In Erlam v Rahman ([2016] EWHC 111) E had the benefit of a charging order over a house in R’s sole name. R’s wife (‘W’) claimed that she had the benefit of a prior interest over the property by virtue of a Deed of Trust. The Deed of Trust, on its proper construction, did not purport to create a trust but to record the fact that W had contributed 75% of the purchase price and so had a 75% beneficial interest. Chief Master Marsh pointed out that the property had been acquired as a buy-to-let investment. As a result, the right approach, following Laskar v Laskar, was to apply the resulting trust approach rather than the approach applicable to jointly-owned family property explained in Stack v Dowden. W had not shown that she had made any qualifying contributions and so she had no beneficial entitlement. Following Laskar, there was a clear difference in approach as between family homes (‘the domestic consumer context’) and the commercial context (even when the business partners were also family members).
The judge went on to consider the possibility that the Deed of Trust did not intend to record the existence of a prior implied trust but was intended to create a trust. In this case, he would have held that the document was a sham (see [42] – [44] for a discussion of the legal principles concerning shams particularly in the context of a property transaction). The existence of the Deed of Trust had not been revealed to any third parties and no restriction relating to it had been registered at the Land Registry. As between themselves, R and W acted as if the property belonged to R (he kept all of the rental income) ([78] – [82]).
Michael Lower
