESPONDENT

 

Property Address: Kingston Farmhouse, Kingston, Hazlebury Bryan, Sturminster Newton, Dorset DT10 2AR

 

Title Numbers: DT244282

 

Before: Mr Rhys sitting as Deputy Adjudicator to HM Land Registry

 

Sitting at: Victory House, Kingsway London WC2B 6EX

 

On: Wednesday 9^th July 2009

 

 

Representation

Applicant: Mr Mercer, Solicitor, of Taylor Wessing LLP

Respondent: Mr Radley-Gardner of Counsel instructed by Letchers Solicitors

 

 

D E C I S I O N

 

Vandervell v Inland Revenue Commissioners [1967] 2 AC 291

Re Paradise Motor Company Ltd [1968] 1 WLR 1125

Introduction

1. This is an application by the Applicants for the registration of a restriction against dealings against part of the Respondent’s registered title DT244282, which comprises a house and grounds known as Kingston Farm House, Kingston, Sturminster Newton (“the Property”). The Applicants’ restriction only relates to part of the land comprised within the title, namely a paddock (“the Paddock”) situated to the north and east of the house. The Applicants claim that the Respondent holds the Paddock upon trust for his own children, Oliver and Emily (“the Adams Children”), and for their own children, Helen and Matthew (“the Bradley Children”). The Statement of Case makes the following claim:

“The application is made by the Applicants but it relates to a beneficial interest in the land created by the dealings entered into by the Applicants with Mr Adams (“the Respondent”), which interest is held by their children Helen and Matthew Bradley. The contention is that Helen and Matthew Bradley hold the area of land shown edged red on the application (“the Paddock”) jointly with the Respondent’s children, Oliver and Emily”

Although neither the Adams Children nor the Bradley Children are parties to the application, or this adjudication, no point has been taken with regard to that omission. The Applicants allege that, in an agreement reached with the Respondent in late 2006 or early 2007, the Respondent agreed to hold the Paddock on trust for the Bradleys’ children, and his own children, as part and parcel of the determination of certain express trusts which affected the Property (including the Paddock). The Chief Land Registrar referred the dispute to the Adjudicator on 19^th September 2008.

 

The Agreement

2. The application arises out of an arrangement made between the parties in 2002. The parties knew each other socially and both sets of children were good friends. It was decided that they would buy a house, to be used for their joint occupation as two separate families. Two separate documents were prepared by lawyers and executed by the parties, namely (a) the an Agreement dated 10^th December 2002 (“the Agreement”) and made between the Respondent (“Rodney”)(1), the First Applicant (“Linda”)(2) and the Second Applicant (“Peter”)(3), and (b) a Declaration of Trust between the same parties made on the same date (“the Trust Deed”). The recitals to the Agreement set out the background to the arrangement, as follows:

“Background

1. Rodney, Linda and Peter have agreed to join resources in order to purchase Kingston Farmhouse as a home for themselves.

2. Linda and Peter have not yet sold their existing property ….(“the Bradleys’ Property”) and in order to secure the purchase of Kingston Farmhouse Rodney has agreed to purchase it

3. The purchase price of Kingston Farmhouse is £395,000 of which the sum of £220,000 is being borrowed by Rodney by way of a Loan secured by Mortgage from Halifax plc (“the Halifax loan”)

4. Pending the sale of the Bradleys’ Property, Linda and Peter have agreed to be responsible for that element of the interest repayments on that part of the Halifax loan which totals £195,000 in which respect, as between them, Linda and Peter are deemed to be the principal debtors.

5. Linda, Peter and Rodney will on completion of the purchase [sic] of Kingston Farmhouse complete the Declaration of Trust contained in the Schedule to this Agreement (“the Declaration of Trust”)

6. Within 56 days of the completion of the sale of the Bradleys’ Property Rodney, Linda and Peter will redeem the Halifax Loan totalling £220,000 (£195,000 payable by Linda and Peter and £25,000 by Rodney) (“the redemption”) following which Rodney will effect a Transfer of the legal title to Kingston Farmhouse to Linda and Peter subject to such revision of the terms of the Declaration of Trust … as is necessary to reflect the redemption and any new borrowing secured on the Kingston Farmhouse by Linda and Peter and any subsequent alterations agreed between the parties.

The operative parts of the agreement include a covenant by Linda and Peter to indemnify Rodney in respect of his liabilities under the Halifax Loan (clause 1). Clause 7 of the Agreement is in these terms:

“The parties acknowledge that:-

7.1 it is anticipated that the minimum length of residence at Kingston Farmhouse will be three years as all the parties are mindful of their respective childrens’ continuing education and the need to remain in Kingston Farmhouse for this purpose

7.2 they intend to divide Kingston Farmhouse into two manageable areas so as to facilitate separation of payment of utility services, separate supplies and payments will be made.

7.3 they intend to carry out at joint expense fundamental changes to the property consisting of:-

…………

(e) landscaping of garden and paddock area to create large garden with pond area and storage shed”

 

 

The Trust Deed

3. The Trust Deed was made between the same parties. The material provisions are as follows:

“2. Trusts

Rodney declares that he:

2.1 holds the property on trust to sell it

2.2 has power to postpone the sale

2.3 has powers to deal with the Property which are equal to those of a sole beneficial owner and

2.4 holds the Property and its net proceeds of sale and its net income until sale in trust for the Co-Owners as beneficial tenants in common in the following proportions (“the Proportions”):-

Rodney 50%

Peter 25%

Linda 25%

4. Prohibitions

Neither Co-Owner without the written consent of the other will do or attempt to do any of the following:

4.3 Transfer their beneficial interest in the Property other than by Will or Codicil.

6. Contingencies

6.1 If one Co-Owner fails to pay his share of the payments due under the Mortgage when it is due the provisions of Schedule 1 will apply

Schedule 1 of the Trust Deed contains provisions which apply in the event that any party makes default in contributing to the mortgage repayments. Schedule 2 contains provisions which apply in the event that any party wishes to realise his or her beneficial interest in the Property. In effect, a buy-out machinery is provided, with the share to be subject to a market valuation.

 

The contributions

4. In summary, therefore, the financial contributions were as follows. Rodney purchased the Property in his own name with the assistance of the Halifax Loan in the sum of £220,000. His cash contribution was therefore £175,000. The balance of his contribution was £25,000, being part of the monies borrowed from Halifax plc. The Applicants made no cash contribution, their entire contribution of £195,000 being derived from the Halifax Loan. Linda and Peter therefore agreed to indemnify Ronald against their share of the mortgage repayments, although of course as against the lender Ronald remained primarily liable. As the Trust Deed made clear, Ronald held the Property on trust for himself as to 50% and for Peter and Linda as to 25% each. There is no mention of any of the parties’ children, other than the reference to their schooling in paragraph 7.1 of the Agreement.

 

Subsequent events

5. The arrangement continued until August 2004. At that time the Bradleys’ personal circumstances changed. In particular, their childrens’ schooling needs suggested a return to Poole, and indeed the Bradley family moved out of the Property at that time. However, they continued to meet their obligations under the Agreement with regard to contributing to the mortgage repayments. Indeed, they continued to pay their share of the mortgage until November 2006. It is common ground that there was a meeting between Peter and Ronald in December 2006, in which they came to an agreement regarding the termination of the arrangements between them. However, they are not agreed as to the precise outcome of the discussions, particularly with regard to the Paddock, and I will have to make findings of fact in the light of the evidence that I heard. Before doing so, however, I should describe the parties’ respective contentions regarding the Paddock, which is the subject-matter of the dispute.

 

The Paddock

6. The Property consists of a detached farmhouse with outbuildings, situated in the village of Kingston. Immediately to the north of the house there is a large Paddock comprising of several acres which forms part of the Property. The Applicants contend that the Paddock was always regarded by the parties as having investment potential, and that this was one of the reasons for purchasing the Property. The Respondent accepts that, after the purchase, there was some discussion of developing the Paddock, but this came to nothing since it was obvious that planning permission could not be obtained. Peter’s witness statement refers to the Paddock thus:

“It took us some time to find a suitable property in North Dorset. We had very particular requirements in terms of the need for accommodation for all of the children. We also considered that whatever property we bought had to have some form of investment value. Kingston Farm fitted the bill ideally. It needed quite a lot of work done to it but it had substantial potential. In particular its principal and beneficial investment feature had been recognised by the previous owner. It had a Paddock on which the previous owner had started works in levelling and he had been making a new access to the Paddock in order that it might ventually be built upon. At the relevant time and indeed to this day the Paddock sits outside of the development boundary of the village. However, inspection of the Land registry plans soon identifies, in my opinion, that it would be quite easy to regard the development of the Paddock as being an infill at some future point given the requirements of a new build in the area in general and at some point it is not too difficult to imagine the Local Plan being amended to include the land within the development boundary. Rod made a number of vists to the local council offices to ascertain the criteria for including the Paddock within the village building line……The arrangement with Road enabled both of us to get what we wanted. The proper level of the accommodation and something for the future. I should stress that it was always the intention of the Applicants and Rod to make the most of the development potential the Paddock provided and that it should be kept for the benefit of the children. Neither Linda nor I thought it necessary to protect individually the children’s rights in the beginning given the document which was entered into in respect of the Kingston Farm [the Agreement and the Trust Deed].”

 

7. Rodney’s evidence regarding the Paddock is different: this is what he says in his Witness Statement:

“2. In or around December 2002 I jointly purchased [the Property] with Mr and Mrs Bradley for £395,000 as it suited us all at the time, although for different reasons. When we looked around Kingston Farmhouse for the first time we were immediately taken with the property. As with most property purchases, the investment potential of the property was recognised but the development prospects of the paddock were definitely not, as although the estate agent informed us that there was a paddock at the back, this was not seen as any great benefit because it was littered with building rubble and thigh high in weeds. Its value was seen only as farmland and we only found out after we purchased the property that the previous owner had illegally attempted to develop the paddock which was stopped by the neighbours, who took legal action. ….

6. Towards the end of 2003 I started to restore the Paddock lying at the back of the property. I rented a digger to prepare the field which was subsequently seeded and put to grass. Thereafter I bought a sit on lawnmower to keep the grass in check, planted trees and shrubs, fixed the fences and commenced work on the patio. This work was done because I have always enjoyed gardening and the paddock had not been looked after for some time. It was not done, however, to increase the [prospects of obtaining planning permission……..

7. As I was now spending quite a lot of time and money on the paddock it occurred to me that it might be a legacy for both my children and those of Peter and Linda. I made a passing comment about this to Mrs Bradley when we were in the back garden. She then mentioned it to Mr Bradley when we went back into the kitchen. Mr Bradley said it sounded like a good idea and the conversation was left at that. There was certainly no further discussion or formal agreement on the matter and no other constraints, explicit or implicit on the use of the land. …..

8. No further discussion of the paddock took place until we heard news, towards the end of 2003 that our neighbour, who had run a small engineering business on the far side of the field had retired and sold the rear half of his property fpr £160,000 as he had obtained planning permission to demolish his workshop and build a house.

9. It was at this point that Linda insisted we also apply for planning permission on the paddock so it could be sold. Although leaving the paddock as an inheritance for the children was only ever a passing suggestion this was now completely forgotten by Linda and Peter as it was Linda’s intention to then use their share of the proceeds to redeem their proportion of the mortgage on the farm. .At Linda’s insistence I paid a visits to North Dorset Planning Department to enquire about the settlement boundary and I was told in no uncertain terms that there would be no change in the settlement boundary for at least the next twenty years thereby precluding any development on the land in that time…..”

With regard to Paragraph 9 of the Witness Statement, Peter’s evidence under cross-examination was that he understood that there was no possibility of developing the Paddock for a period of at least 5 to 10 years.

 

The determination of the trusts

8. As I have said, the Applicants’ circumstances had changed radically by the end of 2006. Although, as the Agreement makes clear, the initial intention was for the Bradleys to sell their house and use the proceeds to discharge the Halifax Loan, this never happened. Indeed, as Peter told me from the witness box, by the end of 2006 he was making repayments on a flat in London, on a house ion Poole, and on the Property itself. Manifestly, it was a struggle to keep up all these payments, and unsurprisingly the Applicants wanted to negotiate a way out of the continuing obligations to the Respondent. At the same time, Rodney had already given some thought to buying out the Applicants’ interest in the Property, and had obtained a valuation in mid 2006 to form the basis of any such buy-out. The Respondent has produced a valuation from a firm called Roy Barrett, dated 29^th June 2006, in the following terms:

“For marketing purposes I would suggest a price of around £460,000 freehold, subject to contract for the whole property as it is and £390,000 for the property excluding the outbuilding and paddock.”

It was thus the desire on both sides, to bring the arrangements regarding the Property to an end, that lay behind the meeting between Peter and Ronald in December 2006. They both accept that such a meeting took place.

 

9. A number of documents have been produced, some of which are more or less contemporaneous with the December 2006 agreement, and some of which are a little later in time.

9.1 The first of these is a table of figures, prepared by Peter (as he accepts), which Rodney contends was used as the basis for the agreement reached in December 2006. This demonstrates an agreement that the current value of the Property was £460,000 – the same figure as Rodney’s valuation – so that, with the appropriate adjustments, the value of the Applicants’ share was £60,000. This is therefore the amount that would be required from Rodney to buy out the Applicant’s share.

9.2 The second document is a letter dated 10^th December 2006 addressed to Rodney. A copy of this letter has been produced, but Rodney denies having received it. Peter insists that he sent it by post, and as an email attachment, although he has no record of any transmission by either method. This letter purports to set out five options for the termination of the arrangements. The first option envisages a buy out “for 50% of the valuation minus £170,000” – which in fact produces the figure of £60,000. The second option is for a buy out “for 50% of the valuation minus £170,000 – then reduces this figure by an agreed amount so that we maintain a share in the paddock for future development”.

9.3 The third document is headed “Discharge of Shared Tenancy Agreement – Adams/Bradley-Kingston Farm resulting from discussions on Tuesday 2^nd December 2006 and confirmed at the meeting of Rodney Adams and Peter Bradley in Poole on Friday 5^th January 2007, the following is agreed”, and was prepared by Peter and sent to Rodney in early January 2007. It is unsigned, but contains a space for signature by Peter, Rodney and Linda. The material passages read as follows:

·         “Peter and Linda Bradley have no further wish to retain an interest in Kingston Farm and agree to the discharge of the shared tenancy agreement with Rodney Adams of 10^th December 2002. Resulting from this no further loan payments are due from Peter and Linda to Rodney.

·         Kingston Farm was valued at £460,000 in June 2006 and Rodney agrees to the purchase of Peter and Linda’s shares representing £230,000 plus a mutually agreed percentage rise to account for the rise in property price from June 2006 to December 2006, the figure to be based on an independent valuation agreed between Rodney and Peter who will act on behalf of Linda.

·         In the above purchase Rodney agrees to pay Peter and Linda the remaining capital representing Peter and Linda’s re-valued share minus Peter and Linda’s outstanding liability of £170,000. This payment shall be made within three months of the date of this discharge of agreement document – if not then a further re-valuation will be made to take account of any property price rise. In any case all monies to be re-imbursed by 31^st October 2006.

·         Peter and Linda to remove such belongings that are held at Kingston Farm as are legally theirs within three months of the date of this discharge of agreement document…………

·         In discharging the shared tenancy agreement it is understood by all signatories to this discharge of agreement document that all have complied with the shared tenancy agreement for the duration of the agreement….”

I assume that the reference to “31^st October 2006” is intended to mean “31^st October 2007”, since the agreement was made after 31^st October 2006 and it would have been impossible for any monies to have been paid by the earlier date.

9.4 The next document is virtually identical to the previous document, albeit that it is in a different font size. It does, however, include an additional term, namely:

“3. Peter and Linda wish to retain an equal share (50%) interest with Rodney in the Kingston Farm Paddock at an agreed price of £2500 – valued currently as agricultural land.”

The document – which Rodney admits that he received – has a handwritten note from Peter on the back as follows:

“17/1/07

Rod

Draft for your comments/amends.

As you can see Linda has asked to have retention of ½ share of paddock these are the best words I can come up with and I have not consulted a solicitor for legal correctness.”

9.5 There is a yet further version of this document which is stated to be drawn up on 14^th February 2007, although it refers to the discussions at the meeting on 2^nd December 2006 “and confirmed at the meeting …on 5^th January 2007..”. Paragraph 3 has been amended to read as follows:

“3. As part of this agreement Peter Bradley wishes to retain a 50% interest with Rodney in the Kingston Farm Paddock valued currently as agricultural land. This interest to pass to Helen and Matthew Bradley upon disposal or sale of Kingston Farm”.

It will be noted that there is no mention of a price or value to be placed on the Paddock, there is no reference to Linda, and for the first time the Bradley Children are mentioned.

 

10. According to Peter, he pressed Rodney for a response to the various documents sent in January and February 2007, but did not receive one. Rodney accepts that he did not respond – he said that as far as he was concerned the agreement had been finalised by early January and there was nothing further to be said. As from December 2006, of course, he was meeting the mortgage repayments alone, without any assistance from the Applicants. He accepts that he was having difficulty in raising any money to buy out the Applicants’ share. It was not until early October 2007, in fact, that he made the full payment of £60,000, in four instalments (on consecutive days) of £15,000 each, which was the maximum amount that his bank would allow him to transfer. The last payment was made on 5^th October 2007. The money was accepted by the Applicants, in the sense that the payments were not returned. On 24^th October 2007 Peter wrote a letter to Rodney in the following terms – the letter, it appears, having been drafted by a legally qualified friend:

“I am writing to confirm that we have received all of the £60,000 in relation to Kingston Farm.

As our property is now removed that leaves only one outstanding matter to be tidied up. That is the issue of the paddock. Here we have agreed that the land should be held by you on trust for your two children and Matthew and Helen and we would be grateful if you would acknowledge that you are holding the freehold on trust for them. The terms of the trust are that the land to be conveyed to them jointly upon disposal of the land.”

Rodney refused to acknowledge the existence of any such trust, and on 23^rd May 2008 the Applicants applied to register a restriction against the Title to the Property - which is of course still retained by Rodney – to protect the alleged trust in favour of the Bradley Children and the Adams Children.

The agreement to discharge the trusts

11. My task is to decide what precise agreement was reached between the parties – if any – in the discussions that took place in December 2006 and January 2007. I heard oral evidence from both Peter and Ronald, who both made detailed witness statements. Linda, although one of the Applicants, took no part in these proceedings, and did not herself make a witness statement. In any event, it is clear that there were no discussions directly between her and Ronald. Peter acted on her behalf, and I think it may be concluded that any agreement reached by Peter with Ronald would bind her. What agreement was reached? Ronald says that the agreement was that he would buy out the Applicants at a price of £60,000. He denies that he agreed to treat the Paddock as a separate item, or to retain this part of the Property on trust for the next generation. He accepts that there was some discussion of the Paddock in his meetings with Peter, but according to him he did no more than promise that he would consider leaving a 50% share in the Paddock to the Bradley children in his Will, assuming that he still owned the Property at that time. He is adamant that he made no binding agreement to create any trust. For his part, in cross-examination Peter accepted that no final agreement regarding the Paddock was reached in his discussions with Ronald. He said that the basic price of £60,000 was agreed, and that it was also agreed that Ronald would enter into some firm arrangement with regard to the Paddock. He said that he trusted Ronald, and was led to believe by Ronald that they would sort out the precise nature of the interests to be created in the Paddock at some future date. As far as he was concerned, or so he told me, the issue of the Paddock was very much in issue in his discussions with Rodney, and Rodney gave a commitment to create a trust interest in favour of the children. Peter denies that he was told that Rodney would consider making provision for the children in his Will.

 

12. In reaching a conclusion on this issue, and in making a finding as to which of Ronald’s or Peter’s evidence I find more compelling, I have in mind the following considerations amongst others:

12.1 Notwithstanding Peter’s evidence that the Paddock was regarded as a separate investment, with development potential, the Agreement itself does not record this. The Paddock is merely referred to as a garden area. I do not accept that this was done to obscure from the planning authority their true intentions. The Agreement is a private document which would not be available to the planning authority. I think it is extremely unlikely that there would not be some specific mention of the development value of the Paddock in the Agreement or Trust Deed, if it had formed an integral part of the arrangement. It is in my judgment much more likely that the issue of the Paddock’s development potential arose after the purchase, in the way that Ronald describes, and was not, as Peter says, an integral part of the scheme from the outset.

12.2 It follows that the Paddock was not regarded as a critical element of the property purchase. At the outset, it was (as the Agreement makes clear) merely intended to be a garden.

12.3 The initial memorandum, prepared by Peter and sent to Ronald in early 2007 after the second meeting between them, makes no reference to any agreement regarding the Paddock. It follows that Peter did not regard this as an element of the agreement that he needed to record. This is consistent with the calculation which he prepared and gave to Ronald, which simply refers to a valuation of £460,000 for the entire Property without mention of the Paddock.

12.4 That the Paddock was not included as a separate term of the original discharge agreement may be inferred from his comment on the note to Ronald on 17^th January 2007:

“As you can see Linda has asked to have retention of ½ share of paddock these are the best words I can come up with and I have not consulted a solicitor for legal correctness.”

This recognises that Peter is introducing a new term into the agreement, as suggested by Linda.

12.5 It is apparent from the subsequent draft dated 14^th February 2007 that this term – regarding the Paddock – had not been agreed and was not certain. This follows from the fact that paragraph 3 of the first memorandum is amended by a slightly different provision regarding the Paddock. All the other terms remain the same as from the first “Discharge Agreement” to the third.

12.6 As from December 2006 the Applicants were released from their obligation to contribute to the mortgage repayments.

12.7 When the Respondent paid the sum of £60,000 this sum was accepted by the Applicants. This figure represents their share of the value of the Property (including the Paddock) as valued in June 2006.

12.8 There is no formal assertion by the Applicants that the Paddock was to be held on new trusts, for the benefit of the Bradley children, until after the payments from the Respondent had been received.

 

13. The essential difference between the evidence of Peter and Rodney is this. Peter says that although no final decision had been taken as to the exact method of creating a trust of the Paddock in favour of the Bradley and Adams children, it was agreed between him and Ronald that some such interest would definitely be created. Ronald, on the other hand, says that all the terms of the discharge agreement were concluded prior to the sending of the document referred to in paragraph 9.3 above Although there was some discussion of the Paddock, he never gave any commitment to create any trust of it. He did however say that he might make a gift of the Paddock in his will, but that was a matter for him. This is the conflict which I must resolve.

 

Findings of fact

14. I prefer the evidence of Rodney on this issue. In my judgment, there was no agreement between Peter and Ronald as to the future ownership of the Paddock. I think that Peter (on behalf of himself and Linda) was very anxious to be rid of the mortgage liability, and was probably negotiating under some financial pressure. As he himself recognised, there was no short or even medium-term prospect that the Paddock could be developed – his memorandum of 17^th January 2007 refers to the Paddock being valued as agricultural land. His own calculation of the sale price omits reference to the Paddock. The Trust Deed itself provides for a buy out of the entire Property, without any separate value being attributed to the Paddock. It seems to me that he was principally concerned to negotiate an acceptable price for the Applicants’ share in the Property as a whole, and thereby escape further liability for the mortgage repayments. The issue of the Paddock did not loom large from his point of view. It was only after he informed Linda of the deal that he had done that she raised the issue of the Paddock, and he went back to Rodney in effect to renegotiate the terms of the agreement. Rodney never agreed to modify the original terms (as set out in the document at paragraph 9.3). Perhaps he ought to have made this clear to Peter – in fact, he did not respond at all – but as far as he was concerned the agreement had been made and already acted upon, in that he was bearing the full cost of the Halifax Loan. It is noteworthy that there was no formal assertion that Rodney had already agreed to execute a trust of the Paddock until after the £60,000 had been paid and accepted. The two documents referred to at paragraphs 9.4 and 9.5 make it clear that the term is merely under discussion, not finally agreed. This is not to say that Peter set out to mislead the tribunal in his evidence. I think he has convinced himself that Rodney gave a commitment to create a trust of the Paddock, when in reality Rodney merely said that he would consider making a gift of it under his Will. By contrast, I found Rodney’s evidence in all respects to be clear and straightforward, and I prefer his evidence wherever it conflicts with Peter’s.

 

The effect of the oral agreement to discharge the Trust Deed

15. The beneficial interests in the Property – including the Paddock – are fixed by the Trust Deed – 50% of the proceeds of sale for Rodney, and 25% each for Peter and Linda. Neither the Bradley Children nor the Adams Children are named as beneficiaries. In my judgment, it is impossible to argue that during the currency of the Trust Deed the beneficial interests are other than as stated therein. Indeed, it was not possible for any named beneficiary to transfer their beneficial interest by an inter vivos transaction – this is the effect of clause 4.3 of the Trust Deed. For as long as their interests were governed by the Trust Deed, therefore, the Applicants were bound to accept that their children had no interest in the Paddock. Their case is, of course, that the Trust Deed has been discharged by agreement. However, I did raise the question whether it was possible for the parties to the Trust Deed to terminate their interests without any formal document having been executed, having regard to the terms of Section 53(1)(c) of the Law of Property Act 1925 (“the LPA 1925”). I hasten to add that this was not a point taken by the Applicants. Indeed, when I asked Mr Mercer whether his clients were contending, in the alternative, that the Trust Deed still remained on foot, he felt bound to concede that his clients no longer claimed any interest in the Property, because the Trust Deed had been discharged. I think he was bound to make this concession since, as I have said, if the Trust Deed remained on foot the claim that the children had an interest in the Paddock would be bound to fail.

 

16. Mr Radley-Gardner, on behalf of the Respondent, sought to reassure me that it was possible for the Trust Deed to be discharged by an oral agreement. He cited the well-known case of Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 in support of this submission. He did not cite the case of Re Paradise Motor Company Ltd [1968] 1 WLR 1125 but that also seems to be in point. Although the wording of Section 53(1)(c) of the LPA 1925 suggests that there may be some doubt as to the effectiveness of an oral discharge of a trust deed, since both parties accept that the trusts have been discharged, and since both parties have acted on that assumption for several years, I think I am entitled to assume that the discharge was effective. Accordingly, once the Trust Deed had been discharged, it would have been possible for new beneficial interests to have been created. The Applicants argue that the Respondent either expressly agreed to create a trust of the Paddock in favour of the Bradley and Adams Children, alternatively that it would be unconscionable for him not to grant such interests. It is also argued that a resulting trust has come into effect in favour of the Bradley and Adams Children, but since it is clear that they have made no contribution to the purchase of the Paddock, I cannot see that there is any legal basis for such a claim.

 

17. As I have held, Rodney and Peter reached a concluded agreement in December 2006/January 2007, the terms of which are recorded in Peter’s memorandum referred to at paragraph 9.3 above. This includes a right for the Applicants to receive an additional sum based on the increase (if any) in the value of the Property between June and December 2006, but that is a contractual matter and is outside the scope of this application. This document was never signed by the parties, but I consider that the effect of the oral agreement was to bind them both. Indeed, their actions (as opposed to their words) are only consistent with a recognition that a concluded agreement had been reached – for their part, the Applicants ceased to make the mortgage repayments, and for his part Rodney paid the sum of £60,000 to the Applicants. At one stage during the course of the hearing I did question whether the parties had reached a concluded agreement, since they may never have reached a consensus ad idem. However, I have rejected Peter’s evidence that the issue of the Paddock remained outstanding, and I have found that there was a meeting of minds on the terms for the discharge of the arrangements between the parties embodied in the Agreement and the Trust Deed. In view of these facts, as I have found them, no new trusts replaced the Trust Deed, as alleged by the Applicants or at all. Furthermore, there are no circumstances which makes the Respondent’s denial of any such new trusts unconscionable. The fact is that the Applicants gave up their interests in the Property in exchange for the agreed terms as to the price and the release from the mortgage liability. The arrangement was intended to and did effect a “clean break”. No terms were agreed with regard to the next generation having an interest in the Paddock. The fact that Rodney may have said that some testamentary provision for the Bradley Children was possible does not, in my view, amount to a binding commitment to do so.

 

Conclusion

18. Accordingly, I find that the trusts declared by the Trust Deed were discharged in or about early January 2007 and were replaced by the mutual obligations contained in the oral agreement between Peter and Rodney, by which Linda was bound. From that time onwards, Rodney has held the Property – including the Paddock – as legal and beneficial absolute owner. It follows that the Applicants, whether on behalf of their children, or otherwise, have no right to enter a restriction against the Property or any part of it. I shall therefore direct the Chief Land Registrar to cancel the Applicants’ application dated 23^rd May 2008. As matters now stand, I can see no reason why the Applicants should not pay the Respondent’s costs. However, I shall give them an opportunity of making submissions on the issue, to be in writing and served and lodged within 14 days of the date of this Decision. The Respondent may reply to any such submissions within 7 days. The Respondent should file and serve a detailed breakdown of his costs within 7 days of the date of this Decision.

 

Dated this 19^th day of August 2009

 

 

 

 

 

By Order of The Adjudicator to HM Land Registry